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Disability Insurance

The Difference Between Individual and Group Disability Insurance

February 6, 2023

Disability insurance provides a monthly amount if you are unable to work due to sickness or accident. This type of insurance is particularly useful, as no one is safe from mishaps or illness. In another article, we explained disability insurance and how it works. Now let’s look at the difference between individual and group disability insurance.

What Individual and Group Disability Insurance have in common

All disability insurance protects you in the event of an accident, sickness, or mental health issue. The definitions of sickness or accident are laid out in each policy.

Disability can be short-term or long-term. It’s considered short-term when it’s a few weeks and long-term if you’re disabled for several months or years. Some insurance contracts include only one of the two terms.

Individual Disability Insurance

The biggest benefit of individual disability insurance is the flexibility it provides. You can choose the coverage that’s right for you. For example, you can choose to be covered for partial disability, which is not possible with group insurance. You can also choose the amount that you will receive if you become disabled, and that amount will never be taxable.

You can also keep coverage until you reach retirement age, regardless of your life circumstances. No change in employment affects your individual disability insurance. In addition, once you’ve purchased the insurance, the premium is fixed, so you’ll pay the same amount for the entire duration of the coverage.

What’s more, since you’re the only person on the policy, the premium is based on your risk profile. In other words, the insurer will take into account the percentage of your income to be covered, your current disability insurance, your debts, your financial resources, and your profession to determine how much you’ll have to pay monthly or annually. They may also ask for a complete physical exam as well as a tele-interview with you to discuss your family and personal history, your use of tobacco, drugs and alcohol, and other questions.

If your risk profile is considered high by the insurer, they may refuse to insure you or may set a higher premium. In fact, individual disability insurance is usually more expensive than group insurance.

Still have questions about the disability insurance offered by Matcha Insurance? Our financial security advisors are available to answer any questions you may have and to reassure you.

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Group Disability Insurance

Group disability insurance is particularly useful for those who have difficulty obtaining coverage. No proof of health is required. Once you meet the conditions set out by your company, union or association (for example, you have been a member or employee for three months), you’ll be insured. You’re required to apply for disability insurance if it’s available under your group insurance.

Rates are determined based on the group’s profile and are reviewed every year. As a result, premiums may vary widely between group plans depending on the industry or the type of individual in the group. For example, a group of construction workers will pay more for disability insurance than a group of office workers because their risk of disability is greater. The average age of the group also affects the premium. Despite these differences, group disability insurance is often more affordable than individual disability insurance.

Group insurance is valid as long as you are in the group; if you leave your job or union, you cease to be covered. So give some thought when evaluating your insurance needs as to whether you want to work for the same employer all your life.

Since group disability insurance is for the entire group, it can’t be tailored to you personally. That’s why you can’t choose your coverage or the monthly amount you’ll receive if you become disabled.

The monthly amount in group disability is often a percentage of your salary, or around 66%. It’s important to think about the remaining 33%, since we usually use 100% of our salaries to maintain our lifestyle. While you may be able to cut back on some expenses while disabled, it’s worth considering whether you can cut them by a third, especially if you have financial obligations (mortgage payments, child-care expenses, etc.) that will continue on.

Supplement group insurance with individual insurance

Both types of disability insurance—individual and group—can be supplemented for an added measure of protection.

For example, if your group disability insurance covers 66% of your salary, you could take out individual disability insurance for the remaining one-third if you plan to stay with the same employer for the rest of your career.

Similarly, if your group insurance only provides coverage for long-term disability, you could purchase individual short-term disability insurance. Matcha Insurance offers both options, sold separately or together.

Contact the Matcha Insurance team of experts for all your insurance needs. We look forward to helping analyze your situation and providing the advice you need!


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