I’m a CERTIFIED FINANCIAL PLANNER™ Practitioner and have been a financial advisor for 10 years. I have group disability insurance coverage through my job that is covered by my employer. While I am greatly appreciative for this benefit I pay for my own individual disability insurance coverage to supplement and here is why:
My benefit is only 60% - like many employer provided plans my group insurance only covers 60% of my compensation. This means that for every $1,000 I was used to budgeting for I would only get $600! While my wife and I like to save money, doing without 40% of my pay would be very difficult for any extended period of time. While we would be able to pay our basic bills – lifestyle and my commitments to our retirement savings and children’s education would certainly not be fulfilled. I wanted to know that we would have additional income in the event of a long-term disability to cover as much of this gap as possible so I could still contribute my part to our long term dreams.
My group insurance does not go up with inflation – this means that if I was receiving benefits for 10 years and we experienced 3% inflation I could feel like my purchasing power is now closer to 48% of my original pay – less than half! This is because the payout stays the same even while my expenses would rise. Over 20 or 30 years this effect would be catastrophic to my family. My individual policy does offer a 3% inflation protection rider to help with this situation.
The premium was not going to impact our ability reach our retirement, college savings goals, or other long term financial goals. On the other hand a catastrophic disability could have wiped us out slowly even with my great group coverage.
I strongly encourage everyone, even if you have group coverage, to look at whether you can really survive (and thrive) off of your group coverage if you are unable to work for many months or even years, or if you should supplement with individual coverage. I can help you with this and many other financial questions, to schedule a quick information only conversation click here or scan below with your smart phone:
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Brendan Pheasant, CFP®, AIF®, ChFC, CPFA