Group Disability vs. Individual Disability Insurance

Published: 06.05.2024

What is Disability Insurance?

Disability Insurance—also referred to as Disability Income Insurance, Income Protection or DI—is a type of insurance that replaces part of your income in the event you become sick or have a mental or physical disability that prevents you from working. The amount of your income that is replaced is usually a percentage of your pay.

There are two main ways in which you can obtain Disability Insurance coverage. The first is through your employer and the second is by purchasing an individual disability income policy.

Group Disability Insurance vs. Individual Disability Insurance

Group Disability Insurance is coverage provided through your employer. Many employers provide full-time employees with group short-term (GSTD) and/or group long-term disability (GLTD) options as a part of their benefits package.

Group benefits cover all eligible employees, regardless of health conditions. In most cases, if you change or lose your job, your group disability coverage does not go with you.

Individual Disability Insurance is a private policy that an individual purchases on their own through a disability insurance carrier. Individual coverage is a great way to supplement a group plan or provide coverage if a group plan is not offered through an individual’s employer.

For more details on the differences between Group Disability vs. Individual Disability Insurance Plans, see our comparison chart below.

	Group Disability	Individual Disability
Type of Coverage	Offered as a benefit through an employer.	Purchased by an individual.
Coverage Amount	A percentage of your base salary, typically up to a maximum amount. These percentages may differ based on coverage type—LTD or STD plans.	Individual policies are more flexible. Sometimes they are based on a percentage of your income, and other times you can purchase a set amount of coverage, which would not require income documentation.
Taxes	In most cases, the benefit payments on group disability plans are taxable. That means, for example, if you receive 60% your income as your benefit, you will receive less due to taxes.	Benefits payments from an individual policy are typically not taxable. This is because premiums are usually paid with after-tax dollars.
Cost/Premiums	Typically has lower premiums but the benefits are not as robust.	Typically has higher premiums but offers greater benefits.
Who Pays	Premiums can be paid by the employer, the employee, or a combination of the two.	The individual pays the full premium cost.
Exams/Underwriting	Typically offered without a medical exam or proof of health if the employee enrolls in coverage when first eligible.	Most policies require a medical exam. The cost of your premium relies on the outcome of these exams and health-related information.
Portability/Renewable	In most cases, if you change or lose your job, your coverage does not continue with you. Your employer may also elect to cancel the policy. Many policies also end when the policyholder reaches age 65.	Policies are typically guaranteed renewable; coverage continues as long as premiums are paid or unless you cancel the policy yourself. If you become unemployed, coverage and premium payments will either be terminated or suspended.

Is Employer-Provided Group Disability Insurance Enough?

If your employer provides group disability coverage, that is a great starting point for protecting your income. But sometimes, it may not be enough.

By purchasing an individual disability plan, you can supplement your employer-provided coverage and protect a larger amount of your income in the event you become unable to work.

This may be a good option for higher earners whose employer-sponsored disability coverage caps out at a much lower amount than their income.

Supplementing with an individual plan is also important for individuals who are the primary household earner or who have significant expenses.

Secure Your Financial Future With Disability Insurance.

Your most valuable asset isn’t your home, car or 401k—it is your ability to make a living.

Make sure you can protect you and your loved ones against the financial effects of becoming sick, injured or mentally or physically unable to work.

Contact our team today to learn more about Group and Individual Disability coverage.