Disability Insurance: Do Workers Need to Buy Individual Coverage?

Jul 29, 2010
Carol Finch

The Benefits of Individual Disability Insurance - Photo by jvangalen

Disability insurance may be a useful way of replacing income if an individual becomes disabled and cannot work. Who should consider buying a private plan?

Disability insurance can come with a lot of benefits. Those that cannot work in certain situations, even for a temporary period, may find that this coverage helps them cope financially. Some may be offered a group plan by their employer; others may have to consider buying individual protection. How can disability insurance help workers and who may need to buy a private plan?

What are the Benefits of Disability Insurance?

Individuals that have disability coverage may be paid part of their income if they become disabled. This may be useful if they cannot work as normal. Here, their insurance plan will pay them a percentage of their earnings. This may not entirely replace a salary but could give enough to meet essential commitments and to avoid getting into financial difficulties.

Who Needs Disability Insurance Coverage?

Any worker should consider the merits of this kind of insurance. According to the Insurance Information Institute, 43% of people in the U.S. will have some form of long term disability (i.e. 90+ days) by the time they reach 65. A plan may, therefore, suit those that are:

Self employed
Not given a group plan by their employer.

If an individual feels that they would not be able to cope financially in the event of a disabling incident that prevented them from working, then this could provide a solution.

What if an Employer Gives a Group Disability Insurance Plan?

Those that are offered coverage by their employer may still want to check out the benefits they will be given. Some employers, for example, may only offer short term coverage such as sick leave. This may not help those that cannot work for longer periods. Benefits given by group plans may also not be enough for some workers and they may want to consider adding supplemental disability insurance to cover any gaps.

What About Workers' Comp and Social Security Disability Insurance?

Some workers opt not to buy an individual disability plan in the belief that they will be covered by workers' compensation or Social Security programs. It is worth remembering that workers' comp may only apply if individuals become disabled in the course of doing their job and may not be valid for out-of-work injuries or accidents.

Social Security programs may help some but may not pay enough to make a difference for some families. SSDI approval may also be harder to get. It may, for example, be based on qualifying working years and the anticipated length of the disability (i.e. 12 months+). These payments will also generally take around 6 months to get started.

Those interested in learning more about individual disability insurance may find the following articles useful:

Source: Insurance Information Institute