Disability Income Insurance - Individual vs Group

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Topic Author
AndroAsc
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Joined: Sat Nov 21, 2009 7:39 am

Disability Income Insurance - Individual vs Group

Post by AndroAsc »

I hope there are some disability income insurance experts here! Would appreciate some help.

5 years back I purchased an individual disability income insurance. For the record, the product is Standard Protector Platinum, and I've basically maxed out all options, including the non-cancelable rider, indexed COLA rider and future purchase option rider. To clarify, this disability income is own occupation disability.

I'll be moving next month to a new job with a substantially higher salary and I am thinking of increase the limits on my individual policy. The future purchase option rider basically allows me to increase the limit to 4X the original amount without medical underwriting. I've been in touch with my agent (and honestly I do not trust insurance agents), who tells me that because my new employer provides a group disability insurance policy I will be unable to purchase a larger increase in my individual policy, OR, I have to decline my employer's group policy, and I will be allowed to purchase the max amount for my salary.

Personally, I am inclined to decline my employer's group coverage because (i) the definitions are not as good as my current policy, (ii) I will probably not stay with my employer for the rest of my life, and I am not sure if group policies are portable (I believe they are not). I also like individual policies because I have 100% control over it, and my opinion is to get as much disability insurance coverage as I can when I am young and healthy. For example, if I took a combination of group and individual policies, and I left my job 10 years later, I will lose a significant chunk of my insurance, and may not pass medical underwriting in the future. Whereas if I just go fully individual, I can be sure that the policy will be there regardless of how many jobs I change in the future?

Is there anything loopholes in my train of thought? Did I fail to consider other things? For those with disability income insurance, how do you handle the group vs individual policies? Do you just buy the best individual policy and decline the group, or go for a mix?
BruDude
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Re: Disability Income Insurance - Individual vs Group

Post by BruDude »

Your current policy will have much better benefits than any group policy you will find. The agent is also correct that having group disability insurance available to you will limit the amount of FIO you can exercise, except you may not be able to opt out of the employer coverage. If the employer pays 100% of the premiums and does not have an opt-out option, you are out of luck and will be stuck with the group plan.
Topic Author
AndroAsc
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Joined: Sat Nov 21, 2009 7:39 am

Re: Disability Income Insurance - Individual vs Group

Post by AndroAsc »

BruDude wrote:Your current policy will have much better benefits than any group policy you will find. The agent is also correct that having group disability insurance available to you will limit the amount of FIO you can exercise, except you may not be able to opt out of the employer coverage. If the employer pays 100% of the premiums and does not have an opt-out option, you are out of luck and will be stuck with the group plan.
I hope this is a joke?!

Can I just sign an affidavit that says I will not use any of the benefits from my employer's group disability insurance? I'm assuming that one has to declare if one has other disability insurance policy during the application?
BruDude
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Joined: Thu Dec 30, 2010 12:28 am
Location: Las Vegas

Re: Disability Income Insurance - Individual vs Group

Post by BruDude »

AndroAsc wrote:
BruDude wrote:Your current policy will have much better benefits than any group policy you will find. The agent is also correct that having group disability insurance available to you will limit the amount of FIO you can exercise, except you may not be able to opt out of the employer coverage. If the employer pays 100% of the premiums and does not have an opt-out option, you are out of luck and will be stuck with the group plan.
I hope this is a joke?!

Can I just sign an affidavit that says I will not use any of the benefits from my employer's group disability insurance? I'm assuming that one has to declare if one has other disability insurance policy during the application?
No, unfortunately you can't do that. If the employer will not allow you to opt out, you're stuck with it. This is very common for physicians as many employers provide 100% employer-paid mandatory group disability to doctors. That is why I stress that people should lock in as much coverage as they can get as early as possible in their career. Yes, you would have to notify the insurance company that you're eligible for employer benefits when applying for the FIO.
Topic Author
AndroAsc
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Joined: Sat Nov 21, 2009 7:39 am

Re: Disability Income Insurance - Individual vs Group

Post by AndroAsc »

BruDude wrote:
AndroAsc wrote:
BruDude wrote:Your current policy will have much better benefits than any group policy you will find. The agent is also correct that having group disability insurance available to you will limit the amount of FIO you can exercise, except you may not be able to opt out of the employer coverage. If the employer pays 100% of the premiums and does not have an opt-out option, you are out of luck and will be stuck with the group plan.
I hope this is a joke?!

Can I just sign an affidavit that says I will not use any of the benefits from my employer's group disability insurance? I'm assuming that one has to declare if one has other disability insurance policy during the application?
No, unfortunately you can't do that. If the employer will not allow you to opt out, you're stuck with it. This is very common for physicians as many employers provide 100% employer-paid mandatory group disability to doctors. That is why I stress that people should lock in as much coverage as they can get as early as possible in their career. Yes, you would have to notify the insurance company that you're eligible for employer benefits when applying for the FIO.
Thanks. Is there anyway to work around this? I was thinking that I could apply for the individual DI policy 1 month before I start work. I can furnish a signed offer letter which states my future salary, and hopefully their financial underwriting will not need paystubs or W-2. In that way, because I applied before I start work, I do not have any group DI coverage at the time of application.
BruDude
Posts: 3548
Joined: Thu Dec 30, 2010 12:28 am
Location: Las Vegas

Re: Disability Income Insurance - Individual vs Group

Post by BruDude »

AndroAsc wrote:
BruDude wrote:
AndroAsc wrote:
BruDude wrote:Your current policy will have much better benefits than any group policy you will find. The agent is also correct that having group disability insurance available to you will limit the amount of FIO you can exercise, except you may not be able to opt out of the employer coverage. If the employer pays 100% of the premiums and does not have an opt-out option, you are out of luck and will be stuck with the group plan.
I hope this is a joke?!

Can I just sign an affidavit that says I will not use any of the benefits from my employer's group disability insurance? I'm assuming that one has to declare if one has other disability insurance policy during the application?
No, unfortunately you can't do that. If the employer will not allow you to opt out, you're stuck with it. This is very common for physicians as many employers provide 100% employer-paid mandatory group disability to doctors. That is why I stress that people should lock in as much coverage as they can get as early as possible in their career. Yes, you would have to notify the insurance company that you're eligible for employer benefits when applying for the FIO.
Thanks. Is there anyway to work around this? I was thinking that I could apply for the individual DI policy 1 month before I start work. I can furnish a signed offer letter which states my future salary, and hopefully their financial underwriting will not need paystubs or W-2. In that way, because I applied before I start work, I do not have any group DI coverage at the time of application.
There is no workaround. The application will ask if you are expecting a change of employment within the next six months and whether you are eligible or will become eligible for group disability insurance. When you submit the offer letter to the insurance company, they're going to ask if the new employer offers group DI and then you're back to square one.
Topic Author
AndroAsc
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Joined: Sat Nov 21, 2009 7:39 am

Re: Disability Income Insurance - Individual vs Group

Post by AndroAsc »

Thanks. First world problems I guess.....
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JDCarpenter
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Re: Disability Income Insurance - Individual vs Group

Post by JDCarpenter »

Agree with BruDude (Whom I'm guessing knows a lot more than me on this stuff).

Just one thing to add: You asked if you are overlooking anything--another good reason to hold onto the individual policy and increase it when you can is the taxation of benefits in the event you need them. Individual benefits are tax free (assuming paid after tax); group benefits are subject to income tax (assume premiums paid preTax). In DW's experience (many years ago), her {medical} Group benefits were relatively paltry so their existence did not significantly impact the individual policy limit increases.
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