Your Guide to Supplemental Disability Insurance

Did you know that just under 1 in 4 of today’s 20-year-olds will have some sort of disability that prevents them from working for at least a year before they retire? What’s more, most of those long term disabilities are due to illness, not accidents.

This means most people need disability insurance, and many people rely on their employer to provide it. If your employer offers group disability coverage, that’s great news. Group plans can be convenient — someone at your company is doing the research for you, and the company may pick up the cost of the coverage. All you have to do is enroll.

But that plan may not be enough to adequately cover you, especially if you’re among the groups that need disability insurance the most.

Before you decide to rely only on a group plan, you may want to give individual supplemental disability insurance a look. Here’s some information and supplemental insurance tips to consider when you’re making your decision. And remember, you can reach out to Farm Bureau anytime to see how we can help.

What Is Supplemental Disability Insurance?

Supplemental disability insurance is a kind of insurance policy designed to work in tandem with your existing  insurance coverage. It can help replaces your lost income in case of disability by paying out benefits to you when you cannot work because of a covered injury or illness.

This kind of coverage essentially helps protect your paycheck so you can continue to pay living expenses if you are unable to work. It’s called “supplemental” because it’s meant to supplement group disability policies that your employer might offer.

Do I Need Supplemental Disability Insurance?

It’s a smart idea to consider buying supplemental disability insurance. Here are three reasons why.

Reason #1: Group Disability Plans May Fall Short

Could you live on less than half of your salary?

Here’s how many group disability plans work: About 60% (or less) of your earnings will be covered if you are unable to work due to a covered illness or injury. When your employer pays the premium, you will be taxed when you use the benefit, and after taxes are taken out, you could receive closer to 40% of your salary. With a pay cut, even a short-term disability can do long-term damage to your financial wellness.

This can also cause a lot of anxiety. For example, if you earn $50,000 a year, your employer might offer a disability benefit that replaces $20,000 of your income. But if you have a young family, the coverage you need is likely closer to your $50,000 income. Supplemental insurance can help you close this gap.

Reason #2: Group Plans May Not Be Portable

If you rely on your company’s group life or disability plan, that coverage will probably go away if you leave your employer. If so, you will be starting at square one with a new policy, and you may need to wait before benefits are available to use. A supplemental disability insurance plan, however, is your policy no matter where you work — it goes with you.

Reason #3: Group Plans May View Your Disability Differently

Not all disability policies define disability the same way. Some group plans may limit or end benefits if you're able to work in a different occupation, even if you can no longer perform the job you’ve trained for. 

For example, if you are a dentist who relies on your hands for work and you develop Parkinson's disease, you might have difficulty continuing to work as a dentist. Depending on the terms of the policy, your group disability plan may provide benefits for a predetermined period of time but later may reduce or discontinue those benefits if you no longer meet the policy's definition of disability, such as if you are able to work in another occupation. 

A supplemental insurance plan may provide additional protection, depending on the policy’s definition of disability and benefit terms. In some cases, it can help protect more of your income if you can no longer work in your chosen profession. 

How Do I Buy Supplemental Disability Insurance?

If you decide individual supplemental insurance is right for you, you’ll typically need to go through an underwriting process.

You’ll be asked about your health, any pre-existing conditions that you might have and whether you have a group plan in place. This information is important because the amount of individual disability insurance you can purchase will depend on the factors such as your income, existing coverage, and the terms of your group plan. If you have a pre-existing condition or other health concerns, it may be more difficult to get the level of coverage you may need. 

After the underwriting process happens, you’ll discuss the right plan for you and your needs. Reach out to Farm Bureau to see what we offer.

When Should I Buy Supplemental Disability Insurance?

As with life insurance, you will get the most favorable rates when you are young and healthy. Purchasing coverage earlier can also help you secure protection before a health condition affects your eligibility. Plus, buying a supplemental disability insurance policy can be, in many cases, more affordable than a single, standalone policy.

So, don’t wait too long to purchase a policy — especially if other people depend on your income for their livelihood — and talk to your agent about what’s needed.

Fill the Gaps

Worried you may have some coverage gaps? Talk with your Farm Bureau agent, who can help ensure you have the right level of insurance coverage for you and your family.