What is the difference between individual and group disability insurance?

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Love them or hate them, jobs are fundamental to our lives. They keep us busy, give us purpose and, unless you’re independently wealthy, help us pay for the essentials – food, shelter, clothing – that we need to survive. The irony is that, while we expend much energy deliberating over the right car, home, travel and life insurance, we often don’t think twice obtaining the appropriate type and amount of insurance we have in the event we are unable to work due to disability.

It’s an especially disconcerting reality considering that one in six Canadians will be disabled for three months or more before the age of 50. And many would have a hard time maintaining their standard of living without a reliable job or a monthly disability benefit.

Now that we’ve established the importance of disability insurance, the questions then become: Are you covered by a “group insurance” policy at work? Do you need to purchase an “individual disability” policy? And, what is the difference between the two anyway?

Group disability insurance

Most companies have some type of short-term and/or long-term disability insurance in place, offered to employees as part of their benefits package. These disability policies provide a percentage of a person’s monthly income if they are unable to work. Of course, as we discussed in earlier articles, the level of coverage that you’re eligible for is contingent upon your income and the specific policy chosen by your employer.

Since group insurance is structured in a way that allows the risk of making a claim to be spread across the entire company, these plans tend to be less expensive than individual insurance plans. And as we’ll see in a later article, some group policies are taxable benefits (where 100% of the premiums for the policy have been paid by the employer), while some are non-taxable benefits (where 100% of the premiums are paid by the employee).

Individual disability insurance

As mentioned above, the type of plan – and coverage it offers – can vary from one job to another. Those concerned that their employer’s policy won’t provide the amount of coverage they may one day need should look into purchasing an individual policy on top of their group plan. For the self-employed or employee of a smaller company who may not have a disability insurance policy at all, investing in an individual plan is a good idea. When purchasing an individual policy, you decide the amount of the monthly disability benefit based on your income level and needs.

Typically, private insurance is set at a fixed premium for the type and term of coverage. That said, individual policies are generally more expensive since the risk of a claim cannot be spread across the group.

Individual disability policies also often have more flexible terms, such as “partial disability” clauses (in addition to “total disability”) as compared to proof only of “total disability” required in most group insurance policies.

 We’re here to help

No matter which policy you’ve signed up for, if you have been denied benefits, we can help! For more information or to speak about a denial of short- or long-term disability benefits, please contact Brad Moscato, Past Chair of the LTD Section, Ontario Trial Lawyers Association, at 416-646-7655 or bmoscato@hshlawyers.com.

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