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Comparison of individual and group long-term disability

September 12, 2018

Group long-term disability provided by your employer is a helpful benefit but this post will point out key differences.

Ownership - coverage is individually owned as opposed to being leased from employer
Rates and renewal - typically rates are fixed and the coverage is guaranteed renewable for individual plans where as group plans often change or can be canceled if the employer can't afford
Coverage limits - Group plans are typically a fixed percentage up to a cap which can leave the highest compensated employees with less coverage as a percentage of income. Individual plans are more tailored to ones specific income
Covered compensation - group plans typically cover just base compensation where individual plans can include bonus and incentive compensation and retirement contributions
Taxes - when a person pays for an individual policy with personal funds the benefits are tax free but employer paid plans are generally taxable

The take away is that an employee should be thankful for group coverage but supplement to adapt to one's individual financial income and lifestyle