Proper Planning with Disability Insurance

While you hopefully won't have to use it, having the right disability insurance if you need it can make the difference between being financially okay and struggling to meet your financial needs.

There are different kinds of plans available should you need disability insurance, so let's look at what is out there.

Group vs. Short-Term and Individual, which to Choose?

Group plans are available through a number of mid-to-large-sized firms who offer benefits that run for at least five years. Unless you find yourself self-employed, a very important thing to do when working for a company is to determine if they offer long-term disability insurance. If they do, be sure to go over it in full detail to see what coverages would be in place should you find yourself disabled.

Many group plans cover up to 60 percent of an employee's income. That amount can be less than that due to the fact that many group plans have a benefit cap, such as $5,000 a month or $60,000 yearly.

There are some factors to keep in mind with group plans. Among them is this type of policy will only insure your regular salary. Also, the majority of group policies place a limit on how long they will pay benefits should you not be able to perform your job duties of two years.

Once you get past the two-year period, you will need to demonstrate that you cannot maintain any job. Not only will this allow your employer to keep costs down, but you can receive new job training for that initial two-year period that you are receiving benefits.

Short-term disability insurance, which is also known as sick leave, takes effect once you're unable to perform your job duties as a result of illness, injury or the birth of a child.

Individual plans are those that make sense for people who are self-employed or not covered by their employer.

Even should you find yourself covered at your place of employment it is not a bad idea to consider supplementing what you currently have. An individual plan allows you to insure an additional 10 to 20 percent of your income.

Another bonus with an individual policy is that the plan stays with you when you switch jobs, plus, you can sue if the insurer denies or delays benefits. Unlike group policies, the amount you could receive out of a lawsuit is not offset by any other benefits.