Individual disability insurance is an insurance product designed to replace anywhere from 45-60% of your gross income on a tax-free basis should a sickness or illness prevent you from earning an income in your occupation.

Practically all insurance companies offer disability insurance policies however insurance companies may be significantly as far as benefits are concerned. Disability insurance is not a product to simply shop for the most competitive rate. Buying the cheapest disability insurance policy on the market is to throw money away.

The odds of getting paid a monthly benefit under a cheap contract may be significantly lower than benefits from a quality contract. Our goal is to provide you with a resource to make an educated decision that will meet your needs.

Group disability benefits can provide much needed replacement income in the event of a disability, and are highly valued by most employees. If you're fortunate enough to have a group disability benefit, you should take the time to calculate whether the benefits provided through your plan are sufficient to make ends meet if you were unable to work for an extended period of time. In the course of thinking this through, it's very important to understand that most employers pay the premiums for the group disability coverage with pre-tax dollars. As a result, benefit payments through a group plan generally get taxed. So while you may receive 60 percent of your salary through your group plan, that income is taxed so you'll really have to make do on less than 60 percent. By contrast, most individually purchased disability policies are paid for with after-tax dollars, as such the benefits are rarely taxed.

Increasing coverage through work is particularly attractive to employees who might find it difficult to obtain comparable coverage on their own due to their age or existing health problems. The reason is, with most group plans, employees are offered the same premium as others in their general age bracket (e.g., 40-50 year olds), regardless of their health status or actual age. So if you have some health issues, the one-size-fits-all premium offered through your employer could be lower than what you'd be able to obtain for comparable coverage on your own.

However, be aware of an exclusion clause called, a pre-existing condition exclusion. This clause stipulates that if you're treated for a particular condition within three months prior to obtaining additional disability income insurance coverage through work, and that condition is the cause of your disability in the 12 months following your voluntary insurance purchase, then the policy will not pay any benefits.

Another potential drawback to buying additional disability insurance through work is that you're limited to the companies and products that your employer makes available to you through your benefits package. You could possibly find a better price or policy that better suits your needs by shopping on your own.

Finally, be aware that most employer-sponsored disability coverage is not portable, meaning you can't take it with you if you leave your job. That's true even if you voluntarily increased your coverage.

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