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More and more employers offering long-term disability insurance

Disability insurance, many financial experts say, is an under-purchased financial product. Many people buy life insurance, and for good reason. But fewer people realize that disability insurance may be just as important, at least in the short term.

When it comes to purchasing disability insurance, should one go with a group plan offered through one's employer, or a private plan? With more and more employers offering group plans for disability insurance, this is a question more and more employees are having to ask themselves. There are definite differences between private and group plans. Here we'll look at several of these.

First, the terms group plans vary, so employees need to be sure they understand them. Usually, such plans replace between 50 and 75 percent of the employee's income if an accident or illness prevents them from working for several months or more. Premiums in these plans are usually lower than 1.5 percent of an employee's salary.

Individual policies can cost several times that amount, but may have other advantages. For one thing, individual policies have locked in premiums and the terms cannot be changed or cancelled as long as one continues to pay premiums. This is usually not the case with group plans.

In addition, group plans sometimes require employees to use up other income sources, such as workers compensation, state disability benefits, and Social Security disability, before receiving long term disability benefits. Private policies often don't have this requirement.

A final thing to keep in mind is that private coverage provides more options when a disability claim is denied.

So both private and group plans have their advantages and disadvantages. Employees should do their research to make sure they select the policy that is right for them.

Source: Reuters, "Should you buy extra insurance at work?," Katie Kingsbury, October 11, 2012

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