Group vs. Individual Disability Insurance: Are You Really Covered?

Many professionals assume that their employer-provided disability insurance is enough. On paper, it seems like a solid benefit: if you become sick or injured, the plan replaces part of your income. In practice, though, the coverage often falls short—especially for high earners. Understanding the differences between group and individual policies is essential for anyone seeking true income protection.

How Group Disability Insurance Works

Employer group plans usually cover around 60% of base salary, with benefits capped at a maximum amount. While this helps, it often leaves gaps:

• Bonuses, commissions, and incentive pay are usually excluded.
• Caps mean high-income professionals may receive far less than 60% of their total earnings.
• Coverage ends when you leave the company, creating a gap during job transitions.

Group coverage provides a safety net, but rarely matches the actual income and lifestyle needs of executives, business owners, or specialized professionals.

What Individual Disability Insurance Offers

An individual disability policy is purchased directly, independent of employment. It has several advantages:

• Own-occupation coverage: Pays benefits if you cannot perform your specific profession, even if you could work elsewhere.
• Customizable benefits: Higher limits, riders for cost-of-living adjustments, and options to cover bonuses or commissions.
• Portability: Coverage remains in force regardless of employment changes.
• Guaranteed renewability: As long as premiums are paid, coverage cannot be canceled by the insurer.

For high earners, these features ensure income replacement is meaningful and aligned with actual living expenses.

The Cost of Being Underinsured

Consider a physician earning $400,000 annually. A group policy with a $10,000 monthly cap would replace only $120,000 of that income—less than one-third. The gap between lifestyle needs and actual benefits can be devastating over years of disability. Without supplemental individual coverage, savings and retirement accounts quickly become the fallback, undermining long-term goals.

Why Both May Be Best

Group insurance offers a base layer of protection at little or no direct cost. Individual policies add the tailored coverage necessary to truly safeguard income. Together, they form a comprehensive shield that preserves financial stability even in difficult circumstances.

Coverage with Clarity

The question is not whether disability insurance is necessary—it is whether the coverage in place matches your income and obligations. For many, the group policy is a start, not a solution. Individual coverage ensures that your plan reflects the lifestyle you’ve built and the future you’re protecting.

• Group disability policies often leave significant gaps, especially for high earners whose income exceeds the plan’s limits or restrictions.
• Individual coverage provides greater flexibility, portability if you change jobs, and stronger protection that can be tailored to your specific financial needs.
• By combining group and individual coverage, professionals can create a more complete income security plan that ensures their lifestyle and long-term goals are protected.