There are three primary ways to obtain individual disability income insurance:
Through an insurance professional
An insurance professional can help you find a policy that will meet both your needs and your budget. A big advantage to buying through a professional is that he or she will be able to search for policies from a multitude of carriers to find just the right product for your needs. If you buy through work (see below), you're usually limited to buying (or increasing) coverage from the one carrier that your employer has chosen to contract with. Furthermore, disability income insurance is not a simple product. With dozens of features from which to choose, it pays to get advice from someone who can explain the many features of disability income insurance and help you strike the appropriate balance between the benefits you desire and the money you have to spend.
Through Your Employer
Most large companies provide their employees with a base amount of both short-term disability (STD) and long-term disability (LTD) coverage. Some small businesses (companies with fewer than 100 employees) also provide these benefits, but many do not. According to LIMRA International, 35 percent of small businesses provide STD insurance and 33 percent offer LTD insurance. It is common for STD insurance to pay benefits for a period ranging from three to six months. LTD insurance usually pays benefits for at least 5 years, and often will provide coverage until age 65 or the retirement age specified under Social Security. Typical group LTD benefits replace about 60 percent of a person's salary and begin when sick leave and STD benefits are exhausted.
Group disability benefits are greatly valued by most employees and can provide much needed replacement income in the event of a disability. 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 would be sufficient to make ends meet if you were unable to work for a period of time. In 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 that. By contrast, most individually purchased disability policies are paid for with after-tax dollars and the benefits are rarely taxed.
Since employers recognize that the group benefits they offer are very helpful but often not sufficient to meet their employees' replacement income needs, many offer their employees the option to voluntarily increase their coverage from, say, 50 percent of their base salary to two-thirds of their salary. Increasing coverage through work is particularly attractive to employees who might have a hard time obtaining comparable coverage on their own due to their age or health problems. That's because with most group plans, employees are offered the same premium as others in their general age bracket (e.g., 45-54 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 may be lower than what you'd be able to obtain if you tried to get coverage on your own. One thing to be aware of is something called a pre-existing condition exclusion. That stipulates that if you're treated for a particular condition in the three months prior to obtaining additional disability income insurance coverage through work, and that condition causes you to be unable to work in the 12 months following your voluntary insurance purchase, then the policy won't pay any benefits. Another potential drawback to buying through work is that you're limited to the companies and products that your employer makes available to you through your benefits package, and you might be able to find a better price or policy 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.
On your own
You probably know that you can get insurance quotes on the Internet for life insurance or automobile insurance. What you may not realize is that some sites also provide online quotes for disability income insurance. The difference is that you can sometimes make an online life insurance or automobile insurance purchase without ever speaking to an insurance agent. With disability insurance, the Web sites are really just gateways to agencies and agents who can help analyze your need for individual disability insurance and help find the right product for your specific needs. The prices you can obtain online are usually the same as what you would pay if you walked into an agent's office. So the only real advantage of buying online is the convenience of never having to leave your home or office.