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Disability Insurance

Question 2: What are the different types of long-term disability insurance?

There are two types of long-term disability insurance that are generally applicable to residents: individual policies and group policies. Disability coverage is also offered through the federal government, but the government definition is so strict and the benefits so relatively small that residents who are interested in meaningful disability insurance should look further.


Individual vs. Group Policies

Terms of individual policies are customizable to meet your specific needs; this usually makes individual policies more desirable than group policies in all areas except one—cost. Individual policies tend to be significantly more expensive than group policies. 

There are three main areas in which individual policies might make this expense worthwhile: 

  1. Strength of the definition of disability* 

  2. Total available coverage (e.g., benefit amount, benefit length)

  3. Portability (i.e., the policy continues to cover you, even if you switch jobs)** 


* Individual policies do not have de facto strong definitions of disability (i.e., inclusive in what is considered "disabled"); it is up to the purchaser to choose a policy with a suitable definition for their needs
** Portability and guaranteed continuation of the policy requires that the policy is non-cancellable, guaranteed renewable, and that premiums are paid on time

These three areas have been highlighted because group disability insurance policies rarely include all three (i.e., a strong definition of disability, a high benefit amount that will pay out over many years, and portability in the case that you leave that group). However, it is important to read the terms of your group policy carefully since some employers may offer exceptionally strong group options that may turn out to be favorable alternatives to individual policies (particularly when accounting for cost).


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