Think your group disability insurance has you covered? Think again. While it’s a great starting point, the fine print often hides big gaps that could leave you financially vulnerable when you need it most. In many cases, people never actually qualify to collect benefits they deserve, or the benefits they receive are a fraction of what they need to live on. An individual policy to supplement employer coverage you get through your job can be a huge relief when the unplanned happens.

Let’s look at some key issues.

1. Where’d All My Money Go?

If your employer pays your group long-term disability (LTD) premiums, your benefits are taxable. A standard policy that pays 60% of your income can look more like 40% after taxes. Let’s see two examples.

A consultant earning $150,000 annually with a typical group LTD policy might receive $7,500 monthly in gross benefits. After taxes, that’s about $5,200. Subtract $2,500 for a family’s COBRA health insurance premium, and he’s left with just $2,750 to pay towards housing, food and other fixed costs.

A single physical therapist earning $90,000 annually with a typical group LTD policy might receive $4,500 monthly in gross benefits. After taxes, that’s about $3,400. Subtract $800 for one person’s COBRA health insurance premium, and she’s left with just $2,600 a month.

For most people, that’s not much towards housing, food, and well,… life. When you’re disabled, the last thing you want is financial strain adding to an already stressful situation.

2. Don’t Forget About Health Insurance Costs

One overlooked consideration during a long-term disability is, as you can see above, the potential loss of employer-subsidized health insurance. Most people on disability are left to cover full COBRA premiums, which can easily exceed $2,500 a month for a family. If you’re relying solely on a group LTD policy, this additional expense can make an already challenging situation even harder to manage.

3. Non-Portability: Not Yours to Keep

Imagine this: You’ve been with your employer for a decade, accumulating a solid benefits package, including group LTD insurance. Suddenly, you switch jobs, and your new employer doesn’t offer the same coverage—or any coverage at all. Your old group policy? It doesn’t travel with you. Unlike individual disability insurance policies, which you personally own, group policies are tethered to your employer. Worse, if you decide down the line to apply for an individual policy, you’re older, possibly in different health, and potentially more complicated to insure. Dun-dun-dun.

3. What Counts as “Disabled,” Anyway?

Here’s where things get even trickier. Most group LTD plans define disability differently than individual policies do. Many start off with a generous “own occupation” definition, meaning you’re considered disabled if you can’t perform your specific job, even if you want to keep working doing something different. Imagine a history teacher experiencing vertigo who can’t teach in a classroom for a few years, but manages writing grant proposals as an independent consultant. With an individual policy, she would be paid her claim benefits in full, even though she’s still working doing something else. On the other hand, a group LTD policy often shifts after two years to say that you want to perform any work—you may no longer qualify for benefits if you choose to do so.

4. Supplementing Group Coverage With Individual Policies

Here’s where I come in with the good news: If you’re locked into a group policy through work, you don’t have to rely on it alone. Individual disability insurance can supplement your existing coverage to close these gaps. And it’s often more reasonable than people expect.

Take a healthy 40-year-old male CPA earning $170,000 annually with a typical group LTD policy that would pay him 60% of his salary, or $8,500 a month in gross pay. After taxes, he’s left with $6,000. After COBRA premiums for a family, he has $3,500 a month to live on. For about $95 a month, he could purchase an individual policy that adds $3,300 of tax-free monthly income, plus increases for inflation in the event of disability, even if he’s chronically ill or injured for the next 25 years. That’s a significant cushion to bring him closer to his prior income for a fair cost.

The Takeaway

Group LTD insurance is a great starting point, but it’s not the comprehensive solution most people assume it to be. By understanding its limitations and supplementing it with individual coverage, you can ensure a safety net that’s reliable, portable and tailored to your needs.

At the end of the day, disability insurance isn’t about preparing for the worst, it’s about ensuring you have the financial stability to weather life’s unexpected challenges with confidence and dignity. After all, no one should have to settle for a lesser version of their life because of an overlooked gap in their financial planning.

Please reach out to me with any questions or for quotes regarding disability, life or health insurance.

Jamie ‘Elisheva’ Kopelman is a disability, life, and health insurance broker with National Financial Network in Manhattan. Kopelman is passionate about making financial jargon simple and giving her clients quality insurance protection that fits any budget. She lives in NYC with her family and can be reached at [email protected] or by phone at 631.560.4701.