How to get individual long-term disability insurance when you already have a group LTD plan with your employer?

I am a tech worker. My employer offers group LTD that covers 60% of my salary? I went out in the market to get an individual policy but my agent cannot find a company who will underwrite a policy with coverage greater than 10% of my salary.

This defeats the whole purpose because if I become unemployed or change jobs I will have only 10% coverage (might as well be zero) which is the first thing I set out to protect myself against.

Do people here know how to find a good company who will issue me a individual LTD policy with 60-70% of my salary and not demand that I reject my employer’s group LTD plan?

2 thoughts on “How to get individual long-term disability insurance when you already have a group LTD plan with your employer?

  1. Chris W. Rea

    Look for an individual long-term disability policy that can do a temporary group plan offset in your policy and that otherwise converts to the full coverage desired when you cease to be a group member (i.e. you resign from the job or are terminated.)

    Essentially, such an individual LTD policy acknowledges you may receive benefits as a member of the existing group LTD plan, yet enhances its benefits. The individual plan would only top up (as opposed to double up) your disability benefits while you are still a group member, and upgrades when you are no longer a member.

    I was in a similar situation some years ago. In my case, I had already purchased an individual LTD policy when working as a self-employed IT contractor; I had no group coverage. But, one of the features I selected for the policy was an annual “future income option”, guaranteeing I could buy more coverage (without any further medical) as my income would increase. I took advantage of it from time to time since I was younger and my income was growing quickly.

    A couple of contract gigs later, I found myself back in a full-time job. The employer enrolled me in their group LTD plan, which was inferior to my individual plan in a number of respects (the definition of disability, wasn’t “own occupation” coverage, etc.), so I maintained my individual policy alongside. While employed full time, I was again offered the opportunity to purchase additional coverage based on higher income. When I applied for increased benefits, the application form had this question:

    If you have group coverage, would you accept the addition of a group offset amendment, if required, due to your group coverage in force? Yes ___ No ___.

    Essentially, I needed to accept the group offset amendment which meant, in effect, “We will increase your individual LTD policy benefits, but as long as you are part of your group LTD plan, those benefits will pay first and reduce additional benefits from your individual plan — until you are no longer part of the group.”

    When I left that job years later, I contacted my LTD insurer for another increase and also informed them I was no longer covered by the group LTD plan. The group offset amendment was removed from my policy (I was issued a “Policy Change Rider” confirming that) and so all the added benefits I’d applied for converted to “full” benefits on the policy no longer subject to an offset.

    So, look for an individual LTD policy that will acknowledge (a) yes, you are part of a group policy, and this means “offsetting”, but (b) more important is that you need a guarantee from the individual LTD policy that when you cease to be a member of the group LTD plan, then your benefits in the individual policy convert to what you previously had in both plans combined.

    Ask your agent if he inquired about group offsets specifically. IMHO, if your agent doesn’t specialize in individual LTD insurance and instead is a “one stop shop”, you should consider talking to an agent who knows LTD inside and out.

  2. mhoran_psprep

    Going through the company does put you at risk if your employment ends.

    The last time I switched companies I was offered via COBRA the ability to extend the LTD coverage for an additional 18 months. Because the new company had a similar plan, there was no need to investigate all the costs and provisions of the COBRA LTD.

    You could check with HR to see what is offered to departing employees. I don’t see a huge risk of the next company not offing LTD. Every company I have worked for in the last 30 years has offered some sort of LTD plan.

    That 60% level seems to be normal for company plans. It would seem to be expensive to get much more than that, because of the risk of stretching out the disability time because 90% for nothing is a good deal.

    One thing to consider regarding the 60% percentage is the tax impact of disability payments. According to the IRS in general if you pay the premium the money is tax free, which means you don’t need 100% replacement.

    Question: Is the long-term disability I am receiving considered


    You must report as income any amount you receive for your disability
    through an accident or health insurance plan paid for by your

    • If both you and your employer have paid the premiums for the plan, only the amount you receive for your disability that is due to your
      employer’s payments is reported as income.
    • If you pay the entire cost of a health or accident insurance plan, do not include any amounts you receive for your disability as income
      on your tax return.
    • If you pay the premiums of a health or accident insurance plan through a cafeteria plan, and you did not include the amount of the
      premium as taxable income to you, the premiums are considered paid by
      your employer, and the disability benefits are fully taxable.
    • If the amounts are taxable, you can submit a Form W-4S (.pdf), Request for Federal Income Tax Withholding From Sick Pay, to the
      insurance company, or make estimated tax payments by filing Form
      1040-ES (.pdf), Estimated Tax for Individuals.

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