June 5, 2009, Newsletter Issue #60: Private Disability Insurance Compared to Government Insurance Protection

Tip of the Week

The debate concerning private disability insurance versus government insurance programs will probably continue. Unfortunately, the debate about which one is better is probably the wrong question. A better comparison might result if one measured how they relate to each other in providing protection. If cost were not an issue, private disability insurance would certainly be judged to be the “better” choice, since you can tailor your protection levels to your needs in an individual private disability insurance policy.

Both of these programs provide important protection that, when needed, is warmly welcomed by all. Using a combination of coverage may be the best solution to the question since these programs are often designed to perform somewhat different functions. For instance, suppose you had no private coverage at all and become injured while performing your occupation. Worker’s compensation insurance (a government program) might be a lifesaver, providing regular income benefits while you recuperate.

While Social Security Disability Insurance (SSDI) is a wonderful program, if you are a highly skilled and compensated professional, this coverage may provide a much lower benefit than you need. But it helps to understand that this program was not designed to provide the protection of a private disability insurance plan for professionals. SSDI tries to provide an income level that covers the basics (food, clothing, shelter) for millions of people. Should you have a more custom designed program, with some excellent optional features for professionals (guaranteed renewable, non-cancelable, future income increase options, own occupation coverage, etc.), your level of coverage will be superior. You may, however, have a good friend or family member who must financially live from “paycheck to paycheck.” Should he or she suffer a disability, SSDI suddenly becomes a very safe port in a very bad storm.

Therefore, the question of which protection is better may be an oxymoron. They are different but designed to help you in a similar way as part of your overall health insurance program. It’s better to understand their strengths and weaknesses and make your own decisions about the level of disability income insurance protection you need.

Refer to your insurance policy contract for specific information regarding your coverage and for actual terms, conditions and exclusions. The above statements are general in nature and may or may not reflect the actual terms of your insurance policy.

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