Personal Insurance

Individual Disability Income Insurance

By Adam Frugoli, Leavitt Group

A recent study by the Social Security Administration revealed that one in four people who are currently 20 years of age will become disabled before they retire. Over 36 million Americans (about 12 percent of the nation’s population) are classified as disabled. Over 50 percent of disabled Americans are age 18 to 64 — the age range considered to be “working years.”*

The effects of a disability can be disastrous to a family or a business. Financial obligations still need to be met, though the ability to do so has been diminished. Most companies and their employees could benefit from either individual disability income insurance or group disability income coverage in the event of a disability; however, this type of insurance is one of the most overlooked areas of risk.

Most people assume they are covered for disability by their employer’s group policy. This might be true for some, but in recent years many employers have dropped or reduced benefits in their group policy. It is very important that employees review their yearly benefit statement to make sure their income is still appropriately covered.

How Does Disability Income Insurance Work?

Disability income insurance provides income payments to an individual who is unable to work due to disability from injury or sickness. It is primarily income replacement insurance paid in weekly, monthly, or sometimes annual benefits. Coverage lasts until the individual can return to work or until the maximum period allowed by the coverage has passed, normally not past age 65. Individuals often purchase this coverage to help them meet expenses and maintain their standard of living in the event they are unable to work due to sickness or injury. Businesses have found this type of policy useful in providing cash to fund a buy-sell agreement or business overhead expenses if a key person is sick or unable to perform.

Disability income insurance is available in many options to fit the varying needs of different individuals and businesses. While considering the different options available, individuals should make sure they select the right insurer when they purchase a contract. Look at the ratings of the insurer, how long the insurer has been providing coverage, and if the insurer has had any class rate increases. Most insurers will not increase premium rates, but they may increase pricing in a class or occupation if they see too many claims and become unprofitable.

Disability Income Insurance Options

The following list includes some options that individuals can look for when considering disability income insurance. These options may not be available through every insurer, so it is important to consider several different policies and insurers to find the right solution —whether for an employee group or individual:

  • Inflation Protection: Increases your coverage payout by the consumer price index or a set amount in the contract.
  • Non-Integration: This rider modifies that any monthly disability payments, including Social Security income, will not reduce your payout.
  • Age 65 Own Occupation: In the event that an individual is unable to perform the material and substantial duties of his or her regular occupation, the insurance company will consider the occupation to be the occupation the individual is engaged in at the time he or she became disabled. They will pay the claim even if the individual is working in some other capacity.

Before benefits take effect, individuals typically have to complete a waiting period. The waiting period may range from 30 to 365 days. The longer the waiting period, the less expensive the premium should be.

There are many riders and options for disability income insurance — we’ve only covered a brief list. For more information, contact your Leavitt Group insurance consultant.

* Reference: 2011 SSI Report

Contact your Leavitt Group advisor for more information about individual disability income insurance.


Adam Frugoli is an insurance broker and vice president for Archibald Insurance Center, a member of Leavitt Group. He has over 17 years in the insurance industry and is a certified HIPAA, HITECH, and OSHA expert. He specializes in risk management, cyber and billing liability, and general and professional liability. He has significant experience with the insurance needs of hospitals, long-term care facilities, and physician practice groups.