Many employees do not think they need an additional disability insurance policy because they are covered by their employers. However, although employer-provided disability insurance is a great benefit to have, it is worth considering as well whether or not you should look into purchasing an additional policy.

Disability insurance is a valuable benefit, especially when you are an employee in a higher risk work environment. However, before you relegate yourself to depending solely on the disability insurance provided by your company, you need to investigate what coverage and type of insurance is offered to you. Most companies will provide up to 60 percent of the income you will lose if you suffer from an illness or injury. While 60 percent is better than not having any type of disability insurance, it can still be a hard blow to you and your family, especially if you are the only provider of income to your family. In addition, the disability benefits that your employer provides are fully taxable. This means that if you had to use your disability insurance, you would receive 40 percent less than your normal salary and then be taxed on this smaller amount. This constitutes a great difference in wages, especially for workers who live paycheck to paycheck under normal circumstances.

Additionally, most companies have a cap on how much disability insurance an employee can receive per month, usually anywhere from $5,000 to $10,000. If you are an employee who makes a much higher wage per month than these estimated figures, that is even less you will be earning as compared to your original wages. It may be valuable in these cases to invest in an additional policy. However, if you are financially unable to do so, having disability insurance provided by your employer is still a valuable asset. If you are able to afford additional insurance, it would be a wise investment to investigate a policy that can provide “top hat” benefits, that is, cover the cost of your taxes so that you can receive the full 60 percent provided to you. You can also invest in a policy that covers you for more than 60 percent. What type of policy you choose in addition to that provided by your employer will depend upon your financial status and whether you can depend on receiving the less than 60 percent your employer’s policy will provide.