Reviewed September 2026.
Employer group disability (often STD + LTD on the benefits portal) is convenient and sometimes employer-paid. An individual disability policy you buy from a carrier can travel with you, may offer own-occupation wording that pays when you cannot do your own job (sometimes even if you work elsewhere, depending on the contract), and often pays benefits that are tax-free when you paid premiums with after-tax dollars. Compare both before you assume open enrollment coverage is enough. Basics: Disability insurance basics.
Six numbers and clauses to line up
| Factor | Typical group LTD | Typical individual LTD |
|---|---|---|
| Who pays premium | Employer, employee, or split | You (after-tax common) |
| Benefit tax | Often taxable if employer-paid | Often tax-free if you paid after-tax |
| Replacement % | ~50–60% of eligible earnings | Often designed around your gap |
| Monthly max | Caps common ($5k–$15k range varies) | Underwritten to your income |
| Definition | Own then any after ~24 months common | Own-occupation options more available |
| Portability | Usually ends or converts when you leave | Stays if you keep paying |
Definition deep dive: Own-occupation vs any-occupation. Amount math: Estimate disability coverage.
Worked sketch: $90k salary, group 60%, individual gap fill
Sam earns $90,000 ($7,500/month pre-tax) and takes home about $5,400. Group LTD pays 60% of eligible earnings ($4,500) with a $10,000 monthly max and taxable benefits. After ~22% tax on the benefit, Sam nets about $3,510. Must-pay floor is $4,600, so the gap is about $1,090/month.
| Option | What Sam compares |
|---|---|
| A. Rely on group only | Gap ~$1,090 + 90-day elimination cash + job-change risk |
| B. Individual gap policy | Quote a ~$1,200–$1,500 monthly benefit (confirm offsets for other disability income) |
| C. Larger emergency fund only | Capital locked for years vs premium cost |
Also check whether the group plan offsets state disability or Social Security Disability Insurance (SSDI) dollar-for-dollar. State short-term programs: State disability insurance.
Portability and job-change risk
Group coverage usually ends on or soon after the last day of employment. Some plans offer a conversion option to an individual policy; that is a separate decision with its own deadline, premium, and benefit terms (not an automatic continuation of the group certificate). If Sam changes employers at age 42, check the new group plan’s eligibility/effective date, elimination period after a disability begins, any preexisting-condition limitation, and whether medical evidence is required for supplemental amounts. Those are separate clauses; a waiting period is not “medically underwritten” by itself. An individual policy issued while healthy keeps coverage through the job hop if premiums continue. Treat that like comparing supplemental life at work vs your own term policy: Supplemental life at work.
Checklist before you enroll or buy
- Download the group certificate / SPD; ignore brochure bullets alone.
- Note %, max benefit, elimination period, offsets, and definition timeline.
- Estimate after-tax benefit vs your must-pay floor.
- Price an individual quote with the same elimination period for an apples-to-apples premium.
- Ask whether the individual policy integrates with (subtracts) group benefits.
- Re-check after a raise, second job, or move to self-employment.
Educational only. Not insurance or tax advice. Offsets, taxation, and underwriting vary by plan and carrier; confirm with documents and a licensed professional.