Welcome to Ask an Adviser, EBN’s weekly column in which benefit brokers and advisers answer (anonymous) queries sent in by our readers. Looking for some expert advice? Please submit questions to
One of the biggest blind spots in employee benefit packages is a lack of adequate disability coverage for the
These unprotected employees are vulnerable when life events, the Great Resignation and other factors impact their income. But there are solutions to closing gaps in
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Marc Warrington, SVP at Sun Life Financial and longtime disability advocate, coined a saying that LTD does not stand for Long Term Disability; rather, it stands for Last Topic Discussed. Group LTD coverage discussions usually occur near the end of benefits meetings and tend to get neglected.
Typical group LTD plans can contain a maximum monthly benefit of 60% up to $10,000. This means that anyone earning $200,000 or less annually could receive 60% up to $200,000. What about anyone making over $200,000, like the CEO or CFO, who is often one of the people approving benefit decisions? If the CEO is making $300,000 a year (or $25,000 a month), that same group LTD plan would cap at $10,000. In other words, that CEO would be getting only 40% income replacement. Meanwhile, all other employees would be receiving 60% income replacement. This scenario is far too common.
The solution to underinsured disability compensation can be solved through IDI, which is a hybrid of individual and group disability plans that can layer on top of the existing group plan. This layering helps achieve greater maximum monthly benefits and true 60%
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Disability insurance is an overlooked benefit. Don’t let it be your blind spot. Identify the coverage gap and provide a comprehensive group plan layered with IDI to offer robust benefits that cover even the highly compensated.