What would you do…
…if you became disabled?
Most Americans do not have enough savings, to pay their bills and household expenses for over 90 days. This includes highly compensated employees. While 48% of Americans report having less than 3 months’ worth of savings, 60% of those earning over $100,000 admit to living paycheck to paycheck according to a leading disability insurance company’s study. It’s likely that both these numbers are “under-reported”, since Americans are proud and reluctant to disclose financial hardship for a survey.
Why is this important? Because 1 in 4 Americans will become disabled for more than 90 days, during their working years. And, if disabled, the average duration of a disability claim is 2.5 years for a rank and file employee, and 4.5 years for an Executive.
But…. your employer provides you with Group Long Term Disability (LTD) protection! Great, you’re all set!
Not so fast!!
While Group LTD provides a great foundation of protection, Group LTD plans typically do not adequately protect employees earning over $100,000. Why? Because Group LTD plan maximums “cap” monthly benefit amounts. Highly compensated employees can cap at the monthly benefit maximum, before achieving the 60% target replacement. This could result in highly compensated employees receiving 20% to 30% protection.
In addition, Group LTD plans generally protect base salary only. Many employees receive bonus, commissions, or deferred compensation. This is not covered by the Group LTD plan 78% of the time.
Last, Uncle Sam gets his payment. If your employer pays for your Group LTD coverage - which is great, and the most common approach - your benefit at time of claim is taxed, just like your income is taxed when you are working.
So, if you are not fully protected by your Group LTD plan, and like most Americans you have less than 3 months of savings, and are living paycheck to paycheck, what would you do if you became disabled? Cashing in your retirement, leverage your mortgage, use credit cards? None of those options have a happy ending.
Employer-sponsored Supplemental Disability Insurance coverage is a great solution. The coverage is very affordable, guaranteed issue, and portable at the same price. These plans can provide up to 75% income protection, including salary, commission, bonus, and deferred compensation.
Over 50% of Fortune 500 companies offer Supplemental Disability Insurance programs. Over recent years, these programs have become a more mainstream benefit program in the smaller employer marketplace and is an excellent attract/retain benefit for highly compensated employees.
May is Disability Insurance Awareness Month (DIAM)!
