Layering disability insurance is a very effective strategy to protect against income loss in the event of a disabling injury or sickness, especially for high earning individuals and physicians and dentists.

Executives earning top salaries and bonuses may come up short with long-term disability (LTD) at work. In fact, group long term disability plans actually are often worse for executives than the average worker.

Here’s why:

Most group LTD plans cover 60 percent of the insured’s income up to a maximum benefit amount. So, executives and professionals who earn salaries in access of the maximum benefit will actually receive benefits that are less than 60 percent of their salaries.

Consider this example: An executive who earns $140K is covered under a group LTD plan that pays 60 percent of salary with a $5000 monthly maximum benefit cap.

According to the Bureau of Labor Statistics, executives usually fall into this salary range. The average salary for general and operations managers in professional, scientific and technical services is $138,400.

Let’s do the math: The executive earns $11,666 per month. Sixty percent of the monthly salary is about $7,000 a month, but the benefit is capped at $5000 a month. With no other long term disability coverage, this executive will have only 42 percent of the monthly income replaced.

While the group LTD benefit is sufficient for employees making less than $100K, it doesn’t replace anywhere near 60 percent of regular salary of high earners.

The higher the salary over the cap, the lesser the replacement percentage for the executive.

How to Ensure Executives Have Adequate Disability Income Coverage:

First, it’s important to schedule a Group LTD review with your executive and professional clients. Many don’t know what their actual benefits are at work. Ask to see a copy of their group LTD plan, so you can review it with them.

Once you have determined their current group LTD benefit, request an individual disability quote from Source Brokerage. Individual disability will provide an additional layer of coverage on top of the group LTD benefit, increasing the disability benefit to 60-70 percent of the executive’s current monthly income.

Individual disability income is underwritten medically and financially.

However, there are many income-earners in this country that have salaries in ranges that cannot be effectively covered by group and/or standard individual disability policies.  Most in the white-collar market as well as physicians and dentists, and many in the rapidly expanding grey-collar market have annual earnings that can hardly be insured by such a combination of group insurance and a single, traditional disability income policy.

Consider an executive making $300,000 per year.  Is a group LTD plan providing 60% of income up to $10,000 per month going to allow enough protection to maintain that person’s lifestyle or the lifestyles and financial needs of their spouse and children?  Families with a high-net worth require more insurance than most, as their average expense ratio is significantly higher than an average household.

The third tier is comprised of high-limit DI and is only accessible through the Surplus Lines market and specialty carriers like Lloyd’s of London which specializes in providing income protection above the usual disability benefit limitations of most U.S. carriers.  High-limit or “excess” disability insurance is readily available on a fully underwritten, individual basis as well as for groups large and small on a multi-life guaranteed-issue basis.

For moderate to high-net-worth individuals, the risks of underinsurance can prove to be severe and financially disastrous.  Your clients need to understand the importance of the varying layers of income protection, and with your guidance, properly tier and layer supplemental benefits on top of existing group and/or individual policies.  Safeguarding 50% of one’s income is not enough.  Safeguarding 60% of one’s income is not enough.  The multi-layer benefit approach to disability insurance will successfully fill the subtle and blatant gaps in your clients’ risk exposure.

Source Brokerage disability income specialists can help you develop a disability income plan for your client as well as and assist with the presentation and sale.

To learn more about layering disability income protection for executives, contact Steve Crowe at ext. 222or request a quote.