Clients who are covered by group disability insurance through their employers may still be at risk. When you hear: “I’m covered at work,” ask to review their group plan. It’s an opportunity to educate your clients about their group benefit, and the gaps in this coverage. Here are some common gaps found in an employer-paid group LTD plan:
- Employer-paid group LTD is a taxable benefit at claim time. So, your clients’ benefits will be reduced by the amount of taxes they owe on the benefit.
- Employer group LTD plans place a cap on the maximum monthy benefit the insureds can receive, regardless of their income. So, if your clients earn more than the group cap, they will come up short at claim time.
- Most employer group LTD plans do not protect the client in his or her own occupation until age 65. It’s common that these plans will protect your client in his or her occupation for 3-5 years and then he or she must not be able to perform any reasonable occupation based on his or her education thereafter. This leaves a lot of discretion to the insurance carrier in the event of serious disabling injury or sickness that lasts longer than 3-5 years.
Take the opportunity to meet with your clients and review their group LTD plans with them. Most employees do not understand the limitations of these plans. They will appreciate your expertise in this area.
After they understand the gaps in their coverage, explain how layering an additional individual disability policy on top of their group LTD plan can make all the difference. Individual disablity income can cover the gap in coverage created by the group cap and taxable benefit. It also carries a strong definition of disability throughout the benefit period, so your clients know that they are covered regardless of the length of their disability.
For a group of 3-5 high income earners in the same organization, you may be able to offer guaranteed issue individual disability insurance as long as the coverage is mandatory.