Long Term Disability Insurance
There are two major types of disability insurance available to employees; group long term disability (LTD) insurance, and individual disability insurance. A group long term disability insurance plan typically is designed to replace 60% of base salary to a monthly maximum spelled out in the policy. A majority of group LTD plans on the market typically cover 60% of base salary to a maximum of $5,000 a month. Notice that bonus income, as well as commission income is often not covered.
Many people earning an income over $100,000 a year are severely underinsured when it comes to group long term disability insurance. Since the monthly maximum is usually around $5,000 a month, any income over $100,000 a year should be insured with individual disability insurance layered on top of the group plan.
Shortfalls of Group Long Term Disability Insurance
- Benefits are taxable if your employer pays the premium
- More restrictive definitions within the policy
- Many have a 2 year maximum on mental and nervous disabilities
- No rate guarantees
Benefits of Individual Disability Insurance
- Benefits are received to you tax free if you pay the premium
- More liberal definitions within the policy to pay you more money in more claims scenarios
- Higher monthly benefits in the $10-15,000 a month range
- Rate guarantees to age 65
- Fully portable if you ever leave your current job
- Guarantees your insurability for the rest of your working years
We always recommend to people that they supplement their group long term disability insurance with a small individual disability insurance plan. The individual plan will lock in your insurability for the rest of your working years, and provide you with a higher income replacement should you ever experience a disability claim. Having both coverages takes you from living off of 40% of your income after taxes, to almost 70% of your income after taxes. An individual disability insurance supplemental plan is very inexpensive, but gives you the comfort of knowing that your income will always be protected regardless of your employers plan, regardless of whether or not you ever leave your current job, and regardless of whether or not you ever have a change in health history. Our coverage will grow with your income well above the group limits as well. For more information about our Long Term Disability Insurance policies and options and/or an application please contact CM&F Group at 1-800-397-3008 or via email at "Contact Us".