Six Reasons to Consider Supplemental Long Term Disability Coverage

Our client, a successful professional with many passions enjoyed a full life and career until a terrible accident left them largely incapacitated with a traumatic brain injury. Not only were they left unable to work, but now needed significant help navigating day-to-day life. While the story is undoubtedly tragic, our client’s insurance program included long term disability coverage that afforded one less challenge, monthly income replacement.

If you don’t often think about becoming disabled, you are not alone. We find that most of our clients are often more focused on securing life insurance than long term disability. While we, of course, wholeheartedly support the instinct to safeguard your loved ones in the event of your loss, we also understand how important it is to make sure you—and they—are just as well protected should you experience a sickness or accident that precludes you from earning a living.

Unfortunately, statistics show that even if you exercise and eat well to stave off debilitating disease, Americans are eight times more likely to become disabled during their working life than to pass away. In fact, just over 1 in 4 of today’s 20 year olds will incur a disability before they reach age 67, according to the Social Security Administration.

Rather than be alarmists, we want to help you make an educated choice about this coverage. Here are some important things to know about long term disability coverage.

1. The long term disability (LTD) policy your company offers covers only a small portion of your income.

If you are a high income earner, in particular, your group plan most likely will not provide adequate income replacement. The calculations of these plans consider the needs of the entire collective, so therefore high-income earners end up receiving less-than-full replacement—sometimes only a small fraction of your income. Additionally, it is likely that your monthly benefit will be considered taxable income which would leave you with significantly less than 60% of your income.

2. Your company’s LTD coverage may define “work” differently than you do.

As with every type of insurance policy, your contract specifies what is and is not covered. In the case of group disability insurance, that means coverage may not kick in if you are still able to work in some capacity. Some disability contracts have definitions similar to Social Security Disability. These policies only cover those people who have been rendered unable to perform any job based on their level of education and experience. For example, a surgeon who injures their hand and can no longer operate may not qualify for coverage without the right definition of disability.

3.  Supplemental LTD policies can be customized to meet your specific need.

Because these policies come with many different riders, an advisor can help you customize your coverage and determine what is most appropriate for your situation.

4. Supplemental LTD should be considered by anyone who works, whether they are single or married with children.

It may sound obvious, but expenses exist regardless of marital status and physical capabilities. Furthermore, single individuals may be more likely to need to hire aides to help navigate daily tasks

5. Supplemental LTD policies can be customized to meet your specific need.

Because these policies come with many different riders, an advisor can help you customize your coverage and determine what is most appropriate for your situation.

6. Supplemental LTD replaces your income through the entirety of your working years.

After you file a claim, the carrier will review your medical records to determine if you are unable to perform material functions of your occupation. Once that determination has been made, you will begin to receive a monthly payout that bridges the difference between the payout from your company policy and what your monthly paycheck had been (or the entire paycheck if you are an independent entrepreneur). That check will continue to arrive for the duration of your disability.  or until you reach the age of 65 or so, and you can use the money however you wish.

Your earning ability is often one of your biggest assets and losing it can be devastating for you and your family. Long term disability coverage is a shield against such devastation. While coverage costs might deter some, we would argue it’s a small price to pay to replace your future income should the unexpected occur. We are here to help guide you on your current company’s LTD coverage and discuss the potential benefits of adding it to your program.