May has been designated Disability Insurance Awareness Month by the LIFE Foundation, a nonprofit organization dedicated to consumer education on financials security issues. This month serves a great time to draw attention to a vast income protection gap faced by high-earning executives and professionals. The gap created by employer-sponsored group disability insurance can jeopardize the financial future, lifestyle, career success accomplished by these individuals as well as put the business/organization at increased liability and risk of litigation.
Mind the Gap
Even though most employer- policies cover 60 – 65 percent of an employee’s salary, they also include coverage limits up to 24 months and a monthly benefit cap between $5,000 and $10,000. As an executive’s salary rises over the years, the benefit caps cause the income protection gap to widen drastically, often only covering at little as 25-30 percent of the executive’s salary. Additionally, the benefits received through an employer-sponsored group plan are also generally taxable, further widening the gap and making it nearly impossible for these individuals to replace their true income to maintain the way of life they have established and the future they have planned.
Your Career, Financial Future and Lifestyle at Risk
In addition to putting an executive’s financial future and lifestyle at risk, disability insurance, if not properly designed, could prevent an executive or professional from continuing in their specialized career. Most employer-sponsored group disability programs do not include an occupation-specific definition, meaning the insurance company may halt disability benefits if they determine the individual is fit to work in any capacity, including outside a designated occupation or specialty.
Your Business At Risk
Most employers agree to provide disability income protection, up to 60-65% of the employee’s salary, through their employment agreement. Due to coverage limits, many high-income earning executives and professionals may not reach that threshold—leaving the business liable and subject to potential litigation.
Additionally, without Business Overhead Expense (BOE) coverage, the business can suffer significant financial burdens in the event of a disability to the owner or another key employee.
How We Can Help
RCM&D consultants will conduct a complimentary policy review and gap analysis to measure the difference between true income and the benefits of an existing disability policy. From this review, RCM&D will identify lapses in coverage, additional liabilities and then offer plan recommendations.
To learn more about how supplementing an employer-sponsored group disability program with individual policies can help close this gap and the benefits for the individuals and the employer. Download our complete article Disability Income Insurance: High Earning Professionals are Vastly Underinsured.
If you have any questions about Disability Income Insurance or would like to arrange the complimentary gap analysis, please contact me directly a hpurvis@rcmd.com or at 443.921.3813.