Long Term Disability Coverage Tips

We found a fantastic article from Andrew Cavaliere who gives a sound perspective on long-term disability coverage.

Take note and read below: The average age of an individual filing a disability claim with the nation’s largest group long-term disability (LTD) carrier is reported to be 45 years old. The most common causes of disability include: back injury, cancer treatment and maternity leave.

Are all of your family’s plans going to be realized if you can no longer earn a living?

Long-term disability benefits can replace part of your income so you can focus on recovery instead of worrying about your ability to pay the bills. Only 5% of baby boomers realize they have a one-in-three chance of becoming disabled during their working years.

All that aside, do you really know what your LTD coverage is and what it pays?

  • Does it adequately protect 60% of your total income or is the monthly benefit capped?
  • Does it protect variable compensation, such as bonus income & commissions?
  • Does it provide tax-free income at the time of claim or is your benefit going to be further reduced by federal & state income taxes?
  • Does it offset against Workers’ Compensation or Social Security Disability insurance benefits?
  • Does it terminate if your employer goes out of business or simply cannot pay the group premiums?
  • Does it protect your retirement plan benefits?
  • Does it provide a cost of living adjustment (COLA) when you are receiving benefits?

These are very important questions and you need to understand the answers clearly. If you are not satisfied with your current plan, and it appears portions of your income are not protected, you may want to investigate an individual supplemental LTD policy for yourself. These plans offer the following benefits that group LTD plans do not:

  • The ability to enhance your existing LTD coverage with an additional layer of tax-free income.
  • Individual policies offer a true own-occupation definition of disability, meaning if you cannot perform the regular and substantial duties of your normal occupation, you can work in another occupation and still be eligible to receive your long-term disability income benefits.
  • Individual policies provide guaranteed renewable benefits that are non-cancellable.
  • Individual policies offer level guaranteed premiums for the life of the contract.
  • Individual policies are fully portable in case of a separation of service.
  • Individual policies can provide a variety of cost of living adjustment benefits (COLA).
  • Individual policies can provide a Catastrophic Disability Rider that can provide up to 100% income replacement.
  • Individual policies can provide a Retirement Protection Coverage that automatically funds your retirement plan in case of a disability3.

Example: John Smith is a 50 year old doctor earning $240,000 a year with a $60,000 annual bonus. His practice has a boiler plate group long-term disability policy with a leading carrier that his practice pays for before taxes. John has a heart attack and his family soon discovers that, after the elimination period, his policy only pays 60% of his base earnings up to a $5,000 maximum per month to age 65. When you do the math, John’s income just decreased by 80%! Moreover, he is going to have to pay taxes on the $5,000 every month and there is no cost of living adjustment to this income for the next 15 years.

Recommending complete, cost-conscious coverage is important to us, as is having our customers fully understand their coverage.  Contact us for more information on insurance for Yorktown Heights and the surrounding Westchester, NY area.


About the Author:

The Yorktown Heights Insurance Agency works to leverage our relationships with insurance companies to provide you with the best information available. We work across companies like Farmers, GMAC, Progressive, Safeco, and many others to find you a great rate. We thank each and every one of our clients who consider us the top insurance agency in Westchester.

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