I have group Long Term Disability Insurance. I’m okay, right??
The short answer is maybe but probably not. The good news is that you have some disability insurance. The bad news is you may have less than you think. If you make less than $50,000 then group long term disability insurance (LTD) is probably sufficient. However if you make more than $50,000 per year then you are probably not okay. I call it the “Group Long Term Disability Insurance Trap.”
A few years back I met with a highly paid professional earning $300,000 per year, which worked out to be $25,000 per month. When I asked if he had LTD insurance he said yes, that his employer’s plan pays him 60% of his salary if he becomes disabled. However, I evaluated the plan and found out there was a cap of $5,000 per month, which worked out to be only 20% of this client’s income. In addition, I informed him that the 20% would be taxed when he received the benefits so his net income would be even less than 20%. He was shocked to think he had less than 20% of his earnings insured and his family could not live on that.
This is where I can help. I was able to find him an additional $10,000 a month of coverage by having him purchase a supplemental disability plan. He would need to pay the cost of this plan, but then the benefits would come to him tax-free. He felt better knowing his family would receive 60% of his salary should he become disabled.
Don’t fall into this “Group LTD Trap.” According to the U.S. Census Bureau, there were 5.73 million employer firms in the United States in 2012 and 89.6% of these firms had less than 20 employees. Most small businesses don’t offer any paid Group LTD plans. Can your family continue to pay their bills without your paycheck? Call us today to evaluate your group LTD plan and discuss your options. You can also check out our website for more info on disability insurance.