Guardian Disability Insurance Brokerage

Is Your Group Disability Insurance Plan Enough?
Even Know What Your Group LTD Pays?
by Larry Laskin

For those fortunate enough to be covered by an employer-paid disability insurance plan, the majority believe that they would be adequately covered if they were to become disabled. The sad truth is that most aren’t.

Most group long-term disability insurance plans (Group LTD) cover 60% of one’s salary to a maximum of say, $10,000 a month. (This maximum varies by plan). This is great news, but because most LTD benefits are taxable to the beneficiary, this is in most cases, not sufficient. Unfortunately, most of them do not realize this until they are on claim. Many have a difficult enough time living on their full salary, now they have to live on 60% of that salary.

In addition, most LTD plans only offer a two-year own-occupation definition of disability. This means that for the first two years of a disability, you can collect benefits if you are not able to perform the substantial and material duties of your occupation and are under appropriate physicians care. After two years, you can collect only if you are not able to work in any reasonable occupation for which you are, or could become fit, based on training, education or experience*. This means that you could end up working in an occupation that you do not want to.

Another issue with LTD plans is that they usually offset for any other benefits received from Social Security, Worker’s compensation, and other sources. These “other payments” could reduce your monthly payments to as little as $50 a month.

Lastly, most LTD plans usually only offer a 24-month benefit for nervous/mental, stress/anxiety, alcohol or drug related abuse claims, unless you are continuously hospitalized.

How do you fill in the gap? Simple. By purchasing an individually owned, supplemental disability insurance policy. If you are paying the premiums yourself, in most cases the benefits that you would receive would be tax-free and would help offset any taxes that you would have to pay on the LTD benefits. You can also get a true own –occupation definition of disability without any offsets and with no limitations on benefits paid for disabilities caused by nervous/mental, stress/anxiety types of conditions.

Long-Term disability is a wonderful benefit that some employers offer their employees, but without supplementing it with an individually owned policy, most people that go out on claim will find out that they did not have proper coverage.

*Group plan's eligibility language quoted is common but variations occur.
Licensed in all states
California Insurance License No. 0C09324
This publication is offered for the purposes of education and information only and should not be considered tax or legal advice. For information on your specific situation please consult your legal or tax advisor.
A 24-month mental and/or substance related disorders limitation is included on all ProVider Plus Policy forms 1400 and 1500, issued in the states of California and Florida, as well as to applicants in all other states except Vermont in the following occupations: Anesthesiologists/Anesthetists (MD or DO), Certified Registered Nurse Anesthetists (CRNAs), Emergency Room Physicians, Pain Management Physicians, as well as Medical Residents declaring any of these physician specialties. State variations may apply.