Disability Insurance

A Firm’s Most Valuable Asset

Many Clients Prepare for Death But Not Life With a Disability

Current workforce trends make providing competitive benefit strategies that offer value for both a firm and that firm’s management especially challenging.

  • Medical advances are extending life expectancy, resulting in a lifespan that is more likely to include disability rather than an earlier death.
  • Even the highly compensated usually depend on their ability to work and earn income to maintain their lifestyle and accumulate retirement funds.

An employer-sponsored, group Long Term Disability (LTD) plan can impart a false sense of security for many highly compensated employees and make maintaining their current lifestyles impossible if they were to become disabled.

Probability of a Disability Lasting at Least 90 Days vs. Death Between the Age Shown in the Table and Age 65

Percentage more likely to become disabled than to die:

AgeMale Female 
 25  32%    147%
 30  31%    141%
 35  32%    135%
 40  32%    125%
 45  32%    111%
 50  33%      94%
 55  32%      79%
 60 9.3%   10.6%

Mortality based on 2001 CSO Ultimate table (composite smoking status)
Disability based on 1985 CIDA, 90-day elimination period, occupation class 1. Statistics vary by occupation
Occupation Class 1: includes professional, technical and managerial occupations that are generally office duties only
1985 CIDA is the most current morbidity table for individual disability claim incidence adopted by most State Departments of Insurance

Potential Disadvantages of an Employer Sponsored LTD Plan

Some possible disadvantages and undesirable consequences of an employer-sponsored LTD for the highly compensated are described below:

Reverse Discrimination

  • Monthly benefit maximums (caps) on employer-sponsored LTD plans subject the highly compensated to lower percentages of earnings actually replaced. 

Excluding Significant Forms of Compensation

  • Variable performance pay, retirement contributions and other incentives continue to be an important component of compensation and often are used to meet financial obligations.  However, many group LTD plans cover only a portion of base salary and exclude these other forms of income.

Insufficient Benefits

  • Most LTD plans do not provide sufficient coverage for “catastrophic disabilities” or disabilities that require expensive custodial services.

How We Can Help

Innovative New Products

  • Effectively meets the income replacement and asset protection needs of highly compensated employees in a coordinated fashion.

Higher Coverage Limits

  • Total coverage can approach or even exceed $50,000 per month.

Enhanced Guaranteed Standard Issue (GSI) Programs

  • Provide easier access to coverage without the usual evidence of insurability requirements.

Benefits of an Executive Disability Plan:

  • Reduces “reverse discrimination” resulting from income exclusions and inadequate plan maximums
  • Improves underlying LTD price stability
  • Enhances purchasing power by leveraging corporate tax deductibility of premiums
  • Provides for guaranteed standard issue and discounts
  • Presents an opportunity to improve communication and enhance appreciation of benefits
  • Addresses the employee’s and family’s retirement funding needs, offering peace of mind
  • Enhancements assist in recruiting and retaining key employees