What To Do About Disability Insurance
PROBLEM: A company has two distinct classes of employees and needs disability insurance. They have (1) staff, and (2) highly paid employees, executives and owners.
SOLUTION: All employees can participate in a group disability policy and a "supplemental disability policy" can be offered to the highly paid employees, executives, and owners.
CASE: An attorney's office has two types of employees. The highly paid employees and partners earn between $150,000 and $600,000 per year. The support staff earns between $40,000 and $75,000.
DEFINITION AND DETAILS: Disability "income replacement" insurance policies are either in the form of a group company plan or purchased by an individual. Depending on the industry and group census (number of employees, age, gender, occupation, etc.), a group policy is usually far less expensive.
Group disability policies usually cover approximately 60% of an employee's earnings and provide for up to $5,000/month in benefits. For example, an employee who earns $100,000/year can receive up to $60,000.
Because group disability maxes out at $60,000, highly paid executives and owners whose salaries exceed $150,000/year should consider a supplemental disability policy. These policies can be a "carved-out policy" for executives, owners, and highly paid employees. A 15-20% discount is usually applied if three or more enroll.
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