If you have long-term disability insurance coverage through work, you’re actually in the minority. Only one-third of American workers receive disability coverage, according to LIMRA*.
Still, even if you’re among those with coverage, you should make sure it’s sufficient to protect your income in the event you’re unable to work due to illness or injury. Familiarize yourself with how your group plan works, what it covers, and for how long.
Typically, long-term disability (LTD) insurance pays 50 to 60 percent of your base salary (pre-tax) for a certain period. It’s a one-size-fits-all type of product that is not specifically designed to meet all of your expenses. In addition, it only pays if you are still employed with that company.
Explore the specifics of your group plan to see how long your current premium rates are guaranteed. It’s not uncommon for group plans to guarantee rates for short terms – typically one to three years. After that, there’s a chance they could change.
Group LTD benefits are usually taxable, reducing the amount of income benefits received. Make sure you factor that into your financial planning to gauge whether your LTD benefits would provide you with enough replacement income after taxes.
As with other employee benefits, group disability coverage can’t be everything to everyone. That can be true for those at higher income levels who might not have their pay sufficiently covered due to benefit caps. Be sure to find out if there’s a ceiling on your coverage.
It’s also worth digging into your group plan to see how it handles the variable compensation that falls outside of your base pay. Check to see if your plan covers bonuses, overtime pay, pension contributions, and other forms of compensation that might boost your income.
Group disability policies generally aren’t portable. Is yours? Even if the answer is “yes,” there are likely restrictions on just how portable it is. A non-portable policy is one that doesn’t follow you. if your change employers – something to keep in mind if you’re not planning to be with the same employer for the rest of your career.
Even if you stay, just remember your coverage is a discretionary benefit. Your employer can modify or eliminate it entirely and there’s a chance you’ll no longer be insurable for personal coverage if that time comes.
*Source: “Facts from LIMRA: 2016 Disability Insurance Awareness Month.” LIMRA.com, 2016.
Disability income insurance policies issued by Ohio National Life Assurance Corporation. Product, product features and rider availability vary by state. Guarantees are based upon the claims-paying ability of the issuer. Disability income insurance is not available in CA. Issuers not licensed to conduct business in NY.
Disability income insurance policies contain exclusions, limitations, reduction of benefits and terms under which the policy may be continued in force or discontinued. For complete details of coverage, contact your financial professional or the company.