Disability insurance offered through your work is a good benefit and a great start to building a financial strategy that protects your ability to earn an income. But if you rely solely on your group long-term disability coverage, the percentage of income replaced can be inadequate. You can consider adding supplemental disability insurance coverage because the combination of the two protects a larger percentage of income by filling in the gaps left by group LTD.
Understanding group long-term disability coverage
When provided by an employer, group LTD insurance typically replaces a percentage of your base salary only (no commissions, bonuses or other wages) with a cap on the benefit amount. If the employer pays the premiums, the benefit you receive if you become disabled is taxed. Coverage typically ends when your employment ends. Learn more about the basics of disability insurance.
Consider supplemental disability insurance
Supplemental disability insurance offers individual protection to help fill the gaps left by group LTD plans. Adding individually owned disability income insurance to the disability coverage you have through work helps protect more of your income. Supplemental disability insurance replaces a percentage of your complete salary minus other existing disability insurance.
Consider a group in this example to see how it works.
Let’s say you have group LTD insurance that pays 60% of your base salary up to a maximum of $10,000. If you earn $225,000 with a bonus, your monthly gross salary is $18,750 and if there was no cap the monthly benefit would be $11,250. But the group LTD benefit is capped at $10,000, which covers about 53% of your monthly salary.
If you purchased supplemental disability insurance with a maximum benefit of $5,000, you’d add that amount to your total monthly benefit, which means combined you’d replace 80% of your salary.
Continue learning more about supplemental disability insurance.
Benefits of supplemental disability insurance
Tax-Free Benefit Amount
When you purchase supplemental disability insurance with after-tax dollars and become disabled, your benefits are received tax free.
Your supplemental disability insurance can offer built-in features and riders typically not found with group LTD coverage.
Your coverage is portable. If you leave your current employer, there will be no changes to the premium or benefit amounts of your supplemental disability insurance.
Sicknesses and injuries can happen when you least expect it. Adding individual-owned disability income insurance to disability coverage you have through work helps protect more of your income by filling in the gaps. Having supplemental disability insurance equips you to be better prepared financially and protect more of your earnings.
Ameritas can help. To learn more or to get supplemental disability insurance speak with a financial professional.
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