Nobody can plan for all of life’s sudden changes. However, when it comes to choosing what plans to invest in for your employees, there are steps a prudent employer can take to protect their most valuable asset.
Executives need to be protected for their ability to earn a living. These high-level employees deal with a number of pressures and often have to travel and deal with demanding schedules. The nature of their positions makes them vulnerable to stress-related illnesses that could lead to long-term disability.
Maximizing executive benefits packages with executive disability insurance is a solution for an employer looking to demonstrate that they respect, value and wish to protect their high-level employees who play an integral role in operations and the overall success of the company.
These employees have amassed experience and are likely to be sought-after by competitors or tempted to go off on their own. Executive disability insurance is a way to attract, retain, and protect dedicated, highly-competent employees who are less likely to walk away from a policy that protects their income and advances their long-term goals.
The devastation of disability
If a highly compensated person becomes disabled, losing 50% or more of their income can be devastating. Employers can minimize the financial loss upon an executive who sustains a long-term disability caused by an accident or illness. It is not enough to rely on workers’ compensation, which only applies if an injury or illness occurs on the job, considering that less than 5% of disabling incidents are work-related. Most are illnesses, not accidents.
Long-term disability plans, too, are only partially effective. These plans typically replace just 60% of an employee’s earnings, an amount often not enough to maintain the disabled executive’s lifestyle or basic needs. Guaranteed issue individual disability income will bridge that gap and is generally tax-free. If the premiums are executive-paid with post-tax dollars, the benefits received are tax-free under current tax laws.
A mutually beneficial investment
Providing executive disability insurance is also to the benefit of the employer. Besides attracting and retaining talent who will value the coverage, there is also a financial angle to consider. Employers may be able to get group rates on the insurance with minimal amount of qualifications, especially if they have low evidence of insurability. It is also possible to supplement the company’s current long-term disability plan, assuming they have one in place, by adding an individual disability income insurance policy for executives.
Supplemental disability insurance
Programs such as individual disability income and excess liability (“umbrella”) insurance can affordably help protect the income and assets of highly compensated employees and increase retention and recruitment efforts.
IDI is a cost-effective choice for employers. It’s also a high quality option that’s reliable and great for executives who need extra protection. Guarantee-issue IDI is great for employers who want to take care of key employees who may have gaps in their disability coverage. This could apply to employees who want to upgrade their coverage, need to replace benefits lost due to taxation of group disability benefits, or may need additional coverage and are key employees or executives with high income, usually $100,000 or more.
Supplemental policies, just like the other options outlined above, can provide many benefits to both executives and employers. They can provide a higher monthly benefit, income protection for any bonus or commission income not covered in their LTD plan, tax-free benefits, portability, inflation protection and a more comprehensive definition of total disability that makes it easier to qualify for benefits. Supplemental insurance is also important because many long-term plans are not designed to cover bonuses, commissions, contributions to nonqualified retirement plans, stock compensation or other forms of incentive compensation that many high-level executives usually receive.
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