How Much Will Your Group Plan Pay?

Most group disability plans will replace 60% of income. However, they also typically put a cap on monthly benefits to help control costs, which of course discriminate against higher-paid employees.

For example, let's assume benefits are capped at $5,000 a month. An attorney earning $8,300 a month who becomes disabled is eligible for the full $5,000 in monthly benefits-- 60% of his $8,300 monthly salary. However, a partner drawing $12,500 a month would receive the same $5,000 benefit, amounting to only 40% of his or her income, and not nearly enough to cover monthly expenses.

Keep in mind, too, that, if the employer pays the premium, group benefits are taxable to recipients, reducing their net value, and are almost always reduced by any government benefits being paid at the same time.

What Is "Covered" Income?

Under the vast majority of group plans, salary alone is used as a basis for determining benefits. Bonuses, as important as they may be, are generally not considered "income" and therefore are excluded from coverage. This factor, when combined with the cap on benefits, can leave an attorney who's receiving only group benefits seriously short of the amount actually due him or her.

How Long Will Benefits Last?

Many group plans pay benefits to age 65, but with a stricter definition of disability after benefits have been paid for one or two years. For example, if an attorney is judged by the insurer able to perform some other "reasonable" job, benefits might cease.

Yet, statistics tell us that one out of four people suffers a disability lasting at least 90 days before reaching retirement age*, and that the average length of such a disability is three years.

Finally, group benefits may cease if the insured returns to work part time.

What About Guarantees?

Group disability premiums are guaranteed for a year or two at most, and can be adjusted thereafter to reflect claims experience.

So What's the Alternative?

Individual Non-Cancelable Disability Income, the best of which offers:

• monthly benefits that replace an adequate portion of income;
• benefits based on "earned income," including salary, bonuses, and contributions to a qualified retirement plan;
• the most favorable definitions of disability (both total and partial) available;
• "portable" coverage, in case the employee changes jobs;
• and coverage that cannot be canceled by the insurer, provided premiums are paid; plus premiums that cannot be increased until age 65.

On top of all that, individual policies can be "tailored" to meet individual needs, with such optional provisions as:

• lifetime benefits;
• residual benefits, if the insured can work only part time;
• cost-of-living adjustments, which help benefits keep up with inflation;
• and options to guarantee your clients' insurability if they need to increase coverage (or lose their group plan!).

*Insurance Commissioners Disability Table