Understand Your Group Disability Insurance
What Do You Really Know About Your Group Disability Insurance?
Many people seem to think that their group disability insurance is adequate, but a close look often illustrates that people may not have what they think they have. In fact, very few people actually know how and what their group disability insurance covers.
What is the definition of “disability”? Most group disability plans are still incredibly weak in this area, particularly for highly paid executives or owners. If your plan only provides a “2 Year Own Occupation” definition, the Insurance Company must re-open your case at this point and see if you are capable of doing any reasonable job. Example: a disabled company executive was no longer eligible for benefits because she could work as a receptionist. The availability of the “new” job is not an issue, the point is that you are able to do it. Most highly paid individuals are usually those who can be easily placed in some less demanding (and less remunerative) job. Just imagine being told to take a 50% cut in pay.
What is the coverage time frame? In many cases, it is short-term coverage only, like 6 months, or 1 or 2 years only.
What is the benefit provided? Is it a flat percentage or does the percentage scale down as income goes up (66 % of the fist $2,500 of monthly income – then maybe 40% of the balance – or something similar)? If it’s a flat percentage, be warned that you are almost certain to collect less than expected.
What is the definition of income? Most group disability insurance plans only cover salary. Many executives – and all owners – have substantial perks and bonuses that are not insurable under most group disability insurance plans. What about “split incomes” and reinvested profits? Will the group plan pay any benefits if they continue to receive income from the company, through salary, dividends or whatever?
What about Partial Disabilities? - Like the early stages of cancer or the recovery period after a heart attack. Chronic migraines that only allow a lawyer or doctor to work half a day?
What about portability? Possibly the most important concern of all. If and when you leave your company, then what? What does job security mean these days? According to Statistics Canada, we will have 3 careers and 8 jobs over our working lifetime. There is a massive growth of people working under contract, as opposed to working as employees. This will only expand as companies, under pressure to cut costs in order to be competitive in world markets, keep searching for ways to reduce overhead. A great way to remove “employee benefits” is to hire people on contract.
The most important factors in jobs today are knowledge and the ability to communicate that knowledge. So much is now done with a computer and a phone. This reason alone illustrates how extremely difficult it is to qualify and be deemed totally disabled for a prolonged period.
What should you do immediately if you haven’t already? Go get your group insurance booklet and investigate your existing plan.
As an owner your company will look after you.
A common thought of company owners (particularly owners of a family company) is that they will be taken care of by their company during a prolonged disability. This makes some sense- to a point. What needs to be explored here is “risk sharing” – along with a discussion of the owner’s dual role – owner and employee in his own business. Risk sharing will show, while it makes sense to have some form of non-insured salary continuation program for owners and family members, it becomes a major drain on the resources of the company when the disability is prolonged. The company is bearing two salaries – or someone (usually another family member) is working additional hours for no pay.
Guarantee Yourself Coverage
Lifesure Group offers you the chance to guarantee yourself coverage should you lose your group disability insurance. We can provide you with any amount of protection- up to the maximum permitted by your income. A personal individual plan will reduce for amounts received from your group plan – but it will cover disabilities not covered by your group plan – because of less liberal definitions, exclusions, partial disabilities or because the group plan no longer protects you. Contact us for your free consultation.
