Becoming disabled can cost someone their job and their savings. Although the number of Americans relying on private disability insurance is climbing, most of this coverage is in the form of a group plan provided by an employer. For most of the working population, group disability benefits, which typically only cover 60% of an employee’s base salary with taxable benefits, cannot help them keep up with their lifestyle let alone allow them to continue to save money. The gap is much bigger for higher earning workers, with bonuses and other compensation, and many are turning to tax free supplemental disability policies to make up the difference.
May is Disability Awareness Month calling attention to the prevalence of disabilities in the U.S. According to Cornell University’s Disability Status Report, in 2018, one-third of individuals between the ages of 30 and 64 were disabled at least once during their lifetimes. For those 65 to 75, nearly a quarter were dealing with a disability.
In addition, 90% of disabilities are caused by illness and not accidents, leading to conditions impacting the ability to work. If you become disabled, relying on Social Security and the benefits from an employer’s group disability plan likely won’t be enough to maintain your standard of living let alone save money for retirement years.
Our team at Cedar Point Financial Services LLC can help individuals and employers provide supplemental disability coverage via:
- Individual Disability Insurance Policies
- Employer Sponsored Multi-life Discounted Plans
- Employer Sponsored Guaranteed Issued Plans
- High Limit Supplemental Policies
- Life Insurance Policy Disability Waiver of Premium Riders
Individual Disability Insurance Policies (IDI) are designed to mitigate the limitations of employer group plans and provide supplemental benefits. IDI policies have a number of advantages:
- Non-taxable benefit payments.
- True own-occ or “regular occupation” definition of disability ensures that benefits will be paid if you are unable to perform the regular duties of your own occupation – even if you’re working in another occupation.
- Benefits are not offset by any other income or Social Security benefits.
- Policies are non-cancelable and guaranteed renewable until age 65 and are fully portable.
- Coverage for mental/nervous or substance abuse is available until age 65 whereas a group policy typically only provides a 24-month benefit.
- Not subject to an “earnings test” and benefits can be paid timely upon satisfaction of a 90-day elimination period.
Multi-life Discounted Plans are employer-sponsored, voluntary individual disability insurance plans which offer a 10%, 15%, or 20% discount in premiums with as few as three employee participants.
Guaranteed Issued Plans are another form of employer-sponsored individual disability insurance that offers these advantages:
- Discounted premium rates
- No medical exams and no labs
- Portable coverage
- Uni-sex rates
- Coverage that can keep pace with salary increases
High Limit Supplemental Policies can provide significant coverage to those professionals, athletes, celebrities, and models with very high earnings whose income cannot be adequately covered by the benefits from standard group and/or IDI policies. These policies are issued by ‘surplus line’ carriers and can provide a tax-free monthly disability benefit of up to $250,000 per month.
Life Insurance Policy Disability Waiver of Premium Riders provides disability benefits for those with life insurance coverage containing such riders. Benefits are typically paid for a maximum period of time, such as 10 or 15 years (or up to age 65). In the case of total disability, these riders allow the policy owner to stop paying premiums and still continue the life insurance protection and even cash surrender value accumulation.
Disability insurance works like an emergency fund if the unexpected happens. With it, if you are too sick or too hurt to work, you won’t receive a paycheck, but you will receive a monthly benefit. These benefits can replace a significant portion of your lost income and protect your savings from being depleted.
It has never been easier to choose a supplemental disability income insurance solution to fit your specific needs. At Cedar Point Financial Services LLC, we will review your circumstances and help you select a cost-effective plan that provides the benefits and flexibility to safeguard your personal income.