Does Your Group LTD Meet Your Executive Team’s Needs?

If a catastrophic scenario renders a top-tier employee unable to work, group long-term disability (LTD) coverage will likely still leave a significant income gap. A supplemental LTD plan can complement your group LTD coverage, creating a more attractive—and arguably fairer—compensation package.

Who would argue with the idea that a company needs to attract and maintain top leadership talent by taking good care of them? You might do this through a range of fairly obvious ways—like offering a competitive salary, exceptional health insurance coverage, and enticing bonus opportunities. But what about the long-term disability insurance coverage?

Although group LTD insurance is likely sufficient for the majority of your employees, it’s a different story for executives and other top earners. They’re left vulnerable to significant income gaps with just group LTD alone. Moreover, savvy executive job seekers are not only becoming increasingly aware of this fact—they’re consciously looking for a remedy to that vulnerability in the benefits packages they’re offered.

So what is that remedy? A supplemental LTD plan. Read on to learn why it’s actually way more than an executive perk.

Group long-term disability is good but

Let’s say that Jane, your EVP of Midwest sales, earns $200,000 in total compensation per year. If she ever needed to use her group LTD benefits, her plan would typically cover 60 percent with a cap of $5,000 per month, in other words, $60,000 a year. That leaves a whopping gap of $140,000. Just because Jane earns more than most employees, is it fair that her LTD covers only 30 percent of her yearly compensation? Some would say definitely not, especially the top-notch executive talent that you might very well be looking for to join your company.

But the shortcomings of group LTD for Jane go further, including the likelihood that her disability coverage:

  • may not apply to bonuses and other incentive compensation
  • isn’t portable if she ever leaves her employer
  • covers her current occupation for a limited amount of time

Supplemental LTD to the rescue

Just to be clear, supplemental LTD coverage stacks on top of the existing group disability plan. It fills the gaps left by group LTD. More specifically, by offering supplemental LTD, your executives can gain the following benefits:

  • Protection that provides the highest level of income replacement, close to 75 percent
  • Special catastrophic disability benefits that can even achieve 100 percent of income replacement
  • Individually owned and fully portable coverage
  • The ability to create more flexible and favorable definitions of their occupations
  • Customized solutions that can provide partial disability benefits, mental health disorder coverage, and cost of living adjustments

Being proactive and adding supplemental LTD can pay off in lots of ways

As any HR director can tell you, this is a competitive labor market, one that includes a growing number of sophisticated applicants, especially at the executive level. Don’t be surprised if you’re asked by an executive candidate about supplemental disability coverage.

And yet at the same time, lots of executives—and the companies that employ them—still don’t fully grasp the implications of having only group LTD. Imagine if one of your top executives really did need to use their group LTD and said to you, “Where’s my 60 percent compensation?” Now you need to explain that there’s actually a monthly cap, which puts them at, say, 20 percent of their total compensation. Nobody wants to have that conversation. On top of that, you as the employer need to decide what you’re going to do with this messy and unfortunate situation. So why not prevent the situation in the first place?

Talk to an insurance broker about having a disability insurance review. It can be an eye-opening experience to see firsthand how the very people who are leading your company may actually have the worst disability coverage. The good news is that, thanks to supplemental LTD, you can do something about it.


Source:  This information was featured in a BizInsights article, published on April 25, 2017, by Chris Henderson.


Investment advisory services offered through M3 Financial, a registered investment advisor.

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About the Author

Chris Henderson

Managing Director of M3 Financial, LLC (CLU)
M3 Financial is a sales and service organization (wholly owned by M3 Insurance) which provides insurance, investment, and retirement planning for individual and corporate clients. As managing director, Chris provides strategic planning and leadership to the M3 Financial sales team. He has obtained his Series 7, Series 24, Series 63, and Series 65 security licenses and is also licensed in life and health insurance.

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