When is group LTD insurance not enough?

Personal Financial Planning

When is group LTD insurance not enough?

Personal Financial Planning

If you become disabled and cannot work, do you have enough long-term disability (LTD) insurance to replace your income?

If you are 35 years old today, research shows there is a 50% chance you will become disabled and unable to work for three months or more by the time you’re 65. That’s why having adequate long-term disability insurance (LTD) during your working years is as important as insuring your life or your home.

Consider the following:

  • Many employers offer LTD as part of their employee benefits package
  • Benefit coverage for group LTD is usually a percentage of pre-tax earnings
  • The typical payment period for group LTD benefits is two years
  • A medical examination is not required to qualify for the basic group LTD benefit
  • Group LTD premiums can change yearly when the employer’s policy renews

So when is group LTD not enough?

  • If the maximum monthly coverage doesn’t provide sufficient income replacement
  • If the definition of salary in your group LTD contract often does not include sales commissions and bonuses
  • If you are a business owner, you should consider individual LTD coverage
  • If you are an employee or are self-employed and have no access to group LTD

Although individual coverage may initially seem more expensive than group LTD, premiums remain constant until age 65 and, unlike group LTD coverage, the policy remains in effect if you are out of work or change jobs.

Other features of individual policies that can be tailored to meet your needs include waiting periods, benefit levels and coverage to age 65 if you cannot work at your own occupation. A future income rider will allow you to increase your benefit levels as your income increases, without a further medical examination.  With more people working beyond age 65, individual policies that allow coverage to continue in two-year increments beyond that age can deliver added value, particularly if you are self-employed.

Long-term disability insurance is part of the continuum of health insurance, which also includes health care insurance, critical illness insurance and long-term care insurance. Your financial advisor can help you select the coverage you require as part of your overall financial plan.

To read the rest of this article by SunLife, CLICK HERE. If you  have questions be sure to contact Harry Perler or David Olejnik.