This is worrying in many respects, but particularly so in the
context of disability. When a household’s breadwinner can’t earn a
paycheck, it may be difficult for a family to keep up with everyday
Unfortunately, suffering a disabling injury or illness is more common
than many people think: according to the Social Security
Administration, one in four U.S. workers will experience a disability
requiring more than a year away from work during their career.
A disability can be due to an accident or injury but is more often
because of an illness or health issue such as cancer, cardiovascular
disease, or musculoskeletal problems. Disabilities can last months or
even years, and prevent the employee from earning an income, potentially
impacting the family’s ability to pay bills, their kids’ tuition, or
maintain their existing lifestyle.
Employers often offer disability insurance, which covers a percentage
of base income (usually around 60%) but often excludes income from
bonuses or commissions. For higher-wage earners like those within the
financial services industry, this can leave significant gaps in
financial protection should they experience a disability which prevents
them from earning an income.
While a basic long term disability (LTD) insurance policy may cover
60% of a base salary, many policies have a monthly benefit maximum of
around $5,000 per month. For those earning more than $100,000 a year,
they’ll see a significant gap between their pre- and post-disability
income. And if the LTD insurance is employer-paid, the benefits are
taxable, bringing that maximum payment down to around $3,600 after tax.
If your workforce earns higher salaries, or rely on bonuses or
commissions, you should consider additional income protection to provide
for them and their loved ones. LTD insurance is an excellent foundation
for income protection; but benefit maximums, uncovered compensation,
and taxable benefits may leave higher income earners with a gap in
Individual disability insurance (IDI) can insure a greater portion of
income – often up to 75% – to help bridge this income gap. IDI also
replaces a portion of total compensation – including commissions and
bonuses – so employees receive benefits that come closer to their actual
pre-disability income. This type of insurance is also portable, meaning
if an employee changes jobs, they can take their IDI policy with them.
Unum provides a variety of employee benefits, including LTD, to a
5,000-employee financial services company based on the West Coast. The
LTD covered 60% of an employee’s salary, up to $10,000 per month.
However, during a routine gap analysis, it was discovered that 76
members of the company’s executive team were over the current LTD
maximum and underinsured. Unum presented the IDI solution, which would
help to close this gap, but the company’s HR team didn’t feel it was
This was until the following year, when the CFO of the company
suffered a massive stroke which led to a long-term disability claim.
Unum was then called in to assist with a solution. Current technology
benchmarking data was leveraged to show the customer what peer companies
were providing for coverage.
When the CFO went out on disability, he was earning $52,000/month,
but the LTD only covered up to $10,000/month, meaning just 19% of his
monthly earnings were covered, and he had a gap of $42,000 per month in
Unum proposed the addition of up to $10,000/month of IDI for those 76
employees earning $200,000 or more, which would increase the benefit
for these executives to $20,000/month combined benefit. Had this policy
been in place when the CFO became disabled, he would have doubled his
monthly benefit and 38% of his salary would have been covered as opposed
to just 19%.
Employers within the financial services industry make up some of the
largest portion of Unum’s IDI business for a few key reasons:
- Financial services has a large percentage of highly compensated employees with costly lifestyles to protect
- Commissions and incentive pay often constitute a significant portion of income
- Organizational structure within the financial services industry allows for executive and management group carve-outs
- Employees see the value in having portable disability coverage that they own should they change jobs or roles
IDI policies can be purchased anytime during the year, meaning you
may not have to wait until the standard open enrollment period. And
while many companies cover premiums on these policies for their top
earners, there are a variety of ways to fund an IDI program for your
For more information about employee benefits, including disability insurance, visit the Unum website.