As a business owner, you understand your employees are invaluable to your business and its success.

You may provide benefits that demonstrate their value to you, but what about income protection if an employee becomes sick or disabled and can’t work? The loss of a key employee could greatly reduce productivity or decrease revenue. An additional benefit you should consider providing to your executive and management teams is Income Protection by way of a Multi-Life Guaranteed Standard Issue Program.

Through this program, you are sponsoring individual and portable Disability Income coverage with very minimal underwriting – only a company census is needed to determine eligibility and individual medical and financial underwriting is NOT required. Furthermore, there will be no ratings or exclusions applied to the policies.

Additional benefits to both you and your employees include a permanent premium discount of 15-25%, a potential tax deduction for your company, and most importantly, peace of mind knowing your most important asset, your income, is protected.

Group LTD vs Individual Coverage offered through a GSI Plan:

  • Group LTD Income replacement ratios- 50%- 60% and subject to a benefit cap of typically $6K- $10K
  • Group LTD Definition of covered earnings typically does not include commissions, bonuses variable compensation, limited to covering only base salaries
  • Individual Coverage includes commission, bonuses and variable compensation when determining the benefit amount an employee is eligible for. For executives and key employees, this additional compensation may be a huge part of their income. Or if working with professionals in a sales capacity, it is crucial this variable income is protected as it may be a majority of their income.
    This coverage supplements Group LTD helping to fill the income replacement ratio gap, especially for higher income earners. We take into consideration the coverage they currently hold with the Group LTD, but have our own issue and participation limits we use when determining how much additional coverage they are eligible for.
  • Group LTD Taxability of benefits- If the employer is paying the premiums for the Group LTD, the benefits paid out to the employee is then taxable.
  • Individual Coverage though the GSI plan can be paid by the employer ( most common ) and benefits would be also taxable, or premiums can be deducted from the employees paycheck ( the premium still physically mailed from the employer ) and the benefit would then be non-taxable. There is flexibility in how the program can be designed.
  • Group LTD Benefit offset & integration- Within the Group LTD contract, it states that the benefits paid out would be subject to offset and integration of any other benefits received, ie Social Security, Workers Compensation, etc. The employee would be responsible for applying for these programs if they were available and if approved, the benefits received would offset the Group LTD benefit paid out.
  • Individual Coverage does not integrate nor will it be offset by other benefits received. Also, the insured is not required to apply to other programs available.
  • Group LTD Lack of portability – If the employee leaves the company, some Group LTD plans are not portable; or if portable, the contract benefits and language may change and also premiums are modified since they are no longer part of the group and may be subject to pricing at their attained age (premiums could increase significantly)
  • Individual Coverage through the GSI plan is a non-cancellable contract, meaning the contract language and premiums will not change and the contract is completely portable should the employee leave the company. The only change that could take place is as to who will be paying the premiums- if the employer was paying for the GSI plan, and the employee leaves, the employee would now be responsible for paying the premiums. Also, the discount on the GSI plan will remain intact even if the employee leaves the company.
  • Group LTD Rates renew/change every few years- With some Group LTD plans, the rates are subject to change, depending on the contract structure. What I have seen to be most common is a rate change every 5 years. The employer would have to refer to the plan to confirm.
  • Individual Coverage as stated in the point above is designed at a level premium and will not change.
  • Group LTD Definition of Disability- In some Group LTD Contracts, the Definition of Disability is not very strong. It may define an employee to be disabled if they are unable to do the duties of their job for the first two years they are on claim (referred to as an “ Own Occupation Definition “ ), then revert to an “ Any Occupation Definition “ requiring they return back to work if they are able to do the duties of ANY occupation, even if that means a significant loss of income and a step back in their career. That could be especially detrimental to an employee in a key position or high wage earner.
  • Individual Coverage through a GSI plan contractually protects the employee with the “Own Occupation Definition “throughout the life of the contract. It states: if you are unable to perform the material and substantial duties of your occupation and you chose to not return back to work (we will never make them go back), you will be paid your benefit. If you chose to go back to work on a part-time basis, and incur a loss of income, a partial benefit will be paid, proportionate to your loss (assuming they have the residual benefit on their contract).

Employer Advantages:

  • Can carve out employees by classification (example: executives, key employees, management staff)
  • Helps recruit and retain valuable employees
  • Business won’t bear the burden of compensating a disabled employee (please also keep in mind, if the company does not have a qualified sick pay plan document in place, and is funded by a Disability Plan, the IRS could penalize the company for paying a disabled employee)
  • Premiums can be paid by the employer or employee
  • Premiums may be tax deductible
  • Flexibility in plan designs
  • Ease of doing business (no medical or financial underwriting)

Employee Advantages:

  • Strong contractual provisions  (“own occupation definition”)
  • Individually owned and portable (insureds also keep the discount should they leave the company)
  • Protecting most valuable asset – income!
  • Minimized underwriting (no medical or financial underwriting)