Is Your Financial Future Vulnerable Because You Bought the Wrong Long Term Disability Policy

Many physicians, lawyers and accountants think that because they have a group long term disability policy through their employer, they don’t need to have an individual disability policy. That’s a big mistake that can jeopardize your financial future because:

• Most group long term disability policies cover 60% of base income and, have a monthly benefit cap.

So, for example, you receive a great end of the year bonus, that bonus won’t be included in calculating your benefits. Worse yet, can you live off of 60% of your base income where your long term disability benefit is taxable.

It is possible that an individual long term disability policy to protect as much as 80-90% of your income through a combination of both long term disability and individual disability coverage.

• Your employer provided an ERISA covered long term disability plan may use an any occupation definition of 24 months. At that point, the definition to require you to prove that you to be unable to do the material and substantial duties of any occupation based on your education, training and experience.

That’s an unacceptable definition of disability for any physician, attorney, or accountant. If your employer provided coverage has an any occupation definition followed by an own occupation definition, you should secure an individual disability policy that covers your own occupation.

• Did you know that if you have an employer provided group long term disability, you can lose your retirement plan contributions if you become disabled. They are individual disability policies that are designed to protect on going retirement plan contributions if you become disabled.
• While your current long term disability coverage is not probably coverage that you could take with you if you left your current employment, you own and control an individual long term disability policy.
• Your employer group long term disability policy may provide for a reduction of your long term disability benefits by the receipt of any Social Security Disability benefits that you or your dependents receive. Some plans will even reduce your long term disability benefit by the receipt of 401k distributions or even a buyout of your practice.

Unfortunately, many professionals don’t think about these concerns when buying a disability policy. They are swayed by the gross amount of the benefit and don’t consider these issues.

While group long term disability benefits have it’s place, we recommend that every professional have an individual disability policy tailored to their personal situation. Will it cost more? Absolutely. What you are buying is peace of mind and your families financial well being.