Employers are responsible for proactively addressing their employees' needs, and for offering solutions to mitigate current and potential financial risks.
Organizations need to make sure they're offering the right mix of programs and benefits that provide value and protection to all employees. One benefit that can help ensure employees in key leadership roles have sufficient protection in the event of a disability is an executive disability plan featuring individual disability insurance. Employers are responsible for proactively addressing their employees' needs, and for offering solutions to mitigate current and potential financial risks. Yet, executive disability plans with individual disability insurance are often overlooked.
Most companies do a good job of offering group long-term disability (LTD) insurance to their employees. It provides a good foundation of protection, usually 40-60% of an employee's base salary up to a specified monthly maximum. However, a company's management or executive team will often have their replacement income limited by coverage caps. Furthermore, incentive and bonus compensation is often not covered by group LTD, which can result in a company's key employees facing greater financial exposure should they suffer an illness or injury that keeps them out of work for an extended period of time.
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While an employee suffering a disabling event is never a positive situation, learning that they were not appropriately insured can turn a bad situation worse. In addition, with the unique needs of leaders and executives, if sufficient coverage was not provided for an employee in an executive role, that situation can result in a number of uncomfortable challenges for an organization.
Executive disability plans with individual disability insurance can ensure that executives and key employees receive adequate replacement income in the event of a disability, providing the coverage they need to meet their financial obligations and maintain their lifestyles. These plans can also serve as a great benefit for the employer, as companies are in constant competition for recruiting and retaining top talent. For most employers, the cost of these plans can be viewed as nominal compared to the risk of losing top talent due to inadequate coverage.
These plans are specialized and include features that can be customized for each employee's needs. Most individual disability insurance plans will contain the following provisions:
Complete portability
The employee will own their policy and can take it with them throughout their career with no changes to the policy or premium rates. This is another great opportunity to provide invaluable support to key employees or executives, even if they may eventually move on to a new organization.
'Own Occupation' definition of total disability
The Own Occupation definition of total disability can be a good choice for clients with highly specialized employees. A policy with an Own Occupation definition of total disability will pay a benefit if a covered employee is unable to complete the material and substantial duties of their role, even if they are able to work in another occupation.
Set rates
The noncancelable provision ensures that premium rates cannot be changed before a policy's termination date as long as premiums are paid in a timely manner. This means that premium rates are based on the employee's age at the time of purchase and cannot be raised for the lifetime of the policy. Of course, premiums will increase if additional coverage is purchased.
Prepare for the unknown
Anticipating the unexpected, such as an illness or injury affecting a key leader should be part of every employer's business planning. In addition, it's important to give ample consideration to the type of support being offered, as employees tend to be more loyal to organizations that keep their best interests in mind — especially through financial support.
Providing executive disability plans with individual disability insurance can help ensure key leaders and executives are protected from financial disruption and hardships in the event of a disabling event. In today's business environment where companies of all sizes are looking for even the smallest differentiator, providing this type of policy can help demonstrate that a company's leadership is valued and adequately protected.
Adam Aschoff is a regional director of guaranteed standard issue individual disability insurance sales for The Standard. Over the past 20 years, Adam has held a range of roles in The Standard's individual disability insurance department. As a regional director, Adam helps brokers educate employers about the importance of income protection and GSI solutions.
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