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Navigating the Nuances of Long-Term Disability Income Protection: Ensuring Fair Coverage for All

posted by TrueNorth Financial Strategies on Thursday, March 28, 2024

In the intricate landscape of employee benefits, disability income protection stands as a critical pillar, designed to offer peace of mind and financial stability in the face of unforeseen health challenges. At TrueNorth Companies, our Financial Strategies team frequently encounters the noble intentions of organizations aiming to safeguard their teams with comprehensive long-term disability (LTD) plans. The common goal is clear: to provide coverage for 60% of an employee’s income, thereby mitigating the financial impact of disability. However, our review of group LTD plans for new clients has unveiled a series of misconceptions and gaps that could leave members of your organization unexpectedly vulnerable.

The Misconception of Comprehensive Coverage

Leadership teams and top performers often operate under the belief that their disability coverage is a comprehensive safety net, encompassing their total compensation. This assumption, however, does not always hold true. A prevalent oversight in many groups' LTD plans is their limitation to covering only the base salary, excluding bonus income. For individuals whose compensation structure is heavily weighted towards bonuses—sometimes accounting for 70-80% of their total income—the realization that this significant portion is not protected can be both shocking and distressing. This gap in coverage can leave your most valued team members significantly underinsured, potentially leading to conflict and dissatisfaction within the ranks.

The Reality of Caps in Coverage

Another critical area of misunderstanding lies in the coverage cap imposed by many LTD plans. In our analysis, it's common to find plans with a benefit cap, such as a recent example where the maximum monthly benefit was set at $6,000. This cap directly impacts individuals earning over $100,000 annually, as it restricts their coverage to less than the anticipated 60% of their income, creating a substantial discrepancy in protection for your higher-earning employees.

Your Income: An Asset Worth Protecting

It's essential to recognize that our ability to earn an income is arguably our most significant asset. The implications of not fully safeguarding this asset can be profound, not only for the individual affected by disability but also for the organization at large. An inadequately protected team can lead to decreased morale, increased turnover, and challenges in attracting top talent.

Secure Best-in-Class Coverage with TrueNorth

Understanding these intricacies and ensuring equitable disability income protection requires a nuanced approach. This is where TrueNorth's Financial Strategies team excels. Our expertise in evaluating existing coverage and identifying gaps enables us to craft tailored solutions that truly meet the needs of every member of your team. By opting for a strategic review and enhancement of your LTD plan, you take a significant step towards offering best-in-class protection. This not only safeguards your team’s financial wellbeing but also serves as a powerful tool in rewarding, retaining, and recruiting top talent that drives your organization forward.

Let us help your organization bridge the gap in disability income protection. By ensuring that your LTD coverage comprehensively and fairly protects all employees, you underscore your commitment to their security and wellbeing. Together, we can build a resilient and motivated workforce, prepared to face the future with confidence.

To learn more about how TrueNorth’s Financial Strategies team can enhance your organization's long-term disability, group life, or group retirement plans, please connect with us below.

(Securities offered through Lion Street Financial, LLC (LSF), Member FINRA & SIPC Investment Advisory Services offered through Lion Street Advisors, LLC. LSF is not affiliated with TrueNorth Companies, L. C.) Tax and Legal services are not offered by Lion Street Financial, LLC., or Lion Street Advisers, LLC.