Many in the corporate world are so busy with work and family responsibilities that they can’t find the time to purchase coverage on their own and thus are frequently underinsured. They value any programs the company can provide to make their life easier. Supplemental disability and life insurance, for example, are not often at the top of people’s minds, but when the plans are rolled out, they always get rave reviews.
This is where corporate benefit professionals really have an opportunity to make a difference. Corporate sponsored multi-life programs are most always offered on a guaranteed issue basis with no medical exams or lengthy underwriting requirements. Simply sign the form and you are covered. For the companies that want to offer voluntary programs, they can use an opt-out strategy where everyone is automatically covered unless they sign a form to decline it. This approach has been used very effectively with 401(k) plans for many years. Under either scenario, the policies are individually owned and portable so they can be kept if the employee leaves for any reason.
Let’s look at disability insurance and the significant value these supplemental programs can provide highly compensated employees. Almost all corporations have a traditional Group Long Term Disability plan that covers 60 percent of base salary to $10,000, $15,000 or maybe even $20,000 per month. The problem is that many of the employees earn salaries that exceed the group benefits cap and bonus income is generally not covered at all. This can cause a serious financial exposure should the executive become disabled since many high-ranking managers have variable compensation (bonus income) that often exceeds 25 percent to 50 percent of their total income. This situation is referred to as reverse discrimination, whereby the highly compensated employee has far less disability income protection as a percentage of their income than all other employees.
Why not offer a portable individual supplemental disability plan that can either be company paid or voluntary to solve this problem?
There are two types of supplemental disability coverage available. The first is traditional/U.S. supplemental disability coverage that is layered on top of a Group Plan and generally provides additional income replacement at 60 percent to a maximum benefit of $5,000 to $10,000 per month with simple applications and no medical underwriting required.
The second option is from Lloyd’s of London, a relative newcomer to this space, but a veteran player in the insurance industry as they have been writing insurance for more than 300 years and are one of the most well capitalized insurance organizations in the world. Lloyd’s is familiar to most people as the insurer of professional athletes and entertainers. In recent years, however, they have developed new multi-life guaranteed issue white collar programs and now insure the partners for some of the largest law firms in the country.
These programs are now available for corporations to cover their highly compensated employees. They can be offered on a guaranteed issue basis with large amounts of coverage available up to $200,000 per month. Of course, most people don’t need that much coverage but it’s nice for those who do. These are individual contracts and are designed to be stacked on top of both group and traditional supplemental disability coverage if these plans are already in place. The Lloyd’s products are very flexible and can provide specialty own occupation definitions with benefits payable until age 65. Coverage is portable and can be continued if an individual leaves their employer.
It is important to do due-diligence because Lloyd’s is a large marketplace with more than 55 Managing Agents (companies) and several are writing this insurance coverage. Thus, there are a variety of products with different provisions and pricing to choose from.