Wednesday, February 29, 2012

Is Group LTD Enough?

Your financial future may not be as secure as you think. Although group long-term disability insurance – provided as a benefit by employers to employees – can provide a great foundation for protecting income from the financial setbacks of a disability, it may not be enough.

Typical group policies cover just 60 percent of gross income (often not including bonuses or commissions), and benefits are usually taxable. This translates into an approximate “pay cut” of 40 percent after taxes. This would not be enough to sustain the average person’s lifestyle in the event of a long-term disability.

Just as it’s important to supplement employer-provided life insurance with additional coverage, most financial experts also recommend individual disability income (DI) insurance as part of a sound financial plan. After all, your odds of becoming disabled are higher than you may think.

Individual DI insurance can help protect your hard-earned savings – and your family’s financial future – from a financial catastrophe. If you were to become disabled, the individual DI policy would pay benefits in addition to any disability benefits you may receive from your employer. And, when you buy individual disability coverage with after-tax dollars, the benefit payments are tax-free.