Review Your Benefits Package Carefully
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Dolf Dunn Wealth Management, LLC Dolf Dunn, CPA/PFS,CFP®,CPWA®,CDFA Private Wealth Manager 11330 Vanstory Drive Suite 101 Huntersville, NC 28078 704-897-0482 [email protected] www.dolfdunn.com Group Disability Insurance December 09, 2013 If a disabling illness or injury were to prevent you from working for weeks, months, or even years, how would you support yourself and your family? If disability strikes, you may discover that your most valuable asset isn't your home or your savings--it's your ability to earn a living. Fortunately, group disability insurance can help protect you. Whether it's offered through your employer, school, trade group, or another association to which you belong, group disability insurance is an affordable solution to your need for income protection. What is group disability insurance? Like other types of disability insurance, group disability insurance pays you a benefit that replaces part of your earned income when you're sick or injured and can no longer work. A group disability policy covers all eligible members of a group that has a common interest or association, and may offer special terms, conditions, and rates. Short-term and long-term There are two major types of group disability coverage: short-term and long-term. Short-term disability insurance plans generally pay benefits for several months, or occasionally as long as 2 years. In the case of employer-sponsored coverage, benefits often start once you exhaust your sick leave. Long-term disability insurance plans may pay benefits for several years, or until age 65, and may be coordinated with benefits from a short-term plan so that your disability coverage is continuous. Ideally, you'll want to have both types of coverage. While it's true that short-term disabilities are more common, long-term disabilities can be even more financially devastating. Group disability features • Group disability insurance is often more affordable than individual disability income insurance. • You may pay the entire premium cost, or if coverage is offered through your employer, your employer may pay all or part of the cost. • Group disability insurance often has flexible underwriting. During initial or open enrollment periods, you may not have to pass a physical. Some plans even cover disabilities related to a pre-existing condition, although a waiting period typically applies. • Your premiums may go up periodically. Many group plans typically guarantee premiums for a certain period (e.g., 1 to 5 years), but may increase rates at the end of that period for the entire group. • Plans may include certain base benefits, with the option to add on other benefits at an additional cost. • "You can't take it with you" is a phrase that typically applies to employer-sponsored group disability coverage; when you leave your job, your group disability coverage will end. In addition, you usually can't convert group disability to an individual disability policy. • Group disability benefits will generally be reduced by payments you receive from workers' compensation, Social Security. and other government programs. • Benefits you receive may or may not be taxable, depending on who pays the premiums. Generally, if either you or your employer pays the premium using pretax dollars, then benefits you receive will be taxable. Consult a tax professional for more information. • Group disability can supplement benefits you receive from an individual disability income policy (a total benefit limit may apply). Page 1 of 2, see disclaimer on final page
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As a financial planner, I worry more about someone becoming permanently disabled than I do them dying pre-maturely. Terry Schiavo was just over 26 years of age when she suffered a massive brain damage caused by a cardiac arrest. In the 15+ years she was cared for, the bills for her care were huge. Please do not just dismiss disability coverage as not needed, it is all about replacing your income when you can no longer work full time.
Transcript of Review Your Benefits Package Carefully
Dolf Dunn Wealth Management, LLCDolf Dunn, CPA/PFS,CFP®,CPWA®,CDFA
Private Wealth Manager11330 Vanstory Drive
Suite 101Huntersville, NC 28078
Group Disability Insurance
December 09, 2013
If a disabling illness or injury were to prevent you fromworking for weeks, months, or even years, how wouldyou support yourself and your family? If disabilitystrikes, you may discover that your most valuableasset isn't your home or your savings--it's your abilityto earn a living. Fortunately, group disability insurancecan help protect you. Whether it's offered throughyour employer, school, trade group, or anotherassociation to which you belong, group disabilityinsurance is an affordable solution to your need forincome protection.
What is group disability insurance?Like other types of disability insurance, groupdisability insurance pays you a benefit that replacespart of your earned income when you're sick orinjured and can no longer work. A group disabilitypolicy covers all eligible members of a group that hasa common interest or association, and may offerspecial terms, conditions, and rates.
Short-term and long-termThere are two major types of group disabilitycoverage: short-term and long-term.
Short-term disability insurance plans generally paybenefits for several months, or occasionally as longas 2 years. In the case of employer-sponsoredcoverage, benefits often start once you exhaust yoursick leave.
Long-term disability insurance plans may pay benefitsfor several years, or until age 65, and may becoordinated with benefits from a short-term plan sothat your disability coverage is continuous.
Ideally, you'll want to have both types of coverage.While it's true that short-term disabilities are morecommon, long-term disabilities can be even morefinancially devastating.
Group disability features• Group disability insurance is often more affordable
than individual disability income insurance.• You may pay the entire premium cost, or if
coverage is offered through your employer, youremployer may pay all or part of the cost.
• Group disability insurance often has flexibleunderwriting. During initial or open enrollmentperiods, you may not have to pass a physical.Some plans even cover disabilities related to apre-existing condition, although a waiting periodtypically applies.
• Your premiums may go up periodically. Manygroup plans typically guarantee premiums for acertain period (e.g., 1 to 5 years), but mayincrease rates at the end of that period for theentire group.
• Plans may include certain base benefits, with theoption to add on other benefits at an additionalcost.
• "You can't take it with you" is a phrase thattypically applies to employer-sponsored groupdisability coverage; when you leave your job, yourgroup disability coverage will end. In addition, youusually can't convert group disability to anindividual disability policy.
• Group disability benefits will generally be reducedby payments you receive from workers'compensation, Social Security. and othergovernment programs.
• Benefits you receive may or may not be taxable,depending on who pays the premiums. Generally,if either you or your employer pays the premiumusing pretax dollars, then benefits you receive willbe taxable. Consult a tax professional for moreinformation.
• Group disability can supplement benefits youreceive from an individual disability income policy(a total benefit limit may apply).
Page 1 of 2, see disclaimer on final page
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for anyindividual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performancereferenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The tax information provided is not intended to be a substitute for specific individualized tax planning advice. We suggest that you consult with aqualified tax advisor.
Securities offered through LPL Financial, Member FINRA/SIPC
Group disability coverage: what tolook forUnderstanding your disability coverage is important.Here are 4 major points to consider when reviewing agroup disability plan:
Benefit period
How long will you receive benefits once you becomedisabled? Typical benefit periods for long-term plansare 2 years, 5 years, or up to age 65, while typicalbenefit periods for short-term plans are 13 weeks or26 weeks (some plans may offer benefits for up to 2years). Policies may further limit the amount of timeyou can receive benefits due to alcoholism, drugaddiction, or a mental, nervous, or emotional disorder.
Elimination period
How long will you have to wait once you becomedisabled before you begin receiving benefits?Elimination periods (sometimes called "waitingperiods") for long-term disability plans range from 30to 180 days, while elimination periods for short-termdisability plans generally range from 1 to 14 days.
Level of coverage
What percentage of your income will the disabilitypolicy cover? Disability policies typically pay a benefitequal to 50 to 70% of your gross monthly base salary.A monthly maximum benefit may apply.
Definition of disability
How does the plan define disability? To receivebenefits, you generally must be under the care of adoctor because of illness or accidental injury thatimpairs your ability to work either in "your ownoccupation" (your regular job) or in "any occupation"for which you might be qualified, based on education,experience, training, and past earnings. Some groupdisability plans incorporate the two definitions, payingbenefits for an initial period (generally 2 years) basedon the "own occupation" definition, then continuing topay benefits if you meet the "any occupation"definition of disability. Some plans may cover partialdisabilities, while others will require that you be totallydisabled to receive benefits.
Most people don't expectto become disabled, butyour risk may be greaterthan you think.
Are you really protected?
Many people believe theyalready have adequatedisability coverage throughworkers' compensation orSocial Security, but that'snot always the case. Hereare the facts:
• Workers' compensationpays benefits only toworkers who aredisabled on the job; ifyou suffer an accident orillness that is non-workrelated, you will notreceive disabilitybenefits under thisprogram.
• Social Security disabilityinsurance provideslong-term disabilitybenefits, but eligibilityrules are strict. Toqualify, you must beunable to work at anyjob (not just your ownjob) and your disabilitymust be expected to lastfor at least 12 months orend in death.
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