By Linda Keller

There’s a one in four chance of American workers becoming disabled before turning 671, and neither gender, nor race nor position in the organization are excepted from the odds.

And make no mistake. Employees value their protection: Some 90 percent think employers should offer long term disability insurance, with 50 percent saying their disability benefits helped them keep up with their financial obligations2.

While employers may think they’ve got it covered, here’s what they may not realize: their group long-term disability plan isn’t sufficient when it comes to protecting one of their company’s biggest assets – their executives.

There’s a substantial gap between standard long-term disability benefits and executives’ total pay packages that particularly affects anyone earning over $100,000 a year. Yet 78 percent of employers don’t cover the bonuses and commissions that constitute a substantial portion of executives’ salaries3. Executives, who are as likely to live paycheck to paycheck as any other employee, need that gap filled as a safety net.

Individual Disability Insurance (IDI) – is ideal for doing the job.

Consider the top three gaps in coverage in basic disability policies for highly compensated employees and how Individual Disability Insurance fills it:

  • Income replacement. Basic group disability policies typically cover about 60 percent of the base salary, up to $5,000 a month. This leaves a large hole between what was earned before and after the disability by higher paid employees. IDI, however, pays at least 75 percent and as much as 100 percent of the total compensation.
  • Taxability. If the disability benefit is employer paid, that also widens the distance between pre- and post-disability earnings as the benefits are taxable. It reduces the monthly income on that $5,000 monthly benefit to about $3,600. IDI is most often offered as an employer paid benefit, but the greater proportion of income coverage helps to offset the tax bite.
  • Bonuses, commissions, and other incentive pay.  Factor in these additional forms of compensation often associated with executive leadership and the gap widens even further, as none are covered under the vast majority of basic group long-term disability policies. IDI policies, however, typically cover total compensation versus just base salary.

While Individual Disability Insurance can be structured as a voluntary benefit, most employers cover the cost. That’s because they see it as a valuable perk to attract and retain senior management.

Individual Disability Insurance serves everyone’s interests. It reduces the exposure and assures the financial security of an organization’s key employees – and it’s portable, as well, so employees can “take it with them” which further adds to its value. For employers, it’s an attractive tool for recruiting and retaining top talent in today’s competitive market.

Make sure you haven’t missed a critical exposure for your executives. Contact an advisor today to request an income replacement analysis to learn how many of your highly compensated employees are above your LTD benefit cap.

Your HUB International consultant can also evaluate your group life benefits and recommend options to offer enhanced coverage for your employees.  It’s an inexpensive way to show your top management talent that you value them. 


1. Social Security Administration stats

2. Consumer Federation of America and Unum, “Employee Knowledge and Attitudes about Employer-Provided Disability Insurance” (2012) and “Employer-Sponsored Disability Insurance: The Beneficiary’s Perspective” (2013).

3. SHRM, “2013 Employer Perspectives on Disability Benefits” (2013).