Corporate disability for the high-net-worth exec

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.