Reviewing LTD plans is our specialty. Our firm is heavily structured to catch every pro and con of the existing plans our potential clients bring to us. Recently, our firm analyzed a key executive’s income protection plan offered by a power house company. In our observations we noticed a very good plan with several loopholes inside the plan that the executive needed to be aware of. Let’s just say, this executive was not fully aware and can now properly prepare their financial plan even better now to sustain their legacy.
Here is the actual case:
- 60% LTD coverage (typical of many plans).
- 90 day elimination period (time before any benefit is paid).
- $15,000 max cap.
- 60% coverage is 100% taxable.
- 24 month coverage on “Mental Illnesses” (1 year only payout after elimination period).
- Once declared “Totally Disabled” –The employee will be kicked off health insurance and will have to pay out of pocket expenses.
- Policy is not portable.
- Supplemental Insurance with external company is not LTD coverage. The external company only offers 3-6 months coverage on STD coverage. That will not make up the difference in loss for the executive.
- Does not cover YEAR END BONUSES. ONLY COMMISSIONS.
- Base Salary plan.
Please note: Th plan is very solid, but needs to plug up the loopholes. For our readers, we have given a brief summary below of the numbers for the executive…
$80K (base salary) | $40K (yearly bonuses) = $120K ($10K monthly)
The employer’s current plan covers the following:
LTD Coverage: $80K x 60% = $48K. Remember – No Bonus Coverage which represents the $40K.
$48K after tax leaves the executive = $4K X .25% ($1K) = $3K (monthly) ……………..
Leaving the executive to pay for health insurance which is on average about $1,700 – $2,000 = $1K take home.
How would this executive’s lifestyle change? Significantly…..This change would put their family in a devastating position for a sustained period of time. It’s better to prepare than to repair……
Let us bring the solution to you!!