Why your employer sponsored Long Term Disability plan isn’t enough

If you rely on commissions and bonuses as your main source of income, your Long Term Disability plan may not be enough coverage to support you and your family.

Your income is your greatest asset. Protect it.

If you’re an incentive-based earner your income is more like a reward for working hard than an expected paycheck.  Insurance carriers treat your commissions as taxable income and cap the monthly disability benefits you receive.

Don’t let your hard-earned income go uncovered. If you’re a high earner IDI is a must have supplement to your standard LTD. IDI covers income from profit sharing to bonuses, so you don’t miss out on the financial benefits you’re entitled to.

Why do I need disability insurance?

Most people have a list of expenses they pay on a regularly scheduled basis. But who pays the bills when you’re not getting paid?    Social Security Disability Benefits don’t always cover you when you aren’t working. In fact, these benefits may not be available to you at all if you are expected to be out of work for less than a year.

If you have a family that counts on your paycheck, or if you alone rely on your income for personal expenses—you need disability insurance. Because when you get diagnosed with a qualified disability, you should be focusing on your personal recovery, not your personal finances.

Short-Term Disability allows you to maintain your standard of living when you become disabled for up to six months only. STD benefits will replace a portion of your salary if you’re out of work due to a qualified leave of absence, illness or injury.

If you’re unable to return to work for longer than six months, Long-Term Disability (LTD) insurance will protect your paycheck for 5 years or up to Social Security National Retirement Age. Your LTD benefit will kick in after your STD benefit runs out.

What if I already have disability insurance through my employer?  Shouldn’t that protect me?

Your employer sponsored Long Term Disability (LTD) coverage provides a solid foundation for income protection, but it may not be enough for you:

  • Most LTD coverage offered through employers don’t consider bonuses, commissions, or incentive compensation as part of your earnings, and they place a cap on the monthly benefits you can receive.
  • If your employer pays for your LTD coverage, benefits are taxable, reducing the net benefit you receive.

Simply put—if you make over $100,000 per month, your LTD policy is underinsuring you.

Standard LTD benefits cover your salary at 60% to a max of $5,000.  Anyone making less than $100,000 is insured properly at this cap, but if you have greater income replacement needs, you should consider supplemental disability insurance.

In this example, three employees with different earnings have the same long-term disability benefit.

The policy covers all but one employee, Jane, the highest earner of the three employees. If Jane were to purchase Individual Disability Insurance, her salary would be covered up to 85% instead of the standard 60%, matching Jack and Jim’s benefits.  

Individual Disability Insurance (IDI) Guaranteed Standard Issue (GSI) program provides an additional monthly benefit in the event of a disability, protecting more of your income than Long Term Disability (LTD).


When you purchase an Individual Disability policy, there’re no medical exams required, limited underwriting and policies have discounted unisex rates (35%).

Unlike LTD, a portion of your bonuses and more of your base salary may be covered with IDI, providing you with additional disability income protection.

How is IDI different than long-term disability insurance?

Think of Individual Disability Insurance as a rider to your LTD. If you were only enrolled in LTD, those benefits may only cover part of your monthly expenses. For example, you may only be able to cover your mortgage alone with your current disability policy while also trying to maintain household expenses. With IDI, your mortgage, student loans, car payment, not to mention your savings are covered.

IDI can help cover income from commissions, bonuses and other incentive pay that Long-Term Disability plans traditionally may not cover. Even if you return to work part time you can still receive benefits from IDI carrier.

Who is Individual Disability Insurance for?

IDI is ideal for employees who have commission-based income or generally higher salaries. IDI is designed to support the needs of executives and professionals with high salaries or uninsured earnings.

Why is it important to have Individual Disability Insurance?

The risk of a disability during your working years may be greater than you think. If you rely on commissions and bonuses as your main source of income, your Long Term Disability plan may not be enough coverage to support you and your family.

Individual disability insurance covers your bonuses and more of your base salary than LTD.

And when you have IDI, you own the policy, meaning you have the option to continue coverage after leaving the company or changing jobs at the same guaranteed premium.

How much does Individual Disability cover?

IDI replaces 85% of your pre-disability earnings. LTD typically covers only 60%. 

Some policies will pay benefits until you turn 67 so you can keep receiving benefits as long as you remain disabled under the terms of your policy. It’s possible you may be eligible for a portion of your benefits as you return to work.

Benefits of Individual Disability Insurance

  • Covers commissions and bonuses
  • 100% portable so if you leave your employer, your policy stays with you
  • Benefits are not offset by Workers’ Compensation and Social Security Insurance payments
  • Protects against reverse discrimination
  • Benefit replacement up to 85% depending upon taxability
  • Tax-free benefits if you pay your premium using after-tax dollars
  • No medical exam required when you enroll
  • Discounted unisex premiums
  • Convenient payroll deductions of premium payments

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