Supplemental Disability Income: Beware These Pitfalls!


wheelchair-749985_1920The income disparity between rank and file workers and highly compensated employees (especially those eligible for bonuses) is leading more and more companies to offer Supplementary Disability Income insurance. These plans, usually written on a guaranteed standard issue basis, provide coverage at discounted rates.

Supplemental Disability Income has a strong appeal these days, especially with the unpredictability of the economy. Providing an effective plan can help you attract and keep quality workers.

However, as many an employer can attest, mistakes in designing a plan can create unnecessary complications and unhappiness. You can increase your chances of having an effective program by avoiding these common errors:

  1. Offering a supplemental plan that changes the definition of earnings, raising the plan’s long-term disability rates in order to accommodate relatively few employees. This spreads the cost of the increase throughout the group – a highly expensive move.
  2. Failing to develop a well-thought-out enrollment strategy. Make sure that that the plan is – communicated effective; contact each employment with an enrollment packet, together with a phone call that can answer their questions. This is important because most insurance companies expect 20% to 30% of the employee group to participate.
  3. Settling for an inadequate guaranteed issue. If possible, go a step further and layer an additional “High Limit Coverage” option that will cover a higher percentage of highly compensated employees’ total compensation up to a higher amount.
  4. Subjecting your employee group to underwriting unnecessarily. This usually indicates poor plan design or lack of innovation.

For more information, please feel free to get in touch with our agency.