Right-Size Income Protection With GSI Executive Carve-Outs

May 8, 2019

It’s likely your clients offer group long term disability insurance to all of their full-time employees. Group LTD plans typically replace 40 to 70 percent of base salary up to a monthly maximum of $5,000 to $25,000, depending on the plan.

Group LTD is a good solution for most employees, but can leave top-tier executives underinsured. Why? Two reasons:

  1. Group LTD plans rarely cover incentive compensation, such as bonuses. This means that executives with big bonus payouts have more income at risk.
  2. Executives need extra protection to cover their larger incomes. Highly compensated employees may find the group LTD benefit maximum results in income replacement of a smaller-than-anticipated percentage of their take-home pay.

The solution? Recommend individual disability insurance, offered on a guaranteed standard issue basis.

You don’t have to increase group LTD plans to levels not needed by all employees. Increasing group LTD benefit maximums or target income replacement percentage for the whole group would spike your clients’ group LTD costs. Instead, be strategic by offering GSI to only those who need the extra protection — such as executives. We call this an Executive Carve-Out.

A GSI Executive Carve-Out can offer highly paid executives coverage for compensation not covered by existing group LTD. In some cases, executives could see their income protection double when you add GSI! An added benefit: the increased GSI income protection is provided at a discount, and with no medical underwriting.

Offer a right-sized income protection plan with group LTD for all and GSI for executives. You’ll help your clients provide top-of-the-line benefits to executives while staying within budget.