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Long Term Disability and Group Benefits

Posted February 16th, 2012 in articles by admin

Although Life Insurance is usually the most common part of a group benefits plan, Long Term Disability coverage is often just as important, but not always included.

Long Term Disability (or LTD) provides a covered person with a salary should he or she become sick or disabled and is unable to work. This salary is usually less than what the person would earn if they were working. As a rule of thumb, the most a person can earn while on LTD is two thirds of their usual income. While it can be difficult to live on 33.3% less money, there are reasons why they do this. The most obvious of which is that people would have very little incentive to go back to work if they were making the same money while staying at home.

That being said, even earning two thirds of your salary can mean the difference between living frugally and financial ruin. If you have no coverage at all, who will be the bills, the mortgage etc? Who will save for your retirement? Nobody.

LTD is often called a living benefit because you don’t have to die to collect it like Life Insurance. You just have to be sick or disabled.

There are different classes of LTD as well. Some policies make the distinction between Any Occupation, Regular Occupation, or Own Occupation coverage. Here is what each means.

Any Occupation usually means that if you are able to perform the tasks of any occupation that you are reasonably qualified for, you must return to work even if you can’t do the job you had before your claim. What they are saying is that if you can’t build homes anymore because you can no longer stand for more than a few minutes at a time, you are probably able to work as a call centre attendant and would be expected to do so.

Regular Occupation usually means that you don’t need to return to work unless you can do the tasks of the job you had when you first made the claim. As in the last example, if you were a home builder and could no longer do that job, you wouldn’t be forced to take any other job.

Own Occupation is usually reserved for professionals such as doctors, lawyers, dentists etc. This class says that if you can’t do your previous job, you can keep claiming the LTD salary. The kicker here is that if you can’t do this job, but choose to do something else anyways, you can earn your new salary and keep getting your LTD salary as well. The reasoning here is that people who train to become a doctor, lawyer etc, will usually return to that occupation if they are able. At least that’s what studies show.

Obviously Own Occupation is the best, but even Any Occupation can be good because it will still pay you if you are unable to work.

At least if you have good coverage, you should earn enough to cover the basic costs of living so that you and your family can keep living a decent life.

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