Disability Insurance for Executives
Chief executives help companies succeed. A lot is expected of them, but they’re well compensated for their efforts. To protect their income from the risk of disability, they need disability insurance for executives.
How Much Do Executives Earn?
Exactly how much an executive earns depends on several factors, including the company. An executive at a Fortune 500 company probably earns considerably more than an executive at a new, smaller company.
However, executives tend to be top earners. Organizations need to hire the best talent to ensure profitability – and those professionals require decent compensation. The BLS says chief executives earned a mean annual wage of $213,020 in 2021.
Why Do Executives Need Disability Insurance?
- According to a study from Harvard Business Review, CEOs work 9.7 hours per weekday on average. If they only worked five days a week, they would be working 48.5 hours. However, CEOs often work more than five days a week: Harvard Business Review says they conduct business on 79% of weekends and 70% of their vacation days. This all adds up to an average of 62.5 hours per week. They can do some of this work at home, but they need to do a lot of it at the office and some requires traveling to other locations.
- What happens when an executive becomes disabled? This isn’t an unlikely scenario. The Social Security Administration says one in four of today’s 20-year-olds will become disabled before reaching age 67. Executives are vulnerable just like everyone else.
When executives experience an illness or injury, they might be unable to keep up with the demanding nature of their job. They probably shouldn’t try, either – they need to focus on their health. The stress that comes with executive positions could be detrimental to their recovery.
Disability insurance replaces a portion of the policyholder’s income if the policyholder experiences a qualifying disability. This allows the person to focus on his or her health without worrying about money.
Case in Point
Dave is the CFO at a major company. He loves his job and doesn’t mind working long hours. Then he has a heart attack. He survives, but he has ongoing and severe complications. His doctor says he needs to take it easy – if he doesn’t, the next heart attack could kill him.
Dave applies for disability insurance and is approved for benefits. He spends his time focusing on his health and with his family.
Case in Point
Jennifer is the CEO of a midsize company. She earns $240,000 a year (or $20,000 a month) and wants to protect her income. She has the group long-term disability insurance policy her company offers to all employees, but it has a monthly cap of $5,000 per month – that’s only 25% of her regular income! She doesn’t know how she’d get by if her income were reduced that much. She talks with an insurance agent and is happy to learn she can buy an individual disability insurance policy to supplement her group policy.
How Much Disability Insurance Do Executives Need?
Disability insurance doesn’t replace 100% of a person’s income. The percentage it replaces can vary: some policies only replace 60% and have monthly caps that limit benefits. If a policy doesn’t offer enough coverage, the policyholder may need to purchase a supplemental policy to boost benefits.
Top earners, including executives, often find they need supplemental disability insurance coverage.
How Can Businesses Provide Disability Insurance for Executives?
Businesses are competing for top talent. Those that don’t offer excellent compensation will lose the best workers to a company that does.
Providing an attractive salary is just part of the equation. Businesses can also support their recruitment and retention strategies with an appealing benefits package.
For example, a company might offer all workers group health, dental, vision, life, and disability insurance. For many workers, this is a great package that will likely meet their needs.
However, a basic package like this may be insufficient for the executives at the company. These workers earn above-average salaries, meaning group disability insurance may not cover enough of their income.
Thankfully, employers have additional options:
- Guaranteed Standard Issue Disability Insurance: GSI policies are available to groups of workers. These policies have minimal underwriting, which can help workers with pre-existing conditions qualify for coverage. Multi-life discounts may also be available.
- Executive Bonus Benefits: Employers can use IRS Code 162, known as the executive bonus, to provide supplemental individual disability insurance benefits to executive workers. When companies leverage this option, the employee owns the policy and receives tax-free benefits. This is a fantastic way to make your top employees feel like you’re taking care of them.
How Can Executives Secure Paycheck Protection?
Instead of relying on the disability insurance benefits they receive from work, executives can purchase their own individual disability insurance.
When you buy individual disability insurance, you’re in charge of the following:
- Coverage: If your company doesn’t offer enough coverage, supplementing your benefits with an independent disability insurance policy can be a great way to boost your coverage. Your income is a valuable asset – give it the protection it deserves.
- Choice: When you buy individual disability insurance, you pick the insurance company that offers the terms you want. Customize the elimination period, benefit period, and riders to meet your needs.
- Portability: Group long-term disability insurance can be tied to a job, but what if you don’t want to be tied down? Individual disability insurance is portable, meaning you can take it with you when you switch jobs. Even if you plan on staying with your current company for a while, locking in portable coverage now can be a smart move. Otherwise, if you decide to switch jobs 15 years from now and experience health problems in the meantime, you may have trouble qualifying for coverage.
Do You Need Disability Insurance for Executives?
An insurance agent can help you compare your policy options and buy disability insurance coverage that meets your needs. Find an agent.
Are You an Insurance Agent?
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