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Need advice on supplemental disability insurance

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  • Need advice on supplemental disability insurance

    Brand new here. I would like to get some advice on supplemental disability insurance.

    I am 40, in a non-surgical field. I have long term disability from my group with SUNLIFE(MGIS). It has a 2-year own occupation period followed by any occupation period until age 65. I think I will be fine living with 60% of the salary should I become disabled. However I am concerned about having own occupation period for only 2 years.  For example the disability may prevent one from working as a physician but the insurance company might think you can still work as a greeter at Walmart.

    What type of own occupation supplemental disability insurance do I need so that I don’t need to worry about not being able to work in my own occupation for the long term?

    What amount of coverage should I look for?

  • #2
    Are you paying for the Sun Life (MGIS) policy? If you are paying for it with pre-tax dollars or your employer is paying for it and not adding the premium that they pay on your behalf to your income, any benefits received would be taxable to you upon receipt.

    So, the first thing you want to do is make up for as much of the taxes that would be lost on the group LTD plan. Carriers will discount the monthly benefit by 25-30% when calculating the amount of individual coverage available if the benefit is taxable.

    You want to also make up for any earnings that you have in excess of the group LTD plan's maximum. For example, if your group policy covers 60% of your income with a maximum monthly benefit of $10,000, then any earnings that you have in excess of $200,000 annually are not covered at all.

    Finally, you want a policy that has a true "Iwn-Occupation" definition of total disability for the entire benefit period. This should state that you are totally disabled of you are "unable to perform the material and substantial duties of your occupation". This would allow you to work in another occupation or medical specialty and still collect full benefits under the policy.

    Lawrence B. Keller, CFP, CLU, ChFC, RHU, LUTCF


    • #3
      Thank you for the reply.

      If I get an own occupation individual LTD plan with 60% salary coverage.  Is it stackable with my current group LTD benefit?

      In other words if I somehow cannot work in my own profession, will I be able to get benefits from both group and individual plans in the first 2 years.

      Also is the benefit taxable if premium is from post-tax income?


      • #4
        Yes, any individual policy would take your existing group LTD plan into consideration. Therefore, in the event you were disabled and met the definition of total disability under both policies, benefits would be payable under both of them.

        The group LTD plan would require both the inability for you to perform the duties of your medical specialty AND have a loss of income of at least 20% compared to your pre-disability income (even in the first two years). So, in the event you are disabled from your specialty and decide to work in another occupation and you do not have a loss of income (even though you can no longer practice  in your medical specialty) of at least 20% of your prior income, you would not receive any benefits under the Sun Life (MGIS) policy.

        If you are paying the premiums for the group LTD plan with post-tax dollars, any benefits received from it would be income tax-free.

        Your medical specialty, group LTD plan's maximum monthly benefit and your earned income would determine which policies would be best for your situation. If you would like to discuss your options and email you illustrations of coverage to review, feel free to call or send an email to [email protected]

        Lawrence B. Keller, CFP, CLU, ChFC, RHU, LUTCF