Cheryl Sherrard quoted in Financial Planning Magazine (July 1, 2013).
Group disability is, by far, the way that most people have coverage. It’s often free or available at very low cost, and there’s no medical underwriting involved. But it only goes so far, advisors caution.
The benefit can be taxable if an employer pays the premium or if the employees pay it pretax. That could come as a shock to someone who believes they’ll be getting 60% of their salary only to find out that a big chunk of it is taxed.
Also, group coverage is based on salary rather than total compensation. Someone whose earnings are based largely on a bonus may find the benefit woefully lacking, says Cheryl Sherrard, director of financial planning with Clearview Wealth Management in Charlotte, N.C.
And group disability often places severe restrictions on which type of disability will be covered. The plans usually pay for 18 to 24 months if a person is not able to perform his or her occupation; after that, they typically only continue to pay if that person can’t perform any occupation.
“These three basics are essential to an employee’s understanding of what they would really get in the event of a disability and can be a real eye-opener if they see the dollars and cents of those details,” Sherrard says.
Read the full article here.