What’s your plan?
Sometimes it may seem challenging to follow basic financial tenets. You’ve heard them before: avoid debt, have three to six months of living expenses saved, take advantage of your employer’s 401(k) match and others you’re probably familiar with.
Mortgage or car payments, health and car insurance, retirement savings, and child or elder care are a few types of expenses many of us shoulder each month.
If you couldn’t work because you were too sick or injured, how would you plan to pay bills? The country’s personal savings rate was about 5% in 2010, according to the Bureau of Economic Analysis, so tapping into savings may not be an option. Would you raid from your retirement savings plan or borrow from others?
Disability benefits at work
If you have group long term disability insurance (LTD) through your employer, that’s a great start. This type of coverage provides basic protection.
Do you know the benefit percentage you would receive and for how long you would be eligible to receive benefits? Is the benefit amount capped?
Not sure? You’re not alone. Many people don’t. Chances are, your group LTD plan looks like this:*
- Most group LTD plans replace 60% of your base salary.
- Benefits are payable after six months, referred to as a 180-day waiting or elimination period.
- The benefit period is to age 65.
- The maximum monthly benefit amount is $10,000 or more.
- Most monthly benefits are taxable because many employers pay the premiuim, further reducing the benefit percentage.
- Incentive income (bonus, commission, etc.) is typically not covered.
You may find that you have a significant income gap. That is, there is too much of a difference between your pre-disability income and the group LTD benefits you'd receive while disabled.
Your bonus - hard-earned but unprotected
Currently, many companies are offering lower salary increases and higher “variable” pay components of employee compensation. So if you suddenly can’t work, it might feel like you never earned that bonus income, because it’s unlikely to be included in the calculation of your monthly benefit.
Assess, then act
Your income is far too important to go unprotected. Here’s how to take control and get started:
1. Check your group LTD plan to see what’s covered. The Summary Plan Description (SPD) can help.
2. Use our income gap calculator with your group plan details to find out whether the income protection you have in place is adequate.
3. Contact your company’s benefit manager about coverage options.
4. Talk with a financial professional about options to reduce the gap you may have in your disability income insurance coverage. If you’re not sure who to call, contact us to find a local MassMutual Financial Professional who can help you.
You probably protect your house, car and your health with insurance. So why not also insure that which makes it all possible: your ability to earn an income. Understanding how DI works can help you decide if you have adequate coverage and get you on the road to added protection.
*Based on findings from The American College and MassMutual’s “Employer Perspectives on Disability Benefits” (2010).
The information provided is not written or intended as specific tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
MassMutual issues individual disability income insurance. Policies have exclusions and limitations. For costs and complete details of coverage call your agent or MassMutual at 1-800-272-2216 for a referral to an agent.
