An Advisors' Guide to Excess & Surplus Disability Insurance

How To Adequately Protect Highly Compensated Individual's Income

Posted Wed, Oct, 13th, 2021
By Exceptional Risk Advisors

In short, to adequately protect a highly compensated client's income is through a layering strategy.  Group long-term disability (LTD) + Supplement Individual Disability Income (IDI) + Lloyd's of London Disability = Comprehensive plan for high income client.  Group LTD and IDI have been around for decades, but for the highly compensated individuals, domestic coverage just scratches the surface.

For example, if your client was one of the 30,000 New Yorkers making over $1 million annually and had a typical employer disability group plan of $15,000 per month, would they be able to live on 18% of their paycheck if they became seriously disabled or ill? 

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Employer provided group LTD plans can be supplemented by a second tier in the form of a supplemental plan using IDI insurance.  This can increase disability replacement income to a combined $35,000 per month, which is deemed adequate for salaries in the $700,000 range.  However, for your client earning $1 million or more, there is still a gap in their coverage.

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The primary problem here is underinsurance.   Ask your client: Would you insure a $10 million home for $1.8 million?  The secondary problem is most traditional insurance brokers are unaware a viable option exists to protect these high performing individuals above and beyond what traditional disability income carriers will underwrite.

Through the Excess Lines DI Market, personal income replacement disability products are available with extraordinary benefits limits to U.S. businesses and individuals through certified Lloyd's of London Coverholders.  Simply put, when your highly compensated client has maxed-out their group LTD and supplemental IDI plans, an additional layer of disability insurance by Lloyd's of London can be offered.  These plans are designed to meet your highly compensated client's unique needs and objectives.

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