An Advisors' Guide to Excess & Surplus Disability Insurance

How to Close the Income Exposure Gap of the Highly Compensated

Posted Wed, May, 15th, 2019
By Exceptional Risk Advisors

Disability Insurance Awareness Month was created to get Americans to think about the need to protect their greatest asset - their ability to earn an income.  When your income is in excess of $1 Million annually, the stakes are that much higher – a 6-bedroom house, kids in private school, luxury cars and a deluxe vacation home in a choice location. 

To illustrate the exposure, take a 50-year-old executive earning seven figures annually with a time horizon of 15 years until retirement. This executive has over a $15 million exposure to their estate in the event he or she were to suffer an injury, or more likely, a serious illness*.   What do your clients possess that is worth $15 million and is not fully insured?  Most likely, nothing!  So the question becomes, how do you close the income exposure gap?

The primary problem here is underinsurance.  Most traditional insurance brokers are simply unaware that a viable option exists to fully insure their highly compensated clients.  The secondary problem occurs when a void exists in the U.S. insurance market and the coverage an individual is seeking is simply unavailable - think those in the entertainment business and professional athletes.  However, thanks to the powerful resources offered via the Lloyd’s of London market, high earning individuals can access extraordinary benefit limits to supplement the programs they have purchased here in the U.S. or secure coverage where options did not exist.

We recently worked with a high-level executive earning over $2.6 million and was seeking additional disability coverage to protect his future income.  With a possible 10-15 years left in his career, this meant protecting an almost $40 million asset.  Download the case study to read how we supplemented the executive's traditional disability policy with an added layer of Lloyd's high limit disability income protection.

According to the IRS, in 2016 there were 424,870 individuals with an adjusted gross income of $1,000,000 or more.  It is very likely that those individuals have exceptional income exposures. Are any of them your clients?

Bonus read: 5 Top Causes Behind Long Term Disability Claims


*Assuming the individual has $25,000/mo in domestic disability coverage in force and an annual income increasing by 3%.