Problem You Face Now
Excluded Compensation
Group Long Term Disability insurance typically excludes bonus, commission, equity and other variable compensation - and any compensation over a certain amount - from the definition of covered earnings. As a result, leadership and sales personnel receive less than 60% income replacement.
Proposed Solution
Individual Disability Policies
In order to restore income replacement ratios to the benchmark level (60%), individual disability insurance is used to make up the difference.
There is no need to cover everyone.
Problem You May Face Later
Severance Doesn't Play Nice with Group Disability Insurance
How to Prevent It
Build Into the Employment Agreement Reimbursement for Non-Cancellable Disability Insurance
If disability occurs during active employment and severance benefits are triggered, the individual will see his or her Group LTD benefit reduced by the same amount, and be unable to take advantage of both.
If disability occurs after active employment, they've lost eligibility for group Long Term Disability insurance policy due to longer being actively at work. Even if an exception for leave applies, the benefit would be zero because severance is not covered earnings.
To ensure continuity of coverage, a non-cancellable form of disability insurance should be established by the individual in order to ensure full control.
It is perfectly fine to let the individual do their own thing and not make group decisions.
Reimbursement of premiums should be provisioned in the employment agreement, beginning at the employment start date (or as soon as possible) and end with the final severance benefit payment.
Problem You May Have Seen
An employee may underperform due to a health problem, making it hard to let them go.
When employees underperform for medical reasons, especially due to psychological and substance abuse conditions, they often try to power through it, obliging the employer to indulge unnatural work practices and double check their work product in order to avoid costly mistakes. Employers torture themselves out of fear that a fired (and ill) employee may sue for wrongful termination.
How to Prevent It From Happening Again
Provide the kind of disability coverage that gives them options and financial security.
Sometimes it's better for all parties if everyone just goes their separate ways. The key is persuasion.
An individual with a high work ethic will only agree to voluntarily separate if he or she can be assured of their financial security and can still work to maintain their sense of worth and identity.
Only individual disability insurance can be designed to achieve near 100% income protection and provide options to work while disabled without being penalized.