What can Nortel teach us of the pitfalls of group long term disability plans?
One of the best arguments for personal, individual disability plans I have ever seen!
For those that think group insurance is adequate, and are relying heavily on the promises of industry to back it up – you’d better take a hard look at the pitfalls of any kind of group insurance – especially one that is designed to protect income in the event of disability…..
You are an employee of a company with a long-term disability plan.
Do you know the terms of how it may pay, and more importantly if it might not?
How much control do you as an employee have over the payments that might be made from the long-term disability insurance?
Well, bizarre as this may sound, Nortel was covering the payments in disguise of an insurer (Sunlife), and now with the company in hard times, those disabled employees stand to lose their benefit:
Imagine that you have a good job at Canada’s premiere telecommunications manufacturing company. You choose to make regular contributions to your company’s long-term disability (LTD) benefit plan because, while you are unlikely to ever need it, you don’t wish to risk finding yourself living in poverty or possibly institutionalized as a result of an accident or disease.
One day Fortune knocks, recruiting you into the world of the disabled. Though you’ve lost much, you are thankful that you’re not also left penniless. Then you receive a letter from your employer informing you that, regrettably,your LTD plan was not really covered by an insurance company and when the business evaporates so will your paycheque.
Even as an insurance broker of 21 years, I find this arrangement bizarre, and under the circumstances unacceptable.
Why on earth would the government allow a company to self insure an area of insurance that can be very expensive indeed?
And, as argued in the article, shouldn’t the money be locked up, as a form of pension plan, as has been argued in the past as companies faltering try to tap into the company pension coffers?
A single disability claim can add up to millions of dollars in payments, and therefore Nortel, with over 400 employees on disability would need to set aside an enormous amount of money. Again, it begs a couple key questions that employees should demand, and seek the answers to:
- Does my company have a similar arrangement?
- How much net income will I get paid if I am disabled?
It also stresses the need to discuss these circumstances with a qualified broker who can help you with an overview of your options and alternatives. In light of the uncertainty of group long-term disability plans, you should discuss the individual options a personal policy could provide.
Insurers can give a discount for employees that want to take out individual policies.
So, while your group plan may be first payor, the individual plan will not leave you hanging as the group plan at Nortel has done.
Premiums for individual policies are guaranteed, the policy cannot be cancelled with the best plans, and you can take it with you from employer to employer.
When you rely on your income, and you stand to earn millions of dollars over the course of your career, can you tell me of a single more important issue you need to look at now?
Call us at 1.866.856.6799.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.