Why Traditional Group Long-Term Disability Plans Fail High Earners

Blind spot monitors were first introduced by Volvo in 2001 to solve a critical problem: even the most experienced drivers can’t see everything. These sensors were designed to alert drivers of risks they couldn’t detect on their own, preventing accidents caused by hidden hazards. 

In much the same way, many high earners believe their Group Long-Term Disability (LTD) insurance plans fully protect them – unaware that essential coverage is missing until a disabling event exposes the blind spot with irreversible consequences. 

The Hidden Risk to High Earners 

Top earners work hard to build a lifestyle for themselves and their families. But the single biggest threat to their financial future isn’t the stock market or economic downturns – it’s an unexpected disability. 

Consider this: 

• Various industry studies have shown that an employee is up to 5x more likely to suffer a disabling event than to die during their working years. 

• Yet, most Group LTD plans haven’t evolved in 30 years to keep up with executive pay structures. 

• Incentive compensation – often 50% or more of total earnings – is usually excluded. 

This creates a massive gap between what high earners expect to receive in LTD benefits and what they actually get. 

Why Group LTD Plans Haven’t Kept Up 

Most Group LTD policies were designed decades ago when executive pay was more salary-based. But times have changed: 

Yet, Group LTD plans are typically still capped at 60% of salary, with benefit maximums that haven’t budged in years. The result? A high earner who becomes disabled could see their income plummet by hundreds of thousands of dollars per year, a devastating financial hit. 

By the Numbers: How Big Is the Gap? 

Let’s break it down:

Executive Compensation

• $500,000 total pay ($250,000 salary + $250,000 incentive) 

• Group LTD only covers  60% of salary with a max of  $10,000/month 

• That means they receive just  $120,000/year  in disability benefits 

• Benefits are usually subject to income tax  

➡️  Total Income Gap:  $380,000 per year  

For high earners accustomed to a certain lifestyle, this loss isn’t just inconvenient – it’s catastrophic. These employees also lose the future potential of what likely would have been continuous opportunity for compensation growth.  

If all of this sounds dramatic, well, it is. Most employees don’t fully understand the limitations of these plans, which can lead to a false sense of security followed by devastating financial hardship should they become disabled.  

The False Sense of Security 

The problem with traditional Group LTD plans is that they feel protective, but only until they’re actually needed. 

• According to Group Market Share (AskGMS), 95% of Group LTD plans  today have a monthly cap of $15,000 or less. 

• Most exclude incentive pay, which is a huge portion of executive income.

• Can’t protect unrealized future income growth.

 This means a high earner’s entire financial future is at risk if they don’t have the right coverage. 

How to Fix It: A Smarter Approach to Income Protection 

The solution isn’t just “more insurance” – it’s smarter planning. 

Secure Your Top Talent’s Future Before It’s Too Late 

The reality is clear: traditional Group LTD plans don’t work for high earners. If employers and executives don’t rethink their approach to disability insurance, they risk financial devastation when the unexpected happens. 

At TIP, we act as your financial blind spot monitor. We help identify and address the unseen risks that could undermine everything your top talent has worked for. 

Contact us today to ensure your executives are truly covered before it’s too late.