It is easy to see how lifestyle and opportunity often trend with upward mobility and earning potential. Income protection is vital to sustain the household and provide the safety net to allow for consumption at your comfort level. Most group long term disability (LTD) plans cover 60% of your income to a stated monthly benefit limit. Typical group LTD benefits are $5,000/month of income to $20,000/month, and this benefit is typically taxable. Supplemental disability coverage fills the gap to minimize the impact.
High Income earners face coverage limits with group Long Term Disability (LTD), and often need to supplement with individual disability coverage to protect up to 70% of income. If your income fluctuates greatly, or is made up primarily of 1099 income, your group LTD coverage may be grossly inadequate. See this chart which shows the deficit of income protection for sales professionals with mostly 1099 income. Take an average of your past three years of income to set a target for income replacement.
*Not meant to be tax advice, please consult a tax advisor for details.
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