Individual disability in addition to group disability

[Hoosier CPA]

First time poster; long time lurker.

Have a question about how much disability coverage I can buy or what I should buy.

I have individual coverage through NMW that I purchased while working at a job that doesn't provide disability coverage. The amount is about $3,400 per month currently and increases for inflation.

My current job provides group coverage of 60% of my base salary (Libery Mutual I think). My understanding from reading here is that this policy isn't worth much, if at all. My group coverage only provides same occupation for 24 months, then it switches to any occupation. I currently work as a CPA in corporate finance.

In case it helps, I'm 39, my base is about $93K and I am eligible for a 20% bonus. I also work a part-time job that pays about $7K a year. So total gross is just under $120K. The 60% coverage at work covers my base, so that is $56K. The $3,400 from NWM equates to $40,800 per year, so my total coverage is currently $97K if I understand it correctly. So that would be about 80% coverage, although it would all be after-tax. Is that correct or would my group coverage not pay out if I am covered by individual coverage?

I can't opt out of my group coverage at work. I want to make sure I have an appropriate amount of coverage. I've looked into pricing with Guardian, as I understand that's a better policy that what I have now with NWM, but told I can't add much of anything there because I now have the coverage at work.

[simplesimon]

Get the most you can - companies will tell you how much it will be, likely to top off your pay to get you to 66% coverage. Make sure you have a future benefit option rider so you can increase it if you switch to a job that either doesn't provide coverage or has optional coverage that you may wish to decline.

You won't get as much as your NWM policy covers now but certainly the terms and riders will likely be better. What does the NWM provide other than inflation adjustments?

[BruDude]

If you keep the NWM policy you won't be eligible to buy anything. If you replace the NWM policy, you'd be eligible for about $3100/month in benefits under a new policy assuming your bonus counts as income (must have received bonus for two years current/prior to count). Being eligible for bonus income doesn't count unless it's a contractually guaranteed minimum. Guardian has a much better policy than NWM and as a CPA you can qualify for the best occupation class, so the rates may even be competitive with your current policy. I ran a quick calculation and an age-65, 90-day EP, $3100/month policy with max FIO rider, 3% COLA rider, and Enhanced Partial (residual) disability rider is about $1300 annually.

[Hoosier CPA]

Thanks for the answers already.

My bonus isn't guaranteed - it's more of a profit share. We'll likely have a payout of about 80% this year (80% of 20%). Does that mean it doesn't count for determining how much coverage I am eligible for?

From looking at the NWM policy - it is regular occupation, has waiver of premium benefit, the premiums are discounted for dividends, it has a COLA increase capped at 3.0%, it's a 90 day policy, and has some language about partial disability. The dividends were a good % of the premiums in the past (I converted the policy to a level term this year, and after the conversion, no dividends will be paid for 2 years).

I'm trying to learn as much as I can about this...

I am also eligible through the AICPA but assume my group coverage would limit what I am eligible for that as well.

[simplesimon]

Does past tax returns show the bonus included?

If you're trying to learn as much as you can, perhaps my favorite reference for LTD is the series posted by White Coat Investor.

http://whitecoatinvestor.com/personal-f ... rotection/

[Hoosier CPA]

It's regular income, so it would be on my W-2.

[Kenkat]

The group coverage is typically before tax, so of the 60% coverage, you will have to pay taxes on that benefit. I think a supplemental disability policy is a good idea even for those who have group coverage. The benefit from an individual policy is typically after tax - i.e., the benefits are tax free.

[pintail07]

The CPA national association use to have a pretty good policy priced very competitive.

[Hoosier CPA]

Will the association have the same income to coverage limits? I think it will. As I understand it, I have "excess" coverage now just because I bought the individual policy when I had no coverage, and then the group coverage was added on top of that (out of my control as it is a benefit that I could not decline), if that makes sense.