How to make sure your clients are covered: RBC Insurance
Most people never assess their disability insurance coverage until they need it � and executives are no exception.
In the event of an illness, many high-income earners rely on the long term disability coverage (LTD) in their group benefits programs to provide the necessary protection. Although many don�t consider purchasing additional disability insurance, a closer look at group LTD coverage often reveals significant gaps in coverage.
�Group and individual advisors need to make sure their high-income clients have the coverage they need,� said John Young, president and CEO of RBC Life Insurance Company. �They definitely have a great opportunity to provide employers and executives with more effective insurance solutions to address income replacement coverage gaps.�
The Concept
The concept of �reverse discrimination� relates to the fact that under the typical group benefits plan, executives may receive lower LTD benefits in relation to their total compensation, than other employees. The resulting �reverse discrimination�, where income replacement ratios may drop as compensation increases thereby reducing the level of income protection, is not a well understood aspect of some of today�s LTD plans. Reasons for this include:
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Group LTD plans have stated maximums that vary depending on the size and earnings of a group. These are designed to adequately insure the group as a whole, but may not be designed to provide the coverage an executive client needs.
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The income used to determine benefit calculations is defined in the group plan and often does not include the many varieties of executive compensation (such as bonuses, commission, pensions, profit sharing or stock options).
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Many employers are unaware of the differences between group and individual plans and are often not familiar with the options available when they develop their employee LTD plan.
The Solution
Traditionally, the insurance industry has provided options that usually involve using group or individual concepts � not both options which would use these concepts simultaneously as components of an integrated solution. An example of such a solution that may effectively deal with the reverse discrimination problem would be to offer an executive disability �top-up� program. This would allow for the purchase of additional individual disability coverage on top of an existing group LTD plan.
By combining individual coverage with group coverage, advisors can include more forms of executive compensation, address uninsured pensions, customize disability policies, provide portability of coverage, and create cutting edge benefits solutions. This ultimately provides a greater income replacement level for the key employees and therefore reduces or eliminates reverse discrimination.
About RBC Insurance
RBC Insurance, through its operating entities, including RBC Life Insurance Company, provides a wide range of creditor, life, health, travel, home, auto and reinsurance products to more than five million North American clients. As a leading provider of individual living benefits and life insurance products in Canada, RBC Life Insurance Company offers a comprehensive portfolio of individual and group life and health insurance solutions, including term and universal life insurance, group benefits, disability, critical illness, and long term care insurance as well as segregated funds. These products are distributed through more than 17,000 independent brokers affiliated with producer groups, financial planning firms and stock brokerage firms, as well as through direct sales and a network of career sales representatives. For more information, please visit www.rbcinsurance.com
