But busy administrators often take only a superficial look at the basic components of their LTD plans without investigating the coverage limits or cost-benefit ratios. As you go over your plan, consider the definition of an LTD policy discussed below. You'll determine if the protection your school provides adequately covers your employees and that you are receiving the best value for your insurance dollar.
- Determine how your policy handles partial disabilities, which are defined as an inability to perform some (but not all) of the material duties of one's regular occupation, and earning at least 20% less than his/her pre-disability earnings. Different policies handle this situation in different ways, so be sure to review your policy or contact your provider to determine exactly how your insurance company handles this portion of your LTD policy.
- Is disability contingent upon loss of both earnings and occupation? Better LTD plans use loss of either earnings or occupation as their parameter, which can result in substantially more income for your partially disabled employees.
- Check your policy's definition of "gainful occupation," which is usually defined as an occupation in which a disabled employee could be expected to earn at least a certain percentage of indexed monthly pre-disability earnings. Most LTD policies set the percentage at 60, which means that carriers will terminate the claim if an employee can earn 60% of indexed pre-disability earnings. Better plans set this number at 80%.
- Make sure your policy provides adequate income for key administrators who regularly work substantially more than 40 hours per week. The normal LTD policy will not consider additional hours when determining disability. Better policies recognize that key employees work longer hours. They will pay benefits if the administrator must reduce hours below 75% of his/her normal work week.
Next month, we'll discuss some basic LTD benefits, as well as a number of the other things that better LTD policies will cover.
