Income & Disability
High Earners Have a Different Disability Problem
The higher your income, the larger the gap that standard disability coverage leaves behind.
The cap problem
Group long-term disability policies typically replace 60% of base salary, up to a monthly maximum. That maximum — often $5,000 to $15,000 per month depending on the employer — is where the problem begins for high earners. A physician earning $400,000 a year has a monthly income of roughly $33,000. A group LTD policy capping at $10,000 per month replaces less than 30% of that income. The policy exists, the checkbox is checked, and the protection is still deeply inadequate.
Bonus and variable income: what group plans ignore
Group disability policies typically base benefits on base salary only. Bonuses, profit-sharing distributions, partnership draws, and other variable compensation are usually excluded. For attorneys, executives, and business owners whose total compensation significantly exceeds their base salary, this exclusion can make the effective replacement rate even lower than the headline percentage suggests.
The 'own occupation' stakes are higher
For professionals whose income depends on a specific, highly trained skill set — surgeons, dentists, trial attorneys, pilots — the definition of disability in a policy is not a technical detail. It is the difference between collecting a benefit and not. A surgeon who can no longer perform surgery but could theoretically work as a medical consultant would not qualify under an any-occupation policy. The financial consequences of that distinction, at a physician's income level, are enormous.
The retirement savings problem
High earners typically save at higher rates. A disability that stops income also stops retirement contributions — and group LTD policies do not replace the savings component of income, only the spending component. For someone who was contributing $50,000 or more per year to retirement accounts, a multi-year disability creates a compounding shortfall that is difficult to recover from even after returning to work.
What the solution looks like
Individual disability income policies — purchased outside of any employer plan — can be structured to cover higher benefit amounts, include bonus income, use true own-occupation definitions, and extend to age 65 or beyond. They are more expensive than group coverage, and they require medical underwriting. But for high earners, the cost of adequate coverage is typically a small fraction of the income it protects.
The question worth asking
If your income stopped tomorrow due to a disability, what percentage of it would your current coverage actually replace — after the benefit cap, after taxes, and after accounting for variable compensation? For most high earners, the honest answer is less than half. That gap is worth closing before it becomes a crisis.
Standard disability coverage is designed for average incomes. High earners need a different approach — and the window to get it is while you are healthy.
If you have not reviewed your disability coverage in the context of your current income, that is a conversation worth having.
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