Annual Enrollment – Disability Insurance

Full Transcript:

Shell overhauled their disability insurance. Ensure you don’t miss out.

Shell’s new disability insurance coverage is a welcome change from the previous overly complicated setup. Shell has expanded their provided coverage, and there’s only one additional disability insurance that employees need to make a decision on. There’s no more dealing with things like quarter-pay or half-pay, income protection insurance, or IPI.

Let’s look at John, a hypothetical example to see how his new coverage would impact him. So, John’s working for Shell and John has more than ten years of service with Shell. John’s base salary is $250,000 or $20,833 per month. Now, let’s assume John becomes disabled and can’t work under the new disability insurance coverages.

So, once his disability starts, the Shell-provided short-term disability kicks in and pays 100% of his base pay. Now, since John has over ten years of service, this goes on at 100% for 26 weeks. Once he hits 26 weeks, John’s coverage goes from short-term to long-term. Now, the company provided disability for long-term is 50% of your base pay, but only goes up to a $5,000 maximum monthly benefit. Now, thankfully, John also then enrolled and paid for the buy-up long-term disability coverage, so he gets 60% of his base pay with a monthly maximum of $12,500. So, John then will receive $12,500 per month for the remainder of his disability. Now, there are a few offsets in here for Social Security, but in general, it’s really important that you understand your coverages.

Let’s talk about a couple important factors regarding John’s situation. So, with the short-term disability this is taxable income. So, John’s take home will be much less than 20,833 per month. However, the long-term disability, John pays taxes on the insurance, so the benefit is tax free. So, when John switches from short-term to long-term, his change in take home pay won’t actually be that large. The other thing to note is that this only covers base pay, and the buy-up option has a max of $12,500 per month. So, if you have a salary higher than $250,000, you aren’t even getting 60% of your base pay, and depending on your lifestyle and your investments, you may want to consider additional third-party coverages. Now, one last thing to note this year only, there is no evidence of insurability requirement to sign up for the buy-up long-term disability option. So, for those of you with preexisting conditions, this is an even more important consideration for the ongoing annual enrollment.

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