The BPFP Blog Is Back! Open Enrollment, Long-Term Disability, and learn more about Aaron Graham.
/The BPFP Blog: We’re Back!
Our team has grown a lot in the past year and we’re excited to start sharing ideas and resources on a more regular basis. We are aiming to get these out at least monthly. We have a lot of ideas for topics to cover including:
Showing how we put the core values of Ballast Point into practice
Explaining the impact of the new proposed financial regulations
Sharing the steps you need to take to start your own side hustle
Reviewing the impact of inflation on your financial future
And also discussing fun topics like the cost of dog ownership
Since open enrollment season is here for many of our clients, we’re starting today with a refresher on long-term disability coverage. We’ll also be including a segment with a bit more about each of our team members so you can get to know us better, starting today with Aaron Graham, CFP®, EA.
Also, we’d like to hear from you! If there’s a specific topic you’d like us to address, please let us know by emailing drew@ballastpointfp.com. Enjoy!
Long-Term Disability
By: Aaron Graham
In need of disability insurance
It’s that time of the year again that we love and hate - open enrollment. One of the most important yet most commonly overlooked insurance benefits your company may offer is long-term disability (LTD) coverage.
Important Concept: Your ability to earn a wage is your most valuable asset.
LTD coverage protects you if you become disabled and are no longer able to earn income. You may be surprised to learn that you are three times more likely to become disabled in your working career than to pass away.
In addition to the greater probability of becoming disabled, it can also wreak havoc on your finances. The most common need for any insurance is to cover expenses resulting from an event that you cannot afford to cover on your own. That is why LTD insurance can be one of the most important coverages to have.
So, you know you need it, and that your employer offers it, but what do you need to know when reviewing your benefits brochure?
Elimination Period (or waiting period) - Think of this like a deductible. This is usually listed as either 30 or 60 days and is how long you must be disabled before your coverage kicks in.
Maximum Benefit Period - This is how long your LTD benefit will pay out should you become disabled. Often this will be for a specified time period or until a certain age.
Maximum Benefit Amount - This is the maximum amount your policy will pay out. It is usually noted as a percentage of pay (typically base pay) up to a certain amount, e.g. “60% of pay up to a maximum of $5,000 per month.”
Your employer may pay for basic coverage and offer additional coverage that you pay for separately. If your employer’s basic coverage does not replace at least 60-70% of your income, supplemental coverage is often a smart choice.
Pro Tip: We recommend that you pay the premiums yourself if you have this option.
While the hope is you never have to use this insurance, if you pay the premiums yourself, the LTD benefits you receive will be tax-free. Conversely, to the extent your employer pays the premiums, those benefits will be included as taxable income.
You may see short-term disability offered as a benefit through your company as well. This is typically designed to cover a period of time equal to the elimination period of your LTD policy. If you have sufficient cash reserves, you may feel comfortable waiving this coverage unless it is offered at no cost to you. We typically recommend that you keep this coverage.
To learn more about open enrollment, check out this helpful guide or reach out to us to schedule a time to discuss your options.
Team Spotlight:
Aaron Graham, CFP®, EA
Aaron joined the Ballast Point Team in April 2021. He lives in Irmo, SC with his wife, Pamela, and two-year-old daughter, Emily.
Fall is Aaron’s favorite time of the year because it marks the start of the best season of all - college football season. Go Gamecocks! Regardless of the season, Aaron thinks any time is a good time for puns and dad jokes, both languages in which he considers himself fluent.
Aaron enjoys empowering clients, providing financial literacy, and mentoring young planners entering the financial planning profession.
