Coordination of Benefits Question

[sturgbe]

Client is earning $400,000 a year now. His group DI will pay 60% to a max of $10,000 a month. Individual DI will pay 50% to its max. Assume he purchases individual DI coverage for another $10,000 a month.

If the client is still earning $30,000 a month at moment of disability. The Group will cover its $10,000 (60% of 30,000 is $18,000, max out is $10,000)

Under this situation, how much will the individual DI Carrier Pay? I am guessing they will only pay $5,000 a month (50% of $30,000 less the group benefit amount).

If the client was earning $40,000 a month, how much would they pay?

 

[TPetersen]

Based upon the scenario given if the individual DI was purchased after the group and there is no coordination of benefit clause, then the individual plans should pay the full $10,000.

As a side note it is good that you have your client with tier 1 and tier 2 coverage. However, based upon the income, 2/3 of income can be easily protected with an excess plan (Tier 3) to cover them up to about $21,600/month in benefits.

You can contact any of the top DI Brokerage outlets for excess coverage.

All the best.