Coordination of Benefits Question

Dec 22, 2015

  1. sturgbe
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    sturgbe New Member

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    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?
     
    sturgbe, Dec 22, 2015
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  2. TPetersen
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    TPetersen Expert

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    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.
     
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