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I’m Doug Lenhoff and today I’m joined by Paul Sitar, regional representative with DI Broker West. Paul, thanks for being here. Hey Doug, it’s great to be here.

Always enjoy the chance to dig into the stuff. So Paul, for listeners who may not be familiar with DI Broker West, give us a quick overview of what you do.

Sure. So at DI Broker West, we’ve been helping insurance agents and financial advisors with disability income products and services for more than 25 years. We’re recognized basically as specialists in the DI space. That’s really our lane.

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And today I want to talk about something that comes up constantly when advisors are working with business clients, a gap that’s hiding inside most group LTD plans. Okay, let’s start there. You say a gap is hiding inside group LTD.

What do you mean by that? So basically here’s the typical scenario. An employer sits down to review their benefits package and health insurance dominates the conversation. Disability conversation gets treated like a checkbox, right? The employer simply hears 60% income replacement and assumes they’re set.

But for the higher income earners, that 60% is nowhere close to the actual math. Why not? If the plan says 60%, isn’t that what the employee gets? Well, yeah, that’s basically what everyone assumes, right? But that’s where the gap hides. Most group LTD plans actually have a monthly cap.

So if a common cap is typically 10,000 a month, that sounds fine if you run the numbers. But for higher income earners, say you have an employee earning 300,000 a year, a true 60% replacement would only be 15,000 a month. But the plan stops at 10, so that’s not 60, that’s actually 40.

And I’ve seen much worse than that. How much worse are we talking about? Well, I remember one time I worked with a company and around 50 employees, there was about 10 that were earning above the cap and that were significantly underinsured. So some were sitting at 30, 40%.

I remember one employee was sitting at 28%. So the employer thought that they had a solid benefits package at 60%, but that really was not the case. And nobody caught it? Oh, they caught it when we told them about it.

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So what does it look like fixing it? There’s a guarantee standard issue disability plans, which is also called GSI. It’s a tool that solves this very cleanly. It layers on top of the existing group LTD plan and restores meaningful income protection for the employees above the cap.

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What makes GSI fit for this situation specifically? Oh, there’s a few things. First, it’s the simplicity. There’s minimal underwriting.

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Employees aren’t going through a full individual DI application process. The benefit design is consistent across the group, which makes it easier to administer. You know, it’s portable, so employees can take it with them when they leave the company.

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And the overall process is much smoother for the employer than trying to get each affected individual employee individually underwritten. Is there a catch? What does the employer have to do to make it work? So the key requirement is the employer pays the premium, right? That’s what unlocks the favorability underwriting terms and makes minimal medical underwriting possible. But for most employers who are already invested in their benefits program, it’s not that hard.

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You know, they’re already paying for the LTD. This is just closing the gap for what they thought they were already doing. So if an advisor is listening to this and thinking, I might have a client who fits this, how do they quickly figure out if a client’s worth looking at? So I’ll typically use a five question screen.

You can run through this in a short conversation or just from what you’ve already known about the client. Okay, walk us through it. First, how many employees does the company have? GSI works really well when there’s, five to 10 covered lives and it scales from there.

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Secondly, does the company already offer group LTD? If they do, that’s a really good starting point to do the gap analysis. And then three, are there any employees earning above the monthly’s cap for most professional and executive level workforces? The answer is yes. Third, are there employees above the monthly cap for most professional executive level workforces? The answer is yes.

Four, do any of the employees receive meaningful commissions, bonuses, or K1 distributions? That’s important because group LTD covers base salary only. Variable comp is usually excluded entirely, which means the income replacement gap can be even larger when you’re just focusing on covering the salary only. And then five, is the employer willing to pay the premium? As I mentioned, that’s important because you’re going to have to pay for this stuff.

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Five questions. Well, that’s pretty efficient.

It is. Yeah. And if you get through those five questions and the answer points to a gap, then you have a real conversation to have. You typically don’t have to overall analyze everything up front.

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So Paul, last thought. What’s the mindset shift you want advisors to take away from this? Really, you just don’t ever assume the job is done because they have group LTD in place. In many cases, that’s actually where the opportunity starts.

The plan exists, the employer thinks they’re covered, but the math tells a very different story for their top earners. The advisor who digs into that and brings a solution becomes the person who found that what everyone else walked by. Love that framing.

If someone wants to take the next step, what should they do? Well, yeah, the next step would be to reach out to us at DI Broker West. If you have a client with a census that you want reviewed, or you suspect there’s a cap issue with one of the groups that you work with, we’re here to help you run the numbers. We can identify the gap.

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We can help design supplemental solutions. We do this every day. This is our job. So put us to work.

Great. Paul Sitar from DI Broker West, Southern California. Thanks for your time today, Paul.

Thank you, Doug. I appreciate it.

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