C-Suite Executives Are Invaluable Assets – But Are These Individuals Receiving Proper Protection?

When the Unexpected Strikes

It was a rather bleak Friday afternoon when Jonathan Smith, CFO of his company, visited his doctor to alleviate the chronic headaches and frequent joint pain he had been experiencing. After some tests, the prognosis was definitive; Jonathan was in the midst of late stage Lyme disease which would eventually render him disabled ––indefinitely. With no successful cure for advanced Lyme Disease, his condition would make it impossible for him to handle the mental demands his job placed on him.

Jonathan was 49 years old at the time of his diagnosis and a successful corporate executive with a $700,000 annual income that included a $400,000 base salary plus a $200,000 bonus, and $100,000 of restricted stock options.

He and his spouse knew the company had a disability policy and they scheduled a meeting with the HR director to learn how to proceed. In the meeting, the director explained that their plan would cover 60% to a maximum of $20,000 a month, but only of Jonathan’s base salary, effectively leaving over 65% of his salary unprotected. Jonathan and his spouse began focusing on their impending financial situation. It became apparent that Jonathan’s spouse would need to become Jonathan’s full time care taker, with neither of them able to work. How would they continue to pay for their new home, their three children’s college tuition, or any of their other numerous expenses? 

A Familiar Story: Inadequate Protection

This is a story that, tragically, sounds all too familiar. Executives and the value they represent to their companies are often incalculable. We are reminded of this fact as the world mourns the loss of enigmatic and playful Hasbro CEO Brian Goldner to his battle with cancer. Golder was described by the interim chief executive as “The heart and soul of Hasbro.”

Unfortunately, it’s a simple fact that, in most instances, executive income is inadequately protected. The vast majority of corporations only protect income up to $25,000 a month, or $300,000 a year maximum with group insurance and individual disability insurance, and the likelihood of disability for this age group is 3.5 times higher than death. This disability benefit scenario is therefore common with highly compensated executives, particularly those with a base salary plus a bonus, and perhaps equity. Today, equity compensation frequently accounts for nearly a third of executive pay, and only one insurance company in the US is equipped to cover it.

The TWG Solution

High-limit Disability Insurance, a product pioneered and exclusively manufactured by The Westport Group, a coverholder at Lloyd’s of London, specializes in bridging this gap. TWG works directly with clients and their benefit consultants to custom design a comprehensive guaranteed standard issue High-limit package with no medical underwriting.