I have found there is a little known loophole with government employees that try to buy private disability insurance on the open market. It doesn’t even matter whether or not the government entity, in which they are employed, offers long term disability insurance or not. It doesn’t matter if it is federal, state or local government employment. Disability insurance underwriters look at government employees differently than the private sector employees because of one government benefit. However, there is a way around it.

I was working with a state government employee in my home state of Tennessee. Tennessee does not offer long term disability insurance to all levels of employees. Therefore my client needed a good long term disability insurance plan from the private market. He wanted a set amount which equated to about half of his monthly earnings, well in range of disability insurance coverage guidelines. However, he could only qualify for 40% of that number or 20% of his monthly pay. Certainly if the employee is injured or ill because of their employment, then workers compensation benefits are activated. I am speaking of an injury or illness not work related. Why, you ask, could he not be underwritten for the 50% benefit? Because disability insurance underwriters use the pension plan of the government employee to calculate benefit levels. If a government employee becomes disabled due to illness or injury off the job, then the government activates their retirement pension at 60%, so they may draw from their retirement for monthly income. In other words, government employees are not given a disability status but a retirement status, if they are no longer able to work. The disability insurance underwriters view that monthly benefit as disability income and through the coordination of benefits lower their eligibility for benefits down to 40%. Rarely is this little benefit ever understood by the employees. This clause is usually found buried in the employee handbook.

So, we had to go for a plan B with my client. Luckily, my client was also shopping for term life insurance as well as disability insurance. I found a nice term life insurance plan with critical illness, chronic illness and terminal illness riders built in that was only 20% more premium than a straight term life insurance product. Now if my client is ever disabled due to one of these afflictions, he can access up to 95% of the face amount of his term life insurance in tax free cash and his premiums automatically reduce to the new face amount on the term life insurance policy. This was the most affordable option for my client. These plans are fairly new and compared to the traditional whole life or universal life insurance options or adding critical care insurance, much more affordable to budget conscious clients.

If you are a government employee, you no longer have to fret about the ability to purchase long term disability insurance. There are options, just contact your trusted insurance agent or advisor today, before you get sick or hurt.

“My advice to other disabled people would be, concentrate on things your disability doesn’t prevent you doing well, and don’t regret the things it interferes with. Don’t be disabled in spirit as well as physically.”-—Stephen Hawking

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Tim Wilhoit is owner/principal of Your Friend 4 Life Insurance Agency in Nashville, TN. He is a family man, father of 3, entrepreneur, insurance agent, life insurance broker, salesman, sales trainer, recruiter, public speaker, author, blogger and team leader with over 28 years of experience in sales and marketing in the insurance and beverage industries.