RBC A670 vs. A707GIO: Choosing Between Higher Coverage and More Certainty

With RBC, you may have a choice

When you already have Group Long-Term Disability coverage, RBC may allow us to structure your individual disability insurance in one of two ways.

This choice usually becomes relevant when you have Group LTD coverage and your income is high enough that we are approaching RBC’s individual monthly benefit limit. Technically, this can start to matter once income is above approximately $182,000, but in practice, we do not typically need to consider the higher combined limit until income is higher, often closer to $300,000 or more.

The decision comes down to this:

Do you prefer a lower individual benefit that is fully guaranteed, or a higher individual benefit that may be reduced if your Group LTD changes in the future?

Option 1: A670, Issue Limit, no Group LTD offset

This option uses RBC’s standard issue limit.

The individual monthly benefit is lower, but it is cleaner and more secure because it is not subject to a Group LTD offset.

Using the example of someone earning $500,000/year with $15,000/month of taxable Group LTD, RBC will treat the Group LTD as $9,000/month after tax.

If RBC’s maximum individual monthly benefit is $16,050/month, the available individual disability benefit would be:

$16,050 maximum monthly benefit – $9,000 after-tax Group LTD = $7,050/month

In this case, the coverage would look like this:

Coverage	Monthly Amount
Group LTD after-tax equivalent	$9,000
Individual disability insurance	$7,050
Total monthly coverage	$16,050

The benefit of this approach is certainty.

Your individual disability benefit is not dependent on your Group LTD plan staying the same in the future. If your employer changes the Group LTD plan, changes carriers, changes the tax status of the benefit, or reduces coverage, your individual monthly benefit is not reduced because of that change.

Option 2: A707GIO, Combo Limit, with Group LTD offset

This option uses RBC’s higher combined limit.

It may allow you to purchase more individual disability insurance, but the extra amount is subject to a Group LTD offset.

Using the same example, if RBC’s combined limit is $19,500/month, and your Group LTD is treated as $9,000/month after tax, the available individual disability benefit would be:

$19,500 combined limit – $9,000 after-tax Group LTD = $10,500/month

In this case, the coverage would look like this:

Coverage	Monthly Amount
Group LTD after-tax equivalent	$9,000
Individual disability insurance	$10,500
Total monthly coverage	$19,500

This gives you an additional $3,450/month of individual disability coverage compared to Option 1.

The trade-off is that the additional coverage comes with a Group LTD offset. This means that if your Group LTD changes in the future, RBC may reduce the individual benefit at claim time.

For example, if your Group LTD later becomes tax-free, the full $15,000/month may count toward RBC’s combined limit.

If the combined limit is still $19,500/month, RBC may reduce the individual benefit to:

$19,500 combined limit – $15,000 tax-free Group LTD = $4,500/month

So while you may have purchased $10,500/month of individual disability insurance, the amount actually payable from the individual policy could be reduced if your Group LTD changes and your income has not increased enough to support the higher amount.

The decision

Neither option is automatically right or wrong.

Option 1, A670, provides a lower individual benefit, but the monthly benefit is cleaner and guaranteed.

Option 2, A707GIO, provides a higher individual benefit today, but part of the benefit may be reduced if your Group LTD changes in the future.

In simple terms, it comes down to whether you value:

More coverage today, with some future offset risk

or…

Slightly less coverage today, with more certainty around the individual monthly benefit

The highest monthly benefit on an illustration is not always the best answer. The more important question is whether the benefit is fully guaranteed, or whether it depends on your Group LTD staying the same in the future.

– Jeff

*Disclaimer: This article is intended for general informational and educational purposes only and does not constitute personalized insurance, financial, legal, or tax advice. Insurance needs, policy features, costs, and suitability vary based on individual circumstances and specific contract provisions. Coverage availability and terms are subject to insurer underwriting and approval. Readers should review their own situation carefully and consult with a licensed insurance advisor before making any insurance decisions or changes to existing coverage.