Disability – Income Protection Insurance
by Paul M. League, QFP — QUALIFIED FINANCIAL PLANNER
Disability can strike anyone, anytime, regardless of age or, type of job. If it does happen to you, a disabling illness or injury can seriously effect your ability to work and earn an income, which will obviously cause significant disruption to your financial security.
2 Very Important Questions To Ask Yourself Now – Before You Are Disabled!
If you have trouble living within your income now, how could you afford to live without any income, especially if you were disabled from an accident or serious illness?
Are your home and car better protected and insured than your most valuable asset; namely, your income?
Remember, your most important asset is your income AND your ability to earn an income. In cases when you are prevented from doing so, such as being disabled from an accident or serious long term illness, this type of coverage can and may literally “save the day” for you and those closest to you based on the benefit guarantees of the insuring company and timely payment of plan premiums.
Avoid the Following MYTH’S
You probably don’t think twice about insuring your home, car and other personal assets. But what about the income that allows you to purchase those assets? People who don’t have any or enough individual disability income (DI) insurance often make their decision based on common myths:
Myth #1: I can rely on my savings.
Fact:Even if you save 10% of your salary, one year of a disability could easily wipe out many years of savings.
Myth #2: Social Security benefits will take care of me.
Fact: Just 35% of the 2.8 million works who applied for Social Security Disability Insurance benefits in 2009 were approved.*
Myth #3: A disability won’t happen to me. I expect to stay healthy.
Fact: Every 10 minutes, 490 Americans become disabled.**
Myth #4: I can rely on disability coverage through my employer.
Fact: Group long-term disability insurance typically covers 60% of gross income, and benefits are usually taxable. Could you afford more than a 40% pay cut?
Myth #5: Individual DI insurance costs too much.
Fact: The average annual cost is typically only 1% – 3% of what you earn.
Don’t let the consequences of a disability derail your lifestyle and future plans. I can help you protect your most valuable asset – your ability to work and earn an income.
*Social Security Online, disabled worker beneficiary statistics. **National Safety Council®, Injury Facts® 2010 Ed.
Disability Insurance has certain limitations and exclusions. For costs and complete details of coverage please contact us directly at: 800-482-5347.
“INCOME PROTECTION INSURANCE,” is a form of Disability Insurance that protects you by replacing lost income (usually up to approximately 50-60% of your income prior to disability), and therefore goes a long way in increasing your financial security in the event of a disability. These plans are normally available for the following benefit periods: 2, or 5 years, or to Age 65. After Age 65 plan coverage can usually be continued for those working full time to Age 72-75. Benefits on most plans can start to be paid after a waiting or “Elimination Period” that can be 30,60, 90, 180, or 356 days (waiting periods and benefit duration depend on job classification as well as income and health considerations).
For owners of businesses there is a form of Disability Insurance called “BUSINESS OVERHEAD PROTECTION” and this, unlike personal Disability Insurance, does not insure Income but instead insures overhead & operating expenses of your company and all employees salaries except your own. Plans of this type are normally bought with a shorter waiting period (typically not more than 30 days) and with shorter benefit periods (typically 12-24 months). These plans are designed to relieve the pressure of a disabled business owner long enough for him to determine whether or not the disability will be long-term or permanent or short-term. If the disability will be long-term then owning such coverage gives the insured business owner time to either replace himself or sell the business to rid himself of the otherwise ongoing financial liabilities & overhead associated with running the company.
Companies also often purchase for their key personnel and rank and file employees, a form of Disability Insurance called “LTD” – Group Long Term Disability Insurance. LTD is an excellent and cost effective way to acquire such insurance and to be covered with during your employment years.
Finally, in terms of overall life planning, It is also important to establish a personal emergency fund equal to at least 3-6 months income/expenses, so that you are adequately protected for otherwise short term emergencies.
Beyond these measures, a structured savings/retirement program, with investments suitable to your personal needs and objectives, should be established out of current earnings without delay.
Disclaimer: The material discussed herein is meant for general illustration or informational purposes only and is not to be construed as investment advice. Although the information has been gathered from sources believed to be reliable, it is not guaranteed. Please note that individual situations can vary; therefore, the information contained herein should be relied upon only when coordinated with individual professional advice. We are not licensed for and therefore do not provide tax or legal advice.
About the Author: Paul M. League, QFP — QUALIFIED FINANCIAL PLANNER, is the Founding Principal of League Financial & Insurance Services (www.LeagueFinancial.com), which is a privately held company, established in 1984, and located in Palm Desert, CA. Paul and his company specialize in assisting clients to create, expand & preserve assets “…in a league of our own.” Contact Information: Paul M. League, P.O. Box 11800, Palm Desert, CA 92255-1800; 800.482.5347; Info@LeagueFinancial.com. © Paul M. League. All rights reserved.
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