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Disability Income
Disability Income is an insurance policy designed to pay benefits to policyholders who are unable to work due to an illness or accident.
Most people protect their material possessions, their homes, cars, jewelry etc. Though many don’t protect their greatest asset and that is their ability to get up every day and earn a living. If you are fortunate enough to be employed by a large employer who provides this benefit that is great. More and more employers are allowing their employees to purchase this on their own by making it available via a salary reduction. Whether you are self-employed, part of a closely held corporation, dependent on the income of a significant other, or a spouse’s income to pay your living expenses, you should consider owning Disability coverage.
This income stream, if needed, helps replace a portion of one’s income typically 50%-70% of their current gross income. It could make a significant difference and provide you the ability to maintain your current lifestyle and possibly protect your family from going into serious debt. The fact of the matter is depending on the nature of the illness or accident it will undoubtedly have some considerable impact on family and finances.
Individual Disability Income Protection policies are designed to pay partial benefits if you can only work part time and there are policies becoming available as you are reading this that will pay you 100% of what you were making even if you have no loss of income and cannot perform all of the duties of your job or profession. An important point to highlight here is that if your work is a specialty occupation such as a Dentist, Surgeon, Engineer etc. you would want to consider what we call an “OWN OCCUPATION” definition of disability. This means if you can’t do all of the substantial and material duties of your profession, the carrier will pay your benefit subject to your waiting period or Elimination Period (EP). This means that after the waiting period is over, typically 90 days which is the most common and the most economical, the carrier will start sending you a monthly income check for the duration of the event.
Ideally, too, you want a policy where it specifies contractually that even if you can teach or work in another profession, your monthly income will still continue. The Elimination Periods can vary from one week to two years. Again you have to look at the options and see what will be best for you financially and give you the greatest comfort.
There are 2 features that you need to be familiar with and they are non-cancelable and guaranteed renewable policies. Non-cancellable policy premiums can never be raised more than what is stated on the policy and none of the benefits can be reduced if premiums are paid on time. However with Guaranteed Renewable policies you have a right to receive the same benefits, but the carrier can increase the premiums, but only if they are increased for all other policyholders in the same class, meaning with the same characteristics. Often times you will see the premiums start out less on the Guaranteed Renewable policies than on the Guaranteed Renewable policies.
A quick note on Business Overhead Expenses (BOE): This coverage is available to help keep your business running when you are recovering from a disabling illness or injury and to ensure that you have a financially sound business to return to or to sell should you need to do so.
Some of the Business Overhead Expenses (BOE) include:
- Salary, wages, fees, benefit payments and employment taxes for employees
- Rent and lease payments for furniture, equipment, equipment, and premises
- Utility costs including phone, electricity, heat, and water
- Laundry, janitorial and maintenance service costs
- Property, malpractice and business premiums
- Professional trade and association dues
- Business property taxes
- The greater of depreciation or principal payments on business property
- Legal, accounting, and similar business fees
There are numerous riders available with this type of coverage that can be designed to fit your needs. The length of these policies typically run for durations of 12, 18 or 24 months.
Give me a call to confidentially discuss your unique situation and I will do my best to provide you with the best solutions available.