Despite the common assumption that the sum of your worldly possessions and investments is your most valuable asset, for most people it is simply not true. The fact is, more than investments, possessions, and even your business, a person’s most valuable possession is usually his or her ability to earn an income.
Losing that income due to an unexpected disability could create a financial hardship for your family and force a drastic change in your standard of living.
For example, a thirty-year old currently earning an annual income of $100,000 is at risk of losing more than $11 million dollars over the course of his or her working years if affected by a total disability and unable to work.
The good news is that preparing for a total disability by purchasing disability insurance protection is probably the best way to protect your future income and help ensure you can provide for your family if you lose your ability to work.
Who Should Consider Disability Insurance?
The risk of becoming disabled is significant. According to the most recent statistics from the National Safety Council, there are 3,000 disabling injuries every hour during the year. Additionally, only 30% of all workers in private industry are covered by long-term disability income insurance.
In order words, the probability of becoming disabled sometime during an individual’s working years is substantial, and the unavailability of employer-provided disability insurance affects 60% of employees.
Disability insurance helps ensure that a substantial portion of your income—typically from 50-70%— would continue if you were to become ill or injured and unable to work for several weeks, months, or even years. Benefit payments are made to the insured directly, providing money to help pay ongoing living expenses and keep retirement, education, and savings intact.
Types of Disability Insurance To Consider
When researching the types of disability insurance protection you may need, it is first important to consider the areas of your life that may be affected by a loss of income. There are many to consider, but the three most significant may be: your and your family’s immediate financial need, your future financial security, and the strength of your firm or business, especially if you are a member of a small or solo firm.
Immediate Financial Need
If the primary breadwinner in your family were to lose his or her income on a long-term basis, what sacrifices would have to be made in order to compensate for that loss? All families would be affected financially and forced to make choices. Some families would be required to move or make dramatic lifestyle changes. Other families would simply be unable to meet their financial obligations.
Long-Term Disability Insurance can help safeguard you and your family against the financial pressures that accompany a total disability by providing monthly income at the coverage level you select.
Future Financial Security
Unfortunately, along with the loss of employment and income, another consequence of total disability is the lost ability to make, and receive employment-matching, contributions into retirement savings vehicles. Even those who have substantial individual long-term disability insurance benefits may be unable to fund their retirement account. Because you have no “compensation” as defined by the IRS, you may be prohibited from funding your retirement accounts, which may impact your standard of living throughout retirement.
Retirement Contribution Disability Insurance helps you continue funding your retirement savings in the event of a loss of income due to total disability.
Strength of Your Firm
If you are a solo practitioner, your personal efforts are directly responsible for generating the income necessary to pay the bills, maintain a staff, and remain in business. If you share a practice, what would happen to your clients if you suffered a total disability? Would your partners be able to continue?
Personal disability plans may help your family with the loss of your income, but they probably won't cover your monthly office expenses. Professional Overhead Expense plans will help protect your practice and your assets, to help ensure that your business will continue to operate without you.
Three Working as One
The advantages of insuring all the financial responsibilities in your life that may be at risk in the event of a total disability are obvious. With protection for the immediate and long-term financial needs of you and your family, and your business needs, you can have the peace of mind that comes with being properly prepared for the unexpected.