The first article in this three-part series on disability insurance was a discussion about why disability insurance is so important for solo and small firm attorneys, who must deal with the loss of personal and business income if an accident or illness prevents them from working for a period of months or years.
Last month, we explained the kinds of disability insurance solo and small firm lawyers should consider—personal disability plans, professional overhead expense disability plans, and retirement contribution disability plans—and some specific coverage provisions that are important to understand when evaluating plans.
This final piece explains options and sources to consider when purchasing disability coverage.
Ways to Purchase Disability Insurance
There are four primary ways to obtain personal disability insurance. Three of these approaches feature group plans that may offer streamlined underwriting requirements for applicants. Group plan coverage and provisions vary widely, however, so be sure to understand and compare plans. Individual policies, purchased through an agent, can be tailored very specifically to the needs of the individual purchaser, but underwriting may be more rigorous than with group plans. Be sure to compare your existing coverage rates to group rates to see if you can save.
- Employer-Paid Group Plans: Employer-paid group plans are more commonly found in larger firms rather than small or solo practices. Where they exist, employer-paid coverage is often provided for both short-term disability and long-term disability, up to a percentage (typically 40–65%) of base salary. With these plans, benefit payments in the event of a disability are generally taxable and coverage is almost always cancelled if the insured leaves the firm.
- Employee-Paid, Employer-Sponsored Group Plans: This kind of plan may be made available to you as stand-alone disability insurance (if there is no employer-paid coverage) or as a voluntary supplemental policy that increases your total disability benefit above and beyond the basic employer-paid disability coverage.
- Association-Sponsored Group Plans: These plans couple the advantages of group plan rates with the portability of individual plans. Because they are not tied to or paid for by an employer, the plans are generally portable and benefit payments in the event of a disability are tax free. Some associations offer specific features and options that serve to tailor the coverage to the unique needs and characteristics of the group, like the plans ABE sponsors for ABA members.
- Individual Disability Insurance: The advantage of an individual policy is that it can be very specifically tailored by the insurance agent to meet the purchaser’s individual needs. The drawbacks are that individual plans generally require more detailed medical underwriting.
- Professional overhead expense disability plans (also called business overhead expense disability plans) and retirement contribution disability plans are more specialized offerings than the more standard personal disability insurance plans. But both are available through selected insurance agents (as individual policies) or certain associations such as ABE.
How ABE-Sponsored Disability Plans Can Benefit Solo and Small Firm Lawyers
The American Bar Endowment, an affiliate of the American Bar Association, offers group term life and disability insurance plans exclusively to ABA members, including these key types of disability coverage. And because these plans are designed by attorneys for attorneys, they offer features and options tailored to fit your profession and lifestyle, such as portable1 coverage you can take with you if you change firms or start your own (as long as you remain an ABA member).
ABE-sponsored plans allow solo and small firm attorneys to get coverage at affordable group rates. Participants receive the full value of the insurance and premiums paid, with no commissions to agents or royalties to state or local bar associations.
Other Unique Advantages of ABE-Sponsored Plans
Insurance That Makes a Difference
ABE-sponsored insurance plans enable ABA members to not only get the quality, affordable insurance they need, but also provide a very special opportunity to support good works of importance to the public and the legal profession.
ABE-sponsored plans are designed to produce dividends that ABA members can choose to donate to ABE2 (if donated to ABE, contribution amounts are tax deductible under IRC § 170(c)). ABE then uses these donated dividends to support annual grants which help fund over 200 legal research, educational and public service projects.
In addition to offering group disability plans that can be purchased separately, ABE has created a special package of insurance plans designed especially for the unique challenges of solo and small firm attorneys. Simple Solution 360 is a customizable package of three key insurance plans for one monthly premium. The package includes:
- Long-term disability coverage
- Professional overhead expense disability coverage
- 10- and 20-year level term life coverage
You select the amount of coverage under each plan during the application process, customizing the package to fit your needs.
Backed by New York Life
All ABE-sponsored insurance plans are underwritten by the New York Life Insurance Company, one of America’s most respected insurance companies. Since 1845 it has been making sure customers are prepared for whatever life has in store. New York Life has received the highest possible financial strength ratings currently awarded to any life insurer from all four of the major credit rating agencies: A.M. Best (A++), Fitch Ratings (AAA), Standard & Poor’s (AA+) and Moody’s Investors Service (Aaa). Source: Third Party Rating Reports (as of 6/9/16).
Let ABE Help You Make a Sound Decision
A major period of disability can have devastating financial consequences on a solo or small firm lawyer’s family and the firm to which he or she plans to return following recovery. Having the right insurance coverage is a crucial step in establishing a strong financial foundation to sustain your loved ones and your practice.
More information on disability and other insurance plans for solo and small firm attorneys is available in Newly Solo, the new ABE ebook created for lawyers who have started a new solo practice or joined a small law firm. ABE’s Insurance Plan Specialists are also available to answer any questions you have or provide any additional information3 you may need to help you make your best decision.
- Newly Solo, American Bar Endowment.
- Eight Questions to ask before Buying a Disability Insurance Policy, Council for Disability Awareness, December 2015.
- Should You Have Disability Insurance?, CBS Moneywatch, December 2014.
1 Subject to U.S. government regulation and Group Policy terms governing termination of coverage.
2 Dividends are not guaranteed, and members may also annually request that any available dividends, or a percentage of those dividends, be returned to them.
3 Including plan features, costs, eligibility, renewability, limitations and exclusions, underwriting carrier information, and charitable contribution opportunity.
All ABE-sponsored plans are group insurance plans, meaning coverage is issued to an ABA member under a Certificate of Insurance. It is not provided under an individual policy, nor is it employer/employee insurance. Plans may vary and may not be available in all states. All plans are underwritten by New York Life Insurance Co., 51 Madison Ave., New York, NY 10010 on Policy Form GMR.
The American Bar Endowment (ABE), a 501(c)3 public charity, supports good works of importance to the public and the legal profession through grants made possible by sponsoring insurance plans for attorneys. ABE also authors “Lawyer’s Healthy Living” for GPSolo Magazine and other educational healthy living and insurance content at blog.abendowment.org.