How would your lifestyle change if you were sick or hurt for a year or more, and could not work?
Your most valuable asset is not your home, car, or possessions. In fact, your most valuable asset is your ability to earn a living. Most of us don’t think about becoming disabled, but sometimes life is unpredictable. You must have income to protect your lifestyle. If it happens to you, how will the bills be paid if and until you are able to return to work? No one can predict when an accident or illness will happen, but most of us can plan ahead and be prepared by purchasing disability insurance.
Disability insurance helps cover loss of income and other benefits in the case that you are unable to work due to an injury or illness. To some, the cost of such a policy might seem either overwhelming or unnecessary. Consider:
A good approximation is that it costs 1.5% – 3% of someone’s gross earnings to protect 60% – 65% of someone’s net income on a tax-free basis. The point is that while we state disability benefits in terms of a monthly benefit, the potential benefits we are providing often exceed $1,000,000. That helps put the premium into perspective.
Is it reasonable to spend 1.5% – 3% of your income today, to insure you receive your potential income from today until age 67?
One of the most important things to understand when purchasing disability insurance is how the insurance company defines “disability:”
Own Occupation/Regular Occupation: This term refers to the job that you were working in right before claiming disability. If your policy protects your “own occupation” that means you won’t be expected to find another job.
Some policies may recognize your skills, experience, education, etc. and expect you to find another job that your disability does not prevent you from doing. These policies may not pay you any benefits if you can work in “any occupation.”
If you experience loss of income due to a partial disability, some policies may pay still pay you a portion of your income. Some policies may also cover you if you can perform some of the work, can only work half-time, etc. For most companies, benefits begin when there is at least a 20 percent loss of income.
At Complete Analysis, Inc. we assist our clients with all aspects of obtaining a disability insurance policy. We take the time to answer all of their questions, including: What benefit amount do I qualify for based on my current income? What is the benefit period and how long do I need to wait before disabled benefits begin? How do different policies define disability? Will my premiums be waived in the case of a disability?
The waiting period is also called the elimination period, and refers to the time you have to wait before your disability benefits kick in. This waiting period varies from carrier to carrier, and can be as short as 30 days or as long a year. Typically, a shorter waiting period means a higher policy premium.
The benefit period refers to the amount of time you are eligible to receive benefits while on a disability insurance claim. If a sickness or injury occurs that prevents you from performing the material and substantial duties of your occupation , the elimination period begins. Once the elimination period has been satisfied, monthly benefit checks will begin to come in at the end of the month. The maximum amount of months that these checks can possibly come in is your benefit period. Your benefits stop when you return to work in your occupation, or depending on the contract, to another occupation making the same income.
Typically, the shortest benefit period is two years, followed by five years. Benefits to age 65 is most popular. Graded lifetime and to age 67 may also be available depending on your occupation.
As a business owner, your family and your employees rely on you. You make sure the bills are paid, and expenses such as payroll, rent, utilities equipment maintenance and loan interest are met.
Business Overhead Expense (BOE) replaces fixed business expenses such as these, in the case that you become disabled. If you have a BOE Disability Insurance policy, you can keep your doors open and business running while you recover, or have time to arrange an orderly sale of the business.
If you depend on your income to pay your bills, you must seriously consider purchasing a disability insurance policy. At Complete Analysis, Inc., we will assess your needs, and guide you in selecting and obtaining the best policy for you. Call or email today to get started.
