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Disability Insurance: Protect Your Paycheck

How long would your savings last if you got sick or were hurt in an accident and weren’t able to work?

This scenario happens more often than you realize. Watch the video below for a short overview on the odds of it happening, and what you can do about it!

BOTTOM LINE: If You Rely on Your
Paycheck, You Need to Protect It!

Click the link below that describes your current situation:

I Don’t Have any Income Protection

I’m Covered by Group LTD at Work

I Own an Individual DI Policy

I Own an Association DI Policy

I Own a Business

Your Income: the Most Important Thing You Can Insure

You buy insurance for your material possessions – your home and car, for example. But have you insured the one thing that enables you to pay for those possessions?

Think about this: the odds of your house burning down are 1 in 1200.1 Do you have homeowners insurance? Of course you do! But you’re actually 300 times more likely to be disabled than to make a claim on your home. And even if you have a million-dollar mansion, your house is probably NOT your most valuable asset.

Again, if you’re like most people, the ability to earn an income is your biggest asset by far.

For example, if you’re 45 years old today and you earn $75,000 per year, you will have earned $3.11 million by the time you retire (see the table below for more details).

Can you really afford NOT to protect your income-earning ability?

The following table shows your earning total potential, assuming you work until age 67 with 5% yearly increases:

Age $25,000 $50,000 $75,000 $100,000 $200,000
30 2,001,594 5,385,477 8,078,216 10,770,955 21,541,909
35 2,692,739 4,003,189 6,004,783 8,006,377 16,012,754
40 1,460,065 2,920,129 4,380,194 5,840,258 11,680,517
45 1,035,762 2,071,524 3,107,286 4,143,048 8,286,095
50 703,310 1,406,619 2,109,929 2,813,238 5,626,477
55 442,825 885,649 1,328,474 1,771,298 3,542,597
60 238,728 477,455 716,183 954,911 1,909,822

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How Does Disability Income Insurance Work?

If you keep your savings in a bank, FDIC insurance is there to keep your money safe (and you wouldn’t trust a bank that wasn’t FDIC insured). In a similar way, disability income insurance protects the money that you haven’t earned yet.

Here’s how this type of policy works:

  • Individually-owned disability insurance policies usually pay you about 60% of your salary for as long as you’re unable to earn an income, typically up to age 65
  • There is a type of coverage known as “own occupation” coverage that stipulates that you can continue receiving the benefit until you’re able to go back to work in your own field
  • The benefit is paid after a predetermined waiting period known as an “elimination period.” This can be 30, 60, 90, 180, 360 or 720 days after the disability began, although the 90-day elimination period is, by far, the most common
  • Premiums for these policies are generally level until age 65
  • Your benefit is tax-free benefit if you pay the premium personally (with after-tax dollars)

Don’t Have any Income Protection? Seriously?

Most people think it’ll never happen to THEM, but the odds aren’t nearly as good as you may think. Here are the FACTS:

  • The odds of a disability lasting over 90 days between the ages of 25 and 65 are ONE in FOUR! 2
  • The average time away from work is almost 2.5 years 3
  • Historically, 48% of mortgage foreclosures were caused by a disability of the breadwinner 4
  • Every 7 seconds, a working-age American suffers a disability that will last at least a month 5

Depending on your age, income and the severity of your illness or injury, a disability could cost you hundreds of thousands or even tens of millions of dollars in lost earnings.

80% of U.S. workers will run out of money within 2 months if they were unable to earn an income. 2

Doesn’t it make sense to put some preventive measures in place?

You are actually 4 times more likely to become disabled than you are to die before the age of 65! 6 If you think LIFE insurance is important to replace your income in case of premature death (and it IS!), what about protecting your family (and yourself) from loss of income caused by illness or injury? Your income dies, but you’re still here.

I understand… No one is looking for yet another bill to pay every year. Having it, but never needing it, well, that’s a cost. But needing it and not having it? That cost is dramatically higher. What would your family do?

Covered by Group LTD at Work?

You might be thinking:

  • I have a group long-term disability (LTD) policy at work; shouldn’t that be enough?
  • My employer has some generous sick leave…
  • I have some savings and that should cover me, right?
  • Isn’t Social Security and Worker’s Compensation sufficient?

The hard truth is, if you depend on your paycheck, none of these “solutions” adequately protects your full earning potential. Let’s take a closer look.

If you’re counting on group disability income insurance coverage to protect your paycheck, think again. People think they’re covered by their employers. In fact, only 32% of U.S. non-government workers have long-term disability through work. 7

If you’re counting on your group disability insurance from your employer, you may want to take a closer look. Your coverage may not be all you think it is. Plus, group disability insurance policies are generally terminated (which means you lose the coverage) if you leave your current employer.

People believe they’ll get government benefits. Fact is, Social Security disability benefits are notoriously difficult to get. We’ve all seen the ads on TV for lawyers claiming to help people collect their Social Security disability. Think about it…if it’s ours, and it’s so easy to get, why do we need to hire a law firm to help us collect it?

And even for those who DO qualify, the average benefit in 2015 is only $1,017 per month.8 Seriously…is that enough to keep your household running month after month?

How about Workers’ Comp? Well, the fact is, 95% of disabilities are not the result of injuries sustained in the workplace, and are therefore NOT covered by Workers’ Comp. 9

Keep in mind:

  • Your group LTD is NOT yours to keep for your working lifetime
  • They often have watered-down definitions of disability that change over time
  • Plans usually don’t adjust to keep pace with inflation
  • Coverage is very “cookie cutter.” You cannot design it according to your needs
  • Caps on benefit limits usually mean highly paid employees are not fully covered to 60%
  • Bonus income you earn may not be covered

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You Already Own an Individual Policy?

So you have invested in individual DI (disability insurance) coverage, thinking you have done the right thing. Make sure you read the fine print! Many policies contain restrictions that limit how long, how much, or even whether you get your claim paid:

  • ​Requirements for lost time or job duties, versus just an income loss due to your accident or illness
  • Limits on benefits for mental/nervous claims
  • No benefit extensions for when claims last beyond age 65 or 67
  • Reduction or denial of benefits if you work at a new job while totally disabled

These and other restrictions could cost you hundreds of thousands or even millions in lost claim benefits…

…here are some of questions you may need to answer:

  • Does your policy require specific loss of time or job duties to consider you disabled, or just income loss with initial doctor’s care?
  • Will your policy provide some type of income benefits beyond the normal benefit period range of 65-70 years old?
  • Does your policy have any restrictions for benefits when a claim is caused by a mental or emotional condition?

The answers to these questions, which may seem like hair-splitting, could literally be worth millions of dollars to you!

In other words, if you have to make a claim that your policy doesn’t cover, you could potentially lose millions in tax-free benefits! The only thing worse than not having coverage is having a policy that does not fit your claim!

Disability insurance policies vary widely in what they consider to be disability. There are various factors that dictate how much, how long or even whether you get paid. Our experienced specialists can perform an objective audit of your existing coverage to help you determine whether there are any weaknesses in it, and whether or not they can be fixed! Certainly not all can be, but we have found that a surprisingly high percentage of people who believe they are “all set” are actually hardly covered at all!

The best time to ask these questions is BEFORE YOU GET SICK OR HURT…not AFTER (when it’s obviously too late)!

You Own an Association Policy?

If you own group coverage through your professional, you probably received a pitch such as this: “Disability insurance designed by dentists for dentists.” Since when is a dentist (or veterinarian, engineer or CPA) an expert in disability insurance planning? Such coverage usually starts off with really low premiums that often increase every five years. And coverage is often watered down:

  • ​Requirements for lost time or job duties, or perhaps even total disability
  • Changing definitions of disability over time
  • Limits on benefits for mental/nervous claims
  • Cancellation of coverage if you forget to pay your association dues!
  • Suspension of coverage if you take time off clinical work to perhaps set up a new practice
  • Coverage ends at certain ages, even if you are still working!

Own a Business?

Business owners may have unique needs for disability insurance beyond individual planning:

  • ​Covering fixed business overhead expenses during disability;
  • Funding buy-sell agreements for disability, not just death;
  • Security for business loans
  • Covering key employees with executive benefits

Without disability insurance coverage, we have seen business interests liquidated, retirement funds raided, employees laid off … and just a lot of needless stress compared to what premiums would have been for adequate coverage

Call us for disability insurance quotes or a review of your current coverage today at 800-442-9899 or get a Free Disability Insurance quote.

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1 Robert Harwood’s Investing for Retirement: The Ultimate Guide to Not Outliving Your Money
2 Commissioner’s Disability Table
3 http://www.disabilitycanhappen.org/chances_disability
4 Get Sick, Get Out: The Medical Causes of Home Mortgage Foreclosures, Christopher Tarver Robertson, Richard Egelhof, & Michael Hoke; August 8, 2008
5 http://www.disabilitycanhappen.org/research/pdfs/cda_infographic.pdf
6 LIMRA International
7 U.S. Dept. of Labor, Bureau of Labor Statistics, Employee Benefits in the United States, 2013
8 http://www.usnews.com/news/politics/articles/2015/07/23/5-things-from-annual-check-up-for-social-security-medicare
9 The Council for Disability Awareness, Long-Term Disability Claims Review, 2014

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