Most people insure their material possessions, their homes, and their cars, but many people don’t recognize what is probably the most valuable asset—their ability to earn an income. If a person becomes sick or injured and can’t work, will that person be able to pay bills and maintain the same or similar standard of living?
What are the odds of becoming disabled? That’s an odd question, and depends on what you read and what you consider a disability. But understanding the comprehensive nature of your particular occupation—what needs to happen for you to be fully able to earn—may diminish your interest in the odds, in favor of simply recognizing the power of protecting yourself. Let’s say it’s a much larger concern for higher earners.
Most people don’t have to look very far to see someone who has suffered an illness or injury. Americans have access to the best healthcare anywhere, yet each of those health episodes has likely created some disruption in income. Unless you are working for the fun of it, most people are actively at work because they choose to live a certain type of lifestyle, typically the American Dream.
Unfortunately, this dream has come challenges. Living a lifestyle means different things to different people, but perhaps many have families, acquire assets, purchase homes and real estate, plan for tomorrow via retirement plans, commit to education goals and obligations, lease cars, support family members, and leverage assets through borrowing. It costs a lot to live!
These are just a few of the things that require a flow of income to support. For many, the ability to perform a trade or practice depends on their acuity, skills, and good health. How do you protect that?
As a financial service professional, I am privy to the financial information of many business owners and professionals. My clients discuss the things that matter most, things they most care about, and the things that keep them up at night, staring at the ceiling at 2 a.m.—worried with fear.
We all know these issues: They are the things that drive us, that challenge us, what we most fear and care about, things that scare us. Things like: “What happens if I get sick or can’t meet cash flow,” worries about money, payroll, deadlines, acceptance, our parents, our kids, finances, bills, retirement, marriage, health.
We all want to “live the life” in every way: nice cars, lovely homes, travel, remodels, educations, bar mitzvahs and weddings, tutoring, jewelry, vacations, Mastro’s dinners, look good, and keep up with our peers. The use of social media has furthered these desires, giving the perception of everyone else’s fantastic lives, displayed instantly—causing many people to feel inadequate and giving a sense that everyone is “eating well.” But what happens if someone gets sick and cannot earn?
The truth is that most people have very little real accumulation for their future and also have very significant debt.
For most of us, we have simply become accustomed to living this lifestyle and because of the demands on our income to create the life, many are ill prepared for a disruption in income. The truth is that most people have very little real accumulation for their future and also have very significant debt.
This phenomenon, living large and spending large, with little or no retirement accumulation to speak of, feeds into the consumption mentality that drives the U.S. economy, and in many ways it also allows us to earn great livings. (How many of us have jobs in industries that are disrupted by COVID-19?)
Lifestyle Lump Sum and Specialty Disability
A host of new disability products is addressing areas of disability coverage, providing better choices and strategies that can substantially protect lifestyles even better than what was available in years past.
One “newer” evolution of disability insurance can now add an additional layer of coverage to any existing disability coverage that many professionals already own, to ensure their lifestyles in the form of a lump- sum benefit.
(Think CAREER-ENDING COVERAGE like an athlete might buy.)
These policies are set up to pay disability benefits at six-month intervals in a lump sum, when the insured is continuously disabled during this period. Typically paying at the end of 6, 12, 18, and then a final payment at 24 months following a disability, these policies provide a stated lump sum available from 1 to 10 times earnings—and provide cash benefits in case of a disability.
The transfer of all sorts of previously uninsurable risks can now be transferred to third parties and assure all sorts of events disruptable by sickness, such as: key man, disability buyout and succession agreements, disability overhead expenses, alimony obligations, pilots’ loss of license, retirement contribution continuations, actor, athletes, and voiceover skills, stock option and pension completions, and loan indemnification—all available to address the significant exposures that many are obligated for, and which could result in financial ruin if left uninsured.
With many pressures on our incomes and so many different complexities that all depend on our income, it is no wonder that disability insurance is critically important for professionals. Factoring in additional drains on incomes due to divorce situations (alimony and child support), education funding, real estate, various business promises (leases, salaries, etc.), and medical expenses, disability insurance is a critical component part of every financial plan.
If you have not done so, ask your insurance advisor to review your coverages in light of your obligations and willingness to self-insure. Unless your uncle is named Bill Gates, it is highly unlikely you have anyone prepared to pay your bills should you become disabled.