Paycheck Protection.
May 16, 2016 by
Why Americans Lack Disability Coverage but Need It.
February 10, 2016 by
Why Americans Lack Disability Coverage but Need It.
Nearly 30 percent of working American adults believe they are more likely to be targeted by the IRS for an audit than they are to experience an injury or illness resulting in loss of work. In reality, they have about a one percent chance of being audited, but they face about a 25 percent chance of losing work because of an illness or injury. Although the majority of adults consider their income as one of the most important things in their lives, a recent report from the Council for Disability Awareness showed that there are several factors preventing working adults from obtaining insurance to protect it.
Regardless of a person’s age, his or her ability to draw an income is the most valuable resource possessed. However, the report showed that more than 55 percent of adults said they did not have disability insurance. This is an important insurance product for every working American to have, and it protects against the loss of income if the policyholder is unable to work for months or years following an injury or illness. When asked why they did not have this vital form of coverage, nearly 35 percent of adults said they could not afford it. Another 30 percent said they had never considered it, and nearly 25 percent said they did not know enough about it.
While people cited being unable to afford coverage as a reason not to have it, they should actually see it as something they cannot afford to go without. On average, a long-term disability lasts more than two years. This leaves helpless workers to try to find ways to compensate for lost income and pay living expenses. Government disability benefits alone will not even come close to replacing prior income. More than 40 percent of respondents said they would purchase disability coverage if it were cheaper, but about 60 percent said they had less than six months of income saved.
About 25 percent of today’s adults who are 20 years old will face a disability before they reach retirement age. Adults underestimate the risk they face of losing their ability to work. Although accidents are what most people think cause disabilities, the main causes are actually depression, back pain and absence requests for cancer treatment. About 50 percent of respondents said they would have to drain their savings if they faced a disability. Younger respondents said they would ask family or friends for loans, but older respondents said they would seek government programs. However, both solutions are only temporary and would not suffice for a long period of time.
It is important to consider how the bills would be paid in the event of a disability lasting more than three months, and people should consider how long they would be able to cover their expenses. Couples should also consider whether they could survive on one partner’s paycheck if the other became ill or was injured. Anyone who cannot answer these questions quickly with a viable solution should seek professional advice.
People who have disability insurance options offered by an employer may find more affordable solutions in their benefits package than they would by searching independently. There are more types of coverage than just disability alone in the marketplace, so all options are worth considering. Some companies may offer more than others, but employees who do not have access to this type of coverage at work should still seek it independently. To learn what options are available, discuss concerns with an agent.
Is Your Business Aware of Disability?
May 12, 2015 by
Is Your Business Aware of Disability?
I recently received an email that May is national Disability Insurance Awareness Month. My initial reaction was, “What, people don’t know they can become disabled?” We’ve all seen situations where an unexpected disability disrupted or even destroyed a family or business. Upon further reflection, I realized the issue is “insurance.” Many people don’t understand the kinds of disability insurance that are available. Let’s help out the cause by providing awareness of various disability protection options that businesses might consider.
1 – Disability Income. Many employers are aware of this form of disability coverage. If you become disabled, after a waiting period, the insurer pays a monthly income for a period of time or until the disability ceases. Companies can buy it for a group of employees (Long-Term Disability “LTD”) or for individuals (Individual Disability Income “IDI”) like themselves or key employees. At the risk of sounding overly simplistic, if you make a high wage and are insurable, the question is not, “Can I afford it?” Rather, the question is, “Can I afford NOT to have it?”
2- Overhead Expense Protection. Smaller, privately-held companies often avail themselves of this coverage. The idea is that if the owner, who is typically the key employee, becomes disabled, the business needs to continue paying fixed expenses such as rent and salaries. As the name implies, with this coverage the insurer pays a defined amount to the company to defray overhead expenses until the owner returns to work. I think of this as “optimism insurance” with the purpose of keeping the company’s doors open while the owner recuperates from a disability.
3 – Disability Buy-Out. Much like Overhead Expense Protection, this coverage is more about the business than the individual. With this option an amount, typically a lump sum, is paid by the insurer if a stockholder becomes totally disabled and consequently triggers a stock buyout. Perhaps because of high profile disabilities in the news, it seems like this coverage is getting more attention – and should. A lot of buy-sell agreements I see either ignore disability, or have it as a triggering event, but without funding. Disability buy-out can provide the cash (typically on a reimbursement basis) when it is most needed. Just be sure to coordinate this coverage with the terms of the buy-sell agreement.
These are the “Big 3” in disability coverage for businesses. One replaces income, one defrays overhead and the other helps fund an ownership transfer. With this being the month for “disability insurance awareness,” I want to point out two other coverage options that are not as well known.
- Business Loan Protection – In an environment when business borrowing is both more difficult and more important, this protection may be crucial. This type of coverage helps ensure lending institutions get paid even when an owner becomes disabled and can’t bring in revenue to cover his/her business-related loan obligations. So, if you become totally disabled and have this insurance, you essentially transfer your loan obligation to the insurance carrier. I’ve seen this offered as a rider to an Overhead Expense Protection policy; that makes sense to me, considering that often debt service is one of the top forms of overhead for a business.
- Key Person protection – When a key employee can no longer work because of a disability, it leaves a serious gap for the business owner and business profits can take a hit. Key person protection provides a benefit for owners to use at their discretion to fill the gap – whether that means spending the benefit to offset recruitment costs or simply replacing lost revenue. It’s become common place for companies to protect themselves with key person life insurance. It’s time to cover the contingency of a “living death”.
Most don’t realize – an individual is 240 times more likely to incur a disabling injury than suffer a fatal injury. It’s important for businesses and their employees to be aware of the “what if” and consider if a disability insurance policy is right for them. My intent is not to evoke pictures of hospitals, rehab centers and nursing homes. I’m suggesting, rather, images of continuing income for families, companies surviving a rough patch while the owner is gone, and successful transfers of business interests. It’s something we don’t want to think about happening, but better to be prepared than not. Think about it. Be aware of it.
Disability Income – Who Will Help With Bills If You Get Disabled?
April 28, 2015 by
When You Can’t Work, Disability Insurance Goes to Work for You
But what would happen if you become disabled or ill and could not work?
How would you…
- Pay your bills?
- Make your monthly rent or mortgage loan payments?
- Buy your groceries?
- Make your car payments?
- Provide for your children’s education?
- Save for retirement?
Most people don’t realize the risk of becoming disabled, permanently or temporarily, at some point in their lives. But the reality is that at age 40, your chances of becoming disabled for 90 days or more prior to age 65 is 43%. (Source: 2004 Field Guide, National Underwriter).
When evaluating the chances of disability, you should carefully consider sources of available funds:
Employer Coverage
How long would the business continue to pay you? How much would they pay you? When would your employer have to hire a replacement? Could the business afford to pay both?
Using Savings
If you saved 10% of your income each year, one year of total disability could wipe out 10 years of savings. Can you afford that?
Obtaining a Loan
Without an income, who will lend you money?
Working Spouse or Partner
Can your spouse or partner earn enough and be a companion, parent, private nurse, and employee — all at the same time?
Selling Investments
Will a sale under forced conditions bring a true value? What will their value be at the time you are disabled?
Collecting Social Security
You cannot collect benefits until the end of the fifth full calendar month of total disability and only if it is expected to last 12 months or more. What will you do if your disability doesn’t meet those requirements? Even if it does, can you wait six months for payment?
Counting on Friends, Family or Charity
Would these sources have funds for you to use? Do you want to depend on them?
Many different disability insurance products are available to help protect you and your family against severe financial hardship that may accompany a disability.
What Is Disability Income Insurance?
September 24, 2014 by
Disability Insurance, or DI, is a type of health insurance that pays a monthly income to the policyholder when he or she is unable to work because of an illness.
Short-term disability (STD) plans provide insurance coverage and benefits for a couple of weeks or as long as two years.
Long-term disability (LTD) policies typically cover an individual for a couple of months but could be purchased to provide benefits for the rest of the insured’s life.
STD and LTD policies have waiting periods that insureds must satisfy before receiving benefit payments. Waiting periods for STD policies typically last a couple of weeks while LTD plan waiting periods may last a couple of months. In some instances, the waiting periods can be waived if the disability is evident, such as a broken arm. Disability policies may allow insureds to stop paying premiums if they are disabled for longer than 90 days (waiver of premiums) and increase coverage amounts at a later time (additional purchase benefit).
Protect Your Power to Earn Through Disability Insurance.
April 16, 2013 by
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Protect Your Power to Earn Through Disability Insurance
If you’re one of the millions of Americans living paycheck-to-paycheck, and most of us are, an accident or illness that leaves you unexpectedly unable to work can leave you unable to pay for your living expenses and result in financial devastation. For this reason alone, disability insurance is a very important insurance coverage. Unfortunately, far too many people don’t have enough, if any, disability coverage t protect them from the above. Cost is one commonly cited reason for the lack of disability coverage. This is especially true for those employed in a high-risk occupation. Other factors impacting rates include the benefits selected, age, and personal health history. However, considering the protection provided by disability insurance, a premium amounting to 3% or less of your income is a relatively small investment. You might have many other tangible areas to spend that 1-3% of your income now, but how would you financially survive should you become unable to work in the future? Most experts agree that adequate coverage starts with a policy providing a minimum of 60% of your gross income during the time you’re disabled. The reasoning being is disability insurance premiums are typically paid using post-tax dollars, meaning the benefits are tax-free. So, a policy that provides 60% of your pre-tax income would amount to your existing paycheck. The waiting period of a policy is a major factor when it comes to policy rates. Premiums are usually significantly lower if you can afford to wait 90 days after becoming disabled to begin collecting benefits. Do keep in mind that this delay means you’ll need personal savings to cover your expenses while waiting for the benefits to start. The maximum benefit period is another major factor affecting the policy rate. Purchasing a policy that only offers benefits until you’re 65-years-old can lower the rate, but you should expect to have sufficient retirement income to provide coverage at the end of the maximum benefit period. When looking at disability policies, you should pay close attention to how the policy defines disability. Some policies are designed to only pay in the event of a total disability and inability to work any job. Partial disability protection is an important feature, as it’s designed to pay the lost percentage of your income in the event that you’re only able to work part-time during your disability. You should further determine if the policy is guaranteed renewable and non-cancelable. With these features, the policy can’t be canceled and the premium can’t be raised should your health change during the course of the coverage. It’s important to make sure the policy has an inflation rider that provides a cost of living adjustment for the disability period. A future insurability rider is another option to consider. This feature will permit you to buy additional coverage (regardless of any occupational, activity, or health-status change) should your income increase. Some carriers may also have an option for transition benefits that will pay a portion of any income loss you might incur when returning to work after a period of disability. |
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