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Major Medical insurance only pays your medically necessary bills. Disability Income insurance can pay all the other bills. It allows you to stay in your home while you recuperate. In my opinion, Disability Income insurance is just as important to your health insurance portfolio as Major Medical insurance.
Yesterday I had two training meetings about Disability Income insurance. The basic principles of Disability Income insurance have not changed during my 25 year career. They got me thinking.
“I am a business owner. What would happen to my business if I were to have a stroke and not be able to work?”
PERSONAL CURRENT INCOME
Just like an employee, if I were not able to work, I would not be able to help new clients. I would also anticipate that many of my current clients would leave to find an insurance agent who is healthy and is able to help them.
The result is that I would need to rely on my personal Disability Income insurance to provide a flow of income until, and if, Social Security Disability Income benefits start. (That would be no less than 6 months after my disability started but could be as long as 3 years, depending on how many appeals it takes)
PERSONAL FUTURE INCOME
One hiccup, that I was aware of but it never hurts to be reminded, that many people do not plan on in their retirement planning is, “What happens to my 401k while I am disabled?”
While you are disabled, your contributions to your 401k at work typically stop. Since you are not contributing to the account, any matching funds that your employer contributes also stop. The result is that if you are unable to work for any extended period of time you will have significantly less in your retirement account to help offset Social Security Retirement.
Also, since Social Security bases your retirement benefit on your income history, an extended period of disability could have a negative effect on how much you get from Social Security when you retire.
The solution to both of these retirement concerns is the same. Most insurance companies do not offer it, but a few do. A few insurance companies offer plans or riders that can be added to your personal Disability Income policy that will continue your benefits after you become eligible for Social Security Retirement.
Those plans and riders cost more in premiums than a traditional Disability Income policy. However, if planning for retirement is a major concern of yours, it is worth the extra premium
Often businesses have an employee with specific skills and abilities. Many times that person is the business owner. However, I have seen several businesses where the key person is not the business owner but an employee with a special skill.
If that employee has an accident or illness that prevents him/her from doing the job, the entire business is effected. If they are unable to work for long enough, the business ceases to exist.
“Key Man” (Key Person for those who are a stickler for political correctness) insurance provides the business with the money that is required to allow the business to survive while it finds and trains someone else, with similar skills, to replace that key employee.
Many times entire businesses are forced to close because the business owner is unable to spend the time that is required to operate the business. When that happens, the owner is not the only person that is punished.
Not only is the business owner’s income effected, but all of the employees must be “laid-off.” Their incomes stop for reasons beyond their control.
Business Overhead Disability insurance provides a business owner with sufficient money to keep the business operating until he/she is recovered sufficiently to return.
Business Overhead Disability insurance typically pays the business enough money to meet payroll, pay utilities, pay rent, etc.
In fact Business Overhead Disability insurance will pay for most of the things that are required for the business to stay operational. However, there is one area that you must address if you are a business owner and wish to protect your business and employees.
Business Overhead Disability insurance will not typically pay to replace your salary. If you are looking for something that would replace your salary while you are recovering from an accident or illness, you will need a personal Disability Income insurance plan.