Enabling Peace of Mind

October is Disability Employment Awareness and Financial Planning Month. When you think of disability insurance, what first comes to mind? For too many people, thoughts first go to medical expenses related to unexpectedly being disabled and since their health insurance covers those medical expenses, it can easily be dismissed as not needed. Disability insurance is NOT health insurance. It is insurance to cover your income and personal financial obligations when you are not able to work to earn that income. 

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According to the Council for Disability Awareness, disability is a common cause of bankruptcy.  Long-term disability claims most commonly stem from musculoskeletal disorders, cancer, pregnancy, mental health issues and injuries. Depending on the cause of the disablement, while Worker’s Compensation and Social Security Disability Insurance may offer some benefits, they will not offer the income replacement to pay all of your household expenses that may be needed. Disability insurance is a back-up plan if you cannot go back to work temporarily or permanently. 
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Whether you are employed by another company or are a business owner, understanding the value of disability insurance is essential for effective financial planning. ​

A Wake-up Call

A client, who was 46 years old and CEO of his company, was anguished by the sudden loss of his brother from a heart attack at a young age. This compelled him to think about his own mortality so he went for a proactive health screening and felt strongly that he should look into disability insurance, being the sole provider for his family. While he was in good health, something that popped up in his proactive screening caused the initial Disability Insurance carrier to deny his application. 

Due to access to a variety of carriers, we were able to resource a custom high-risk carrier to underwrite him, customized for him, and for the same price he hoped to pay when initially considering options. 

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Re-engineering Coverage

​After an insurance review and audit, a CFO of a company in the engineering and construction field with 250 employees learned that the company was under-insured in disability insurance based on the HR Director showing that the owners and several employees had incomes exceeding their group disability coverage.  Upon analyzing the group long-term disability contract and census, it was further clarified that as the company continued to grow, this issue would also grow. Another issue of concern was that full group underwriting would be difficult due to the medical issues of some of the key people. 
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The solution was to obtain a guaranteed issue offer from a leading individual disability carrier for the owners and key people, avoiding the cost of a much higher cap for the entire company that would also entail more challenging medical underwriting. 

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You Just Never Know

I have become impassioned about the value of disability insurance for a very personal reason. Good friends of ours, a family of five, were hit by a teenage driver two days before the Christmas holiday, resulting in the tragic loss of their six-year-old daughter. The mother who was driving, and two other children survived, however, the husband and father required extensive recovery time and rehab over a four-month time period. Without disability insurance, this caused significant financial hardship. Friends and family came together to raise funds to help support the family through this stressful and emotional time in their lives. I often ask myself, what about the family who doesn’t have that support network around them? What would they do without a safety net of financial support?

6 Key Questions - Disability Insurance

The questions below pertain to you as an employee as well as if you are also a business owner or employer.

​Answer the questions that best relate to your current situation to guide you in understanding the value of disability insurance for you.

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1. If you were not able to work, how long will your finances cover your family? According to Disability Claims Review data, the top three reasons for long-term disability claims are muscle, back and joint disorders (28.6%), cancer (15.1%) and injuries and poisonings (10.3%). What is the likelihood these could be the cause for a future disability for you? Is your work physically straining or high risk for injuries? Does cancer run in your family making it a higher possibility that you could be inflicted? The most important question of all is, if you were out for a few months or permanently, do you have finances to cover your family’s living expenses? To calculate what you will need, check out this Life Happens Calculator.
2. Does your employer offer Disability Insurance?  The full benefits that you can opt into through the company you are employed may include disability insurance. Inquire if disability insurance is a benefit, and what you are obligated to pay to supplement if it is not covered in full by your employer. o you know you have DI at work, Is it enough? Workplace plans generally include two policies, a short-term and long-term.
3. Should you have coverage for short-term, long-term, or both?  Short-term disability insurance typically covers only 60 to 70 percent of your salary, with a cap of $1,000 a week, if you miss work due to illness or injury for up to three months. After that long-term disability can kick in, and it typically pays 60 to 67 percent of your salary up to caps of $5,000 or $10,000 per month, until you turn 65. These payments may be calculated on base salary only, without commissions or bonuses. Payments may also be taxable. If you're looking to buy your own coverage, forget about short-term policies. You're better off putting the money into emergency savings.
4. If you own a business, how long could your business operate without you?  When you own a business, there is not only your family living expenses to consider, there is also the ability to keep your business running while you are out on disability. Has your business put a financial contingency in place with cash reserve or policies to cover wages, overhead, mortgage, rent, leases, and all that needs to be covered to operate effectively?
5. Is there a key person that if they were injured and not able to work, your business could not sustain?  When it comes to owning your business, you also need to think of those key people in your company who, if they became injured or disabled, could cause a negative impact on your company’s ability to operate in their absence. From a key high performing salesperson or specialized technical contributor, obtaining coverage to bring peace of mind to your business, and also offering disability to these key people as an added benefit, creates a win-win that translates into loyalty and your peace of mind. 
6. Do you have a business partner? If they were injured, do you have the financial contingency in place to continue to operate if they become disabled? Just as was stated related to a key employee, a business partner or key shareholder who is actively involved in the company and then is no longer able to contribute due to becoming disabled can cause significant capacity, as well as financial strain to the business. 
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In my opinion, disability insurance should not be an option. It is a prudent financial resource to ensure your peace of mind and your family’s comfort and wellbeing. It is also an astute financial business initiative for companies that value their employees and key people. 

For Your Future,

Lori Capozza Zeind
www.lczconsulting.com

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