The potential effect of a disability is devastating. For most people their is a 1 in 4 risk of having at least one long term disability which lasts three months or longer before reaching age 65. Recent statistics indicate that up to 48% of foreclosures are due to disability. If you are 30 years old and making just $50,000 a year, your potential earnings at risk are almost $2 MILLION!

Disability insurance pays you a monthly income when you are unable to work due to injury or illness. An individual plan is owned by the insured, so there is never any loss of coverage when changing jobs. This type of coverage is the only insurance that protects your earning potential. A major illness or traumatic injury can leave someone in bankruptcy, unable to work. Disability insurance is designed to protect you from such occurrences.

High quality guaranteed-renewable or non-cancellable disability coverage is not inexpensive, but it is essential financial planning. There are a number of features that you need to know about disability insurance:

• definition of disability - Are education, experience, and past earnings taken into account in determining whether the insured is qualified to resume work? Better policies have more liberal definitions of disability, and many will allow you to purchase an 'own-occupation' designation, so that if you are disabled, and cannot do your job, you will be paid. Restrictive definitions of disability, or policies with definitions that may change after a period of time, are usually cheaper but may not do the job you want.
• partial or residual benefits - these benefits may be payable under some policies where the impairment allows the insured to perform only a portion of his duties. This provision may also pay benefits in the event the disability reduces the insured's income by a certain amount ( for example, 20% or more) from pre-disability levels.
• cost of living adjustment - a policy provision, usually optional, that provides for increased benefit payments after a disability occurs. Some policies limit this feature after a certain age
• elimination period - this is the amount of time, selected by the insured, that must expire before benefits are payable. If you choose a 180 day elimination period, you will need to wait six months from the start of disability before the insurer begins paying you benefits. Being realistic about the elimination period is very important; if you do not have six months worth of living expenses in the bank, then choose a lower elimination period, i.e. 90 days.
• benefit period - The length of time that benefits will be paid for after the elimination period. Typically, 2 to 5 years are common in blue collar industries or occupations, with 5 year and 'To Age 65' election periods common for white collar and professional occupations.
• monthly benefit - The amount that you will receive, typically selected at time of issue. An insurer may pay up to 66% of your gross income in disability benefits. If individually owned, then the benefits are tax-free. If employer paid, benefits are taxable - not a healthy situation. Business owners who wish to provide 'golden-handcuff' disability coverage to highly compensated or key employees and have those benefits remain tax-free need to be cautious; email me at rick@viehdorfer.com for more information.
• successive disability - The situation where a disabled person temporarily returns to work but thereafter has a recurrence of the disability. In many plans, the successive disability periods can be tied together to meet the elimination period.

We believe in own-occupation disability insurance coverage. It provides the most comprehensive long term disability insurance coverage available. Own-occupation disability insurance protects YOUR occupation and any recognized specialties within your occupation. We recommend individual disability insurance coverage that is also non-cancellable and guaranteed renewable. This means that your premiums will remain level for the life of the policy. You will pay the same premium at age 40 that you will pay at age 64. Premiums are based on age, sex, occupation, income level, and health history. There is every incentive in the world to buy long term disability insurance coverage at your current age, as rates go up next year. Always make sure your disability insurance coverage is "Non-Can". You don't want to receive a huge rate increase at age 55, at a point in time where a new disability insurance policy is more difficult to obtain.

On a practical basis, many business owners have established buy-sell agreements to protect one another and the business in the event of an untimely death. Very often these agreements are funded with life insurance to make certain that the necessary dollars are available at the time of death to purchase the business interest. The death of a business owner can be devastating to the business and to the family; yet , the probability of long-term disability prior to age 65 is greater than death. Frequently, the probability of a permanent disability is not provided for in buy-sell agreements. Business owners can amend existing buy-sell agreements or have separate agreements to provide for this potential disaster. Beyond personal and group disability plans, several specialized disability contracts are available to the businessperson; these policies cover expenses such as staff salaries, rent, telephone, utilities, malpractice and other business insurance and other expenses necessary to keep a business open and running. Policies available include:

• -Business Overhead Expense: These policies cover expenses such as salaries, rent, and other expenses necessary to keep a business open and running
• -Key Person Disability: Reimburses the business for the loss of a key employee and allows funding of temporary replacement or training of a successor.
• -Disability Buyout: Provides income to fund a buy-sell agreement triggered by the total disability of a shareholder-executive.

For a list of disability carriers, click here.

We provide expert consultation to business owners, key personnel, and highly-compensated employees in today's competitive job market with a wide range of options and plans to cover every possibility. For a proposal, click here, or email me with your specific situation and questions. Also, please review executive benefits for additional information.

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