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May 07, 2019

May is Disability Insurance Awareness Month: Are You Prepared?

There’s an old saying that when bad things happen, they tend to happen in threes. That seems to be true with accidents and illnesses. For example, a small business owner has a stroke. That’s one thing. Then, he is unable to work during treatment and recovery. That’s two things. And, because he can’t work, he can’t pay his bills, and he’s forced to file for bankruptcy. That’s three things.

The above scenario is more common than you might think. Approximately 25 percent of people will become disabled before reaching retirement age. More than 75 percent of people say they couldn’t pay their bills for more than a year without an income. Whether you work for someone else or own you own business, not being able to work for any period of time can be financially devastating.

The risk of disability is real, as the facts in the infographic below illustrate. (Click image to download PDF).

Protect Your Most Valuable Asset

Did you know that the ability to earn a living until you retire is worth more than a million dollars? That’s why many financial experts say that earning power is your greatest asset – worth more than your home, your vehicles and your investment accounts. You probably insure your home and your cars, but do you insure your ability to earn a paycheck? Thankfully, that’s what disability insurance does. May is Disability Insurance Awareness Month. Take the opportunity to educate yourself on the disability insurance options available. Below are three to consider.

Individual Disability Insurance

Many people choose to protect their paychecks with an individual disability insurance policy. Unlike group disability insurance coverage that you may get at work, individual policies are portable – meaning that they follow you when you change jobs or become self-employed. They’re also tailored to your income needs. If you personally pay the premium, your benefits are typically not taxed.

Individual policies can also be layered to supplement the protection provided by group disability insurance policies. While having group disability insurance coverage is much better than having no coverage at all, group benefits are usually taxed and offer you a capped benefit that may be much less than what you need. This can leave those with higher-than-average incomes with some major gaps in protection.

Key Person Disability Insurance

If an important employee can no longer work due to illness or injury, both the employee and the business can suffer. Group or individual disability insurance can protect the employee from the financial impacts, but key person disability insurance is needed to protect the business.

A company can purchase key person disability insurance to cover essential workers who would be hard to replace. If the covered worker becomes unable to work due to disability, a claim can be filed. The payout can help the company mitigate the financial loss caused by losing a key person and can help bridge the financial gap while the company finds or trains a replacement.   

Business Overhead Expense Insurance

If you own your own business, you know that its success depends upon your hard work. If an illness or injury prevents you from working, your business will suffer. Business overhead expense insurance is designed to protect against this risk.

If a business owner is no longer able to work due to disability, group or individual disability insurance will help cover the person’s individual finances, while business overhead insurance will cover the overhead costs of operating the business. This way, the company can keep running in the owner’s absence.

Don’t underestimate the risk posed by disability. Protect yourself, your family and your business with disability insurance coverage. Contact our life and disability insurance team to learn more.

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