Individual Disability Income Protection: Who Needs It?
Your most valuable asset is probably your ability to earn an income. Multiply your annual income by the number of years until you expect to retire and you will see what I mean. I doubt you would wait very long to insure a piece of property that is worth that much money. Medical techniques have advanced to the point where diseases and injuries that used to be fatal are now more likely to leave you disabled. That is good, but you will need income to pay for your care in addition to your normal living expenses. Money from savings, borrowing, selling assets or social security are unpleasant and unreliable sources of income. Disability insurance will be there when you need it. Medical underwriting is strict and policies can be difficult to obtain, so it’s best to get a policy while you are healthy. Individual plans are flexible and allow you to program around savings or sick pay. If you have to get up and go to work every day in order to pay your bills, you need disability insurance!

Statistics
Statistics are a dry subject but you are far better off knowing the odds. According to the insurance commissioner’s disability table of 1998, seven of ten people between the ages of 35 and 65 will become disabled for three months or longer and one out of seven employees will be disabled for five years or more before retirement. UNUM/Provident, a major disability insurance company, reported in July of 2002 that the five leading causes of long term disability claims in order are: cancer, pregnancy complications, back disorders, cardiovascular conditions and depression.

Business Overhead Expense Protection
If you are self-employed and become disabled, your income will decrease or stop but your business expenses are going to continue. Without additional financial support your practice could be crippled or even shut down by these ongoing expenses. Options such as selling the practice, hiring a replacement, using savings, other disability insurance benefits, or temporarily closing the office are less than appealing. The solution is to purchase business overhead expense protection so that these expenses can be paid by the insurance company. This will allow you to keep your practice open, retain skilled employees, and pay your share of expenses in a group practice. Premiums are usually deductible as an operating expense regardless of the type of business structure.

Disability Buy Sell
Most professional practices have established Buy Sell agreements to protect the owners in the event of an untimely death. Very often these agreements are funded with life insurance but make no provision in the event of a disability, a much more likely occurrence. Agreements can be modified to address this issue and insurance can be purchased that would pay a lump sum benefit or a series of payments. Waiting periods can be established so the disabled owner is not forced out of the business too soon and the remaining owners will not be forced to deal with someone who is disabled and non productive any longer than necessary.

Group Disability Insurance Supplementation
Group Disability insurance plans usually cover base salary only. Income from other employment, bonuses, company perks, employer retirement plan contributions, etc. are often not protected. That means the more highly compensated individuals in the group are often subjected to reverse discrimination because a much lower percent of their total income is covered than is provided for support employees. Supplementation with an individual disability plan is common and can allow for a much higher percent of protection overall. This option can be offered on an employer or employee paid basis and substantial premium discounts are available as a result of employer sponsorship.

Qualified Sick Pay Plans
One of the most difficult decisions a business owner has to make concerns what to do about sick pay for a disabled employee. Unfortunately, most business owners simply do not realize the consequences of paying a disabled worker without establishing a formal plan. IRS rules and regulations are pretty clear about the outcome of doing so in the absence of a formal plan, one of which is that the payments may not be a deductible expense. A qualified Sick Pay plan can be a rather simple form of agreement, can offer different benefits for different classes of employees, and will avoid negative consequences.

Premium Discounts
Individual disability insurance rates are sex distinct and females pay higher rates than males. If the employer will sponsor a plan, employees can purchase a full or supplemental plan at substantial discounts. The females would have access to the much lower cost unisex rates. The employer can offer an excellent benefit to employees with no direct cost.