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WHAT IS DISABILITY INSURANCE? |
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By far, a working adult’s
number one asset is the ability to earn an income. Disability Insurance
is designed to pay a monthly benefit to replace lost income in the event
that you have an injury or serious illness and can’t work.
Just about everyone under the age of 40 is convinced
that they will never have a career threatening injury or illness. Most
of these same people will also avoid talking about buying disability
insurance to protect income simply because it’s an uncomfortable
topic. We can give you examples to show you why this type of insurance
is so important. And we can make it a little less stressful to talk about.
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WHO NEEDS IT? |
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Disability insurance can be the key to protecting your assets if you
have a car accident or a serious illness. If you have people who depend
on your salary – it’s a must.
Working Men: Believe it or not a male age 35 has a
32% chance of disability.
Women: The statistics show that a female age 35 has
an over 52% chance of becoming disabled for at least 90 days prior to
age 65. That’s over half of all females. So that’s why Disability
Insurance is so important for both men AND women.
Head of Households: if you are the major breadwinner
in your family, you need Disability Insurance. For example, a 35 year
old making $150,000 today will earn over $7.1 million dollars during
their working career up to age 65. Should an injury or illness occur,
where will money come from to help pay for ongoing mortgage, car, and
ongoing expenses?
Employees with a Group Long Term Disability Plan: Most
employers will offer or provide a Group Long Term Disability plan (GROUP
LTD). The typical structure is designed to pay 60% of your pre-disability
income to a maximum of $5,000 or $10,000/month. If we look at the $5,000
monthly cap, that means that anyone who is earning more than roughly
$8,000/month in gross earnings will be limited to $5,000 of income. If
you are one who is limited by this type of monthly cap, you could be
well underinsured…suppose you are earning $12,000/month and are
capped at $5,000? With 60% of your $12,000 equal to $7200/month but capped
at $5,000, you are in the hole $2,200 per month. That might be the difference
in car or equity line payments or other ongoing obligations.
Here’s what’s worse…since most employers pay for the
Group LTD plan and deduct the premiums as a business expense, any benefit
received will be taxable as ordinary income to the recipient. So, if
we use the example of the above individual earning $12,000/month gross,
not only do they lose the difference between the $5,000 monthly cap and
their 60% replacement of $7,200, the $5,000 will be taxed leaving the
disabled employee with somewhere close to $3000/month net…this
is hardly reflective of the pre-disability $12,000 monthly income.
The real key in this planning area is to ask questions…ask if your
company provides a Group LTD plan; ask what the monthly cap is; ask what
percentage of lost income it replaces, i.e. 60% or 66/23%. Then, we need
to look at your income and see how much of a taxable loss there might
be and also how much additional protection you can obtain from an individual
supplemental plan so that your full working income is protected.
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Why Clients
Choose Mensh |
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We have nearly 50 combined years of experience in the Disability Insurance
marketplace. There are significant differences between traditional mortality
based life insurance underwriting and morbidity based disability insurance
underwriting.
Because we have hundreds of physician clients, we have
learned the nuances of health issues that can make it easy or difficult
to qualify for Disability Insurance. This gives us an edge when it comes
to getting a successful review and implementation of your coverage. As
with our other product offerings, we remain independent and can bring
all of the top rated carriers and companies with the most comprehensive
contract language.
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Q & A |
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How is a Disability Defined?
The definition of total disability is “because of sickness or
injury you are unable to perform the material and substantial duties
of your regular occupation, or occupations if more than one, in which
you are engaged at the time of disability.” This is the key component
of the contract as most plans differ in their definitions. Mensh Insurance
will focus a significant amount of time and energy in this area of the
discussion.
What is a Residual Disability?
A residual disability can be thought of in two different claim scenarios.
Think of a residual disability as a partial disability, or as a recovery
benefit. The residual disability rider in the best disability insurance
policies can act as an unlimited recovery benefit, and does not require
a loss of time or duties in order to pay a claim. For individuals who
own their own business, are in sales, or are the chief rainmaker for
their company, there must be a residual disability rider on your policy.
Do Benefits increase over time?
The majority of plans will include a cost of living increase rider to
ensure that policy monthly benefits increase throughout the life of the
claim.
What are the greatest statistical risks for a disability claim?
The leading causes for claim are disabilities due to back problems,
followed by emotional, psychiatric, and neurological disorders.
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