DISABILITY INCOME
By Chuck Davis, CLU, ChFC
What happens when your paycheck stops? What’s your plan? What are your options? A threat to our financial security is the unknowable timing of death and disability. Do we keep this risk or transfer it? The risk is there every day. Let’s explore some ideas.
Great resource: DisabilityCanHappen.org
Idea 1: Here is an example. You are offered a job and the pay is $100,000. You have to be at work every day to earn it of course. You become disabled and cannot produce, the income stops. You are offered job 2. Everything is the same except this job pays $98,000. However, should the same scenario take place and you are disabled for work, you will receive $5,000 tax-free per month until normal retirement. The difference in the two salaries is a premium of $2,000. That’s called transferring the risk.
Idea 2: Social Security is a powerful benefit and it is in force on most of us because the premium (tax) is mandatory. The average SS claim payment is $1193. The average wait time to draw the first check is 730 days. Only 30% of the people who apply for SS Disability actually receive the benefit.
Idea 3: If you own a private business, do you insure a key employee or a partner or do you ‘self-insure’? What happens when this person becomes disabled? When do you stop their paycheck? Is it your moral responsibility or not? Offer insurance to them, let them decline or buy their own. Have a written, formal plan.
Idea 4: Big mistake, disability strikes and there is no insurance, or small mistake (premium?) disability strikes and there is no insurance. Make DI insurance a part of your business or personal budget. It is the best solution.
Disability insurance is an incredible risk management tool. More doctors have more disability insurance than any other trade group in our society. Why? Because they see the results daily. If you decide to insure, determine what is adequate coverage, is it appropriate, is it cost effective, and what does the contract actually say it will do for you?
You’ve got your homework. Good luck in your shopping.
Great resource: DisabilityCanHappen.org
Idea 1: Here is an example. You are offered a job and the pay is $100,000. You have to be at work every day to earn it of course. You become disabled and cannot produce, the income stops. You are offered job 2. Everything is the same except this job pays $98,000. However, should the same scenario take place and you are disabled for work, you will receive $5,000 tax-free per month until normal retirement. The difference in the two salaries is a premium of $2,000. That’s called transferring the risk.
Idea 2: Social Security is a powerful benefit and it is in force on most of us because the premium (tax) is mandatory. The average SS claim payment is $1193. The average wait time to draw the first check is 730 days. Only 30% of the people who apply for SS Disability actually receive the benefit.
Idea 3: If you own a private business, do you insure a key employee or a partner or do you ‘self-insure’? What happens when this person becomes disabled? When do you stop their paycheck? Is it your moral responsibility or not? Offer insurance to them, let them decline or buy their own. Have a written, formal plan.
Idea 4: Big mistake, disability strikes and there is no insurance, or small mistake (premium?) disability strikes and there is no insurance. Make DI insurance a part of your business or personal budget. It is the best solution.
Disability insurance is an incredible risk management tool. More doctors have more disability insurance than any other trade group in our society. Why? Because they see the results daily. If you decide to insure, determine what is adequate coverage, is it appropriate, is it cost effective, and what does the contract actually say it will do for you?
You’ve got your homework. Good luck in your shopping.
Chuck Davis, CLU, ChFC, is the Managing Principal of Main Street Financial, Inc. Our mission is to assist businesses with building financial sustainable financial security. Our process provides guidance, advice, and solutions for the private business owner and individuals.
[email protected], www.mainstreetfinancialinc.com, 843.830.0555
[email protected], www.mainstreetfinancialinc.com, 843.830.0555
