Disability Insurance

As you enter the workplace, you may be given the opportunity to participate in an employer-sponsored plan. In general, group plans are designed to provide a basic level of disability coverage at a modest cost and with minimal underwriting. A typical group disability plan covers up to 60% of your income. Some cover as much as 66 2/3%. However, benefits are generally subject to a cap e.g. $5,000 - $10,000 per month, which may leave you underinsured. Typically the benefit payable under an employer-sponsored group plan is offset by payments from government programs such as Social Security disability benefits.

Individual disability insurance may offer the most generous level of benefits, plus a wide array of policy options to tailor coverage to fit your specific needs. The policy is owned by you, which means that you can take the coverage with you, regardless of where you practice. You must qualify financially and medically for an individual disability insurance policy.

There are differences among individual DI policies. The best policies are:

Non-cancellable and guaranteed renewable

This means that the coverage cannot be cancelled or modified for the term of the contract (typically age 65) as long as you continue paying the premiums. (The policy can be renewed after age 65 if you are not disabled and are gainfully employed full-time.) Additionally, your premiums are guaranteed. The key word is “non-cancellable.” If a policy is not “non-cancellable,” then premiums are subject to change by the insurer. 

True “own-occupation” protection

True “own-occupation” protection with specialty language for medical professionals. The policy’s definition of total disability determines when benefits will become payable. Under the true “own-occ” definition of disability, an individual is considered totally disabled if, solely due to injury or sickness, he or she is unable to perform the material and substantial duties of his or her occupation, even if gainfully employed in another occupation. You may hear about policies that have a “modified own-occupation” definition of total disability. Under this definition the insured will not be considered totally disabled if he or she is working in another occupation.

When tailoring an individual disability policy to meet your requirements, these are the details you must consider:

  • How long do I want to wait before benefits begin? (Elimination period)
  • How long do I want benefits to last? (Benefit period)
  • How much benefit might I be eligible for? (Monthly benefit)
  • Am I protected if I am partially disabled? (Stress the importance of coverage for partial or residual disabilities.)
  • What happens when I recover, but continue to have a loss income?
  • As my income rises, can I guarantee my right to increase coverage in the future, without medical underwriting? (Benefit Purchase Option Rider)
  • Will my benefit keep pace with inflation when I’m disabled? (Cost of Living Adjustment Rider)

Life Insurance

Do I need life insurance?

  • Ask yourself: Will someone suffer financially if I die? If so, you may need life insurance.

How much do I need?

  • Do a financial needs analysis to figure out immediate expenses (funeral costs, mortgage and other debts, uncovered medical costs, taxes, estate settlement costs, etc.)
  • Then calculate ongoing expenses (food, housing, utilities, transportation, health care, clothing, insurance, etc.)
  • Finally, determine future expenses (college, retirement, etc.)
  • Combine the amounts needed for current and future financial obligations, then subtract spouse’s earnings, savings, investments, and life insurance you already own. The balance = the amount of life insurance needed.

What kind of life insurance should I buy?

  • The two questions to ask are: How long will I need to be insured, and what can I afford to spend?
  • Remember: The cost of life insurance typically increases with age, and one of the biggest mistakes is to underestimate how long you’ll need to be covered.

Term Life vs Permanent Life

Term Life

Term insurance is the basis of ALL life insurance coverage. It’s pure insurance, much like your auto or home insurance. You pay your premium, and if there’s a claim it’s paid.  If there’s no claim, the carrier keeps the premium.

Short-term coverage is handled through term insurance: Income replacement, college funding, pay off a  mortgage,  business coverage like buy/sell and key man. Today’s term durations typically run 10, 15, 20, and 30 years. After the level premium period, premiums increase substantially.  

Term does give you flexibility in locking in your insurability for potential conversion opportunities.  

Because of the basic coverage of term, the premiums are usually the least expensive of all Life products.

With the changing marketplace there are growing enhancements to many term policies and other riders that provide a disability waiver of premium and child riders.

Permanent Life

Permanent insurance is broken down into three basic categories: 

  • Whole life
  • Universal
  • Variable Universal Life

Whole life is the “classic” form of permanent coverage – and provides the strongest guarantees. Generally, whole life features guaranteed premiums, cash values and death benefits. Many whole life policies have a mechanism where cash value growth is enhanced by excess earnings or investment growth beyond the basic guarantees.  

Whole life also tends to have relatively high premiums compared to term or universal life – to cover the cost of all the guarantees. 

Universal Life (UL) offers a guaranteed death benefit as long as the premiums are paid and no loans or withdrawals are taken. This type of policy offers great planning for estate and wealth transfer opportunities.

Cash accumulation ULs offer the opportunity to grow cash values based on the carrier’s investment. These can be very effective in leveraging the tax advantages life insurance provides. They also provide premium flexibility as the client can reduce or stop premium payments if the cash values are sufficient. The products update monthly and there must be adequate cash values for the policies to continue.

Variable UL policies act much the same as cash accumulation UL policies, with the exception that the client can choose the underlying investment options available through the contract. Policies are now available that offer death benefit guarantees to VUL contracts, at an additional cost. 

Life Insurance Riders

Today’s policies offer many additional riders that add value during the insured’s lifetime:

  • Waiver of premium to pay premiums, or cost of insurance, should the client become disabled.
  • Accidental death to pay additional proceeds in the event of accidental death.
  • Child riders to offer coverage on children of the insured at a lower rate than an additional policy.
  • Living benefits, or accelerated benefits riders that allow the insured to access the death benefit amount for care if he or she becomes chronically or terminally ill, as described by the rider, and meets the other requirements of the rider.

Long-Term Care

Long-term care insurance is an insurance product that helps pay for the costs associated with long-term care. Long-term care insurance covers care generally not covered by health insurance, Medicare, or Medicaid.

Final Expense

Final expense insurance is designed to cover the bills that your loved ones will face after your death. These costs will include medical bills and funeral expenses.

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