If you make $300,000 or less then this post is probably not for you, unless you can envision a time when your income is higher. Traditional disability income insurance will pay, at most, 65% of your income as a benefit, theoretically what you would net post taxes. This means that the maximum benefit at $300,000 is about $16,300 a month.
If that really is your tax situation (self employed might be a lot different since we deduct the air we breathe before taxes) and you don’t get any bonuses or incentives on top of your salary, traditional disability income insurance should work very nicely for you. The problem comes when you don’t fit that mold because no matter what you want to argue, traditional disability income, with very rare and very small exceptions, caps benefits at $16,300 a month, just shy of $200,000 a year. Let me say that another way. No matter how much money you make, traditional disability income insurance is going to turn your income into $200,000 a year if you are disabled. Nothing wrong with that as long as you can quickly adjust to that if you happen to make $400,000 a year or you make $300,000 a year plus large bonuses for doing your job well.
Let’s dance around a little with people who are easily disabled. It doesn’t take a lot of damage for a neurosurgeon or cardiac surgeon, or for that matter any surgeon, to be rendered unable to do their job. Loss of sight. Loss of use of a hand. Inability to stand for long periods. Loss of the ability to do their job for any reason (other than self inflicted injury) is pretty easy to imagine. And you guys don’t make $300,000 or $400,000. In a lot of cases we are talking about incomes in excess of $1 million a year and a lot more the better you are. The dilemma is that you can’t buy multiple traditional policies to stack on top of each other. If you have a benefit of $11,000 a month from one company, the other company is only going to allow a benefit of $5300 a month.
So, let’s be real. Anyone making a million or more a year has several years income socked away and disability isn’t going to be that big a deal, right? We can do this with a show of hands. How many of you highly paid physicians, attorneys, dentists, or executives would get along just fine on $16k a month? Ok, let me rephrase that. We know you don’t want to, but if that was the hand you were dealt could you adjust your lifestyle pretty easily to live one 1/5 or 1/10 of what you currently make? Ouch!
So, what’s a successful guy or woman to do? While you can’t pile on traditional coverage to make up for the shortfall, we do have an outlet that will issue either primary or supplemental disability income with a maximum benefit of $250,000…..a month. That’s right. $3,000,000 a year and it won’t cap or mess with the traditional coverage you have.
OK, so it’s non traditional. It’s not written by an insurance company. It is underwritten by Lloyds of London, the same company that writes disability insurance to cover contracts for professional athletes and entertainers. I know there is an assumption out there that if Lloyds writes it the premium is inordinately high. I certainly used to believe that until I started placing coverage with them and found out that what they offer is, in most cases, in line with what you could get elsewhere IF YOU COULD GET IT. Their high limit disability program prices are on a cost/benefit comparison not much different than what traditional companies offer. So, the cost is reasonable and the limits are high enough to level the playing field. Oh yeah, they will also write coverage that no traditional company will touch. A physician with bipolar disorder. An attorney just diagnosed with prostate cancer.
Bottom line. Disability doesn’t have to be the end of your financial lifestyle. It’s going to be hard enough without your bank having a hole blown in it. If you are stuck in a situation where you carry disability and hope you never have to use it because of the financial disaster that would ensue, or if you’re part of a group of highly paid business partners needing high limit buy/sell disability, or a successful business owner that needs high limit business overhead disability, call or email me directly. Let’s talk.