Disability Insurance for Professionals
By: Karen Rinehart, CFP^®
The Henssler Financial Group Position Paper

Disability insurance is a product that is designed to provide 45% to 60% of your gross income should sickness, injury or illness prevent you from working and earning income. Many professionals are surprised to learn that disability insurance is more important than life insurance. The Social Security Administration's Disability Benefits publication claims that 30% of all 20-year-old workers will need some type of disability protection before they reach age 65. In addition, statistics show 48% of foreclosures are due to disability.

There are two main types of disability policies, short-term and long-term. Let's consider how long-term disability insurance can benefit you and your business needs:

If you have received extensive education and training, it is important to obtain a disability policy that will deem you totally disabled if you are not able to perform the material and substantial duties of your profession. This type of policy is considered an "own occupation" policy. The benefit to an own occupation policy is you are not penalized if you decide to continue working in an occupation other than your current profession. While these policies are typically more expensive than group policies, we suggest that the cost is worth the added benefit.

In addition, you should get a policy that is noncancelable and guaranteed renewable. This means that you have locked in your rates and benefits, and the company cannot make changes to the policy unless you request the changes. These policies are typically the most expensive, so if you are starting your career, cost could be an issue. In that case, you should look to obtain a guaranteed renewable policy. While these policies are less desirable because the insurance company can raise the premiums for different reasons, they cannot deny you the insurance.

Inflation riders are also an important feature for your policy. This means if you file a disability claim, your monthly payment will increase as the cost of living increases. Today a policy may be worth $3,000, but it will likely be more 10 years from now. Another important rider is a future purchase option. This option allows you to buy more coverage as your salary rises or as your business expands. This is especially good for younger professionals or business owners.

Long-term disability insurance premiums will typically cost between 1% to 3% of annual income. Prices vary based on age, gender, health history and occupation. The elimination period will also affect the cost of the policy. The elimination period is the length of time between the onset of a disability and payments to you begin. You can choose an elimination period as short as 30 days or as long as 720 days. The longer the elimination period the less your premiums will be.

You will also have to choose a benefit period for your policy. This is the length of time the insurance company will pay benefits. Insurance companies allow you to choose benefit terms lasting two years, five years, to age 65 or for the rest of your life. The longer the benefit period, the more expensive your coverage.

Protecting your ability to earn income is imperative to both your personal financial plan and business plan. At The Henssler Financial Group, we recommend disability insurance play a major role in protecting your ability to earn income, as statistics show an individual is more likely to become disabled in their earning years than to meet their demise. For more information on disability insurance, please contact The Henssler Financial Group at 770-429-9166 or comments@henssler.com.