Income Protection - Build A Strong Foundation

How long can you survive without a paycheck? If you are employed, presumably you expect to receive financial compensation for your efforts. We exchange value for value -  our labor, expertise, and time for the monetary reward we use to build our lives – Buy homes and cars, pay the bills, send kids to school, save for retirement, finance our hobbies and lifestyle.

But what if something were to prevent you from earning that paycheck?

How soon would the life you’ve built begin to fall apart?

Disability Insurance (DI) is too often overlooked and misunderstood. Disability Insurance (DI) is more accurately described as Income Protection benefits.  This type of policy replaces your income from employment should you become unable to work due to illness or injury.  Often people associate the word disability with extreme physical limitations, but that is not always the case. Disabling conditions can be long term or short term, physical or mental, and due to illness or injury. Disability insurance contracts can be designed to cover a wide variety of circumstances that may limit your ability to earn an income.

Many people assume that they would be covered under a government program that would provide income replacement if they experienced a disability. However, Workers Compensation programs only cover employees for work-related conditions and injuries that happen on the job, and less than half of the disability applications submitted to Social Security are approved. Most families don’t have adequate emergency savings to cover their expenses for more than three months without drawing from their retirement savings, the cost of health care is continually rising, and many employers do not offer disability coverage as an employee benefit.  This leaves millions of Americans without income protection in the case of a short or long term disability.

https://disabilitycanhappen.org/diam/ 

Think of it this way – If you had a machine in your workshop that dependably generated your salary in cash (legally of course) and presented it to you monthly, wouldn’t you want to protect that contraption? Insure it? Be able to replace it if it stopped working? If you bring home a paycheck that someone’s livelihood depends upon, then YOU are the salary machine. You need Disability Insurance.

And if you own a business, you have both personal and professional needs to consider. Keeping your business up and running successfully while you are unable to work is essential to the financial well-being of not only your family, but your partners and employees as well.

Disability Overhead Expense (DOE) insurance pays a benefit that can keep cash flow stable, maintain payroll and employee benefits, and keep the debt liabilities paid so you have a sound business to return to after your term of disability. If the longer term plan is to sell the business in your absence, then Disability Overhead Expense insurance helps your business maintain its value and be viable for sale.

In a partnership, businesses often work with counsel to develop a Buy-Sell Agreement which outlines the terms of how to legally and financially address the disability of one of the partners. However, financial resources need to be available to fulfill the terms of the agreement. Rather than redistribute the liability burden, or drain assets and equity from the business, a Disability Overhead Expense policy can be used.  A policy would be taken out on each partner with a benefit payable to the business to help cover that partner’s share of the overhead expenses while they are unable to work due to disability..