While we normally protect almost everything we own, in many cases, our largest asset and financial resource remains at risk. We purchase insurance to protect our health, our cars, our homes, our lives, purchase warranties on new TV’s, computers and jewelry insurance, etc. However, we ignore our largest resource, our ability to earn an income.
When a recent study was done, they asked people would you purchase income protection to maintain your monthly bills should there ever be a reason you were unable to work and the answer was 79% “YES”. When the same people were asked if they would purchase disability insurance, the answer was 86% “NO”, even though these can be the exact same things.
Why is this? We think it’s about people being misinformed and uneducated about what individual disability coverage, or income protection, really covers. Only about 4% of the population has it and only about 30% of large companies offer it as an employee benefit. About 80% of physicians own it, but it is time that the rest of the population understands the advantages of income protection.
Many people use this to protect their savings and retirement accounts from being liquidated should they not be able to work. Or also protect their mortgage payment and other essential monthly bills for their family. In many cases, one can get up to a tax-free $4,000 monthly benefit from a simple application and phone call, without doing a medical exam.
Another misguided fact is that many people assume their income and employment would likely only be interrupted following some sort of accident. This is completely misleading as this only accounts for about 7% of disability claims. The majority of claims come from two categories: Mental/Nervous (stress, anxiety, drug abuse, MS, ALS, etc) and Musculoskeletal (neck, back, legs). How many people do you know with back problems?
Won't worker's comp protect me? We hear this a lot. Worker's comp plans only affect you if you are hurt on the job and this is fewer than 5% of all accident and illness claims.
Doubt you will ever use it? 1 in 4 employees age 20 will have a long-term disability before they retire and 38% of those will last longer than 5 years.
Many small business owners consider this protection crucial to their business. If you own a business with 5 employees with an average age of 37, you statistically have a 91% chance of one of those employees having a long-term disability that will affect business revenues. If you have 10 employees with an average age of 47, there is a 98% chance of a long-term disability occurring before they retire. These are staggering numbers!
Many business owners also have partners. This usually entails some sort of Buy/Sell Agreement that details what would happen to that partner’s share of the companies should he no longer be able to contribute either from a disability or a death. This protection is perfect for this type of planning. Many banks are now requiring enough individual disability income protection to cover the cost of any commercial loan payments they may have outstanding on the business.
A 35 year old making $50,000 per year, will have almost $2.4 Million in income by the time they retire. With that large of an asset, for 1-3% of your current income, isn’t that worth protecting?
A 45 year old currently making $100,000 per year will earn almost $2.7 Million by the time they retire. This number is usually a greater asset than any retirement savings or real estate combined that they will have!
As you can see there are many different situations in which income protection planning can be advantageous to a regular employee with a small family making $50,000 or a small business owner making $100,000 or more.
To get a free, no obligation quote on how easy it can be to obtain income protection, contact us today. It can be as simple as a phone call. The majority of people procrastinate and that’s when everyone hears the horror stories that come up in this field. Don’t be a statistic!
If you are a business owner, we also have a free service for Buy/Sell reviews and Business Valuations! Ask us about this program.
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