Disability Insurance for Professionals, Self Employed & Individuals
Planning on having an injury or illness that leaves you disabled? Most of us don't. I certainly didn't. My multi-year disability cost me over $500,000!
A disability is something you may never recover from financially even if you are lucky enough to recover physically. When you lose your income you lose more then just your pay check. You also lose the opportunity to invest, save for your kid's college education and prepare for retirement. Think you have enough money to whether the financial storm? Keep this in mind, approximately twenty years from now today's dollar will be worth approximately fifty cents, advances in medical technology will keep you alive from something you would have died from today, the average life expectancy is rising and it will soon be common to live beyond 100. It is conceivable we could spend 40 to 50 years in retirement. If you become ill or injured, your income suddenly stops and you have to live off your savings and investments, how much will be left to retire on? How long will it last?
Without a disability policy, after you've drained your savings, refinanced your home, whipped out your retirement portfolio, spent your kid's college fund, maxed out your credit cards . . . What's left?
If you own a disability policy, everything is left. All your finances, hopes and dreams for your family's future are safe and secure. The only thing you have to concentrate on is getting well.
Key Person Disability
When a key employee is disabled the loss is experienced in two ways. The first is the loss of profits that would have been attributed to the key employee. The second is the cost associated with finding
a replacement. Key‑Person Disability coverage is designed to provide your business with income during the disability of a key employee.
How Key‑Person Disability Income Works
Upon the disability of the key employee, the employer receives funds for the loss of the key employee. The funds can be used to replace a portion of business profit lost to the key employee's disability or to attract and train a replacement for the key employee.
Disability Income for Key Employees
Provides a salary continuation plan for selected employees during a disability caused by injury or illness.
If you or one of key employees became disabled, would you:
- Continue to pay wages, and
- Continue to take a business tax deduction?
If you said, "of course I would," you may be surprised to learn that the tax courts have ruled that unless you have established a Qualified Sick Pay Plan before a disabling accident or illness
occurs, any "wages" paid to a disabled employee are:
- Not a business expense,
- Not tax-deductible, and as a result
- FICA taxes are not tax-deductible.
Only under a Qualified Sick Pay Plan may a firm continue to pay wages to a disabled shareholder / employee and deduct them as a necessary business expense (IRC 105, IRC 162).
Disability Overhead Expense Reimbursement
Business Overhead Insurance is designed to provide funds to cover overhead expenses during a business owner's disability. Business overhead expense insurance is intended to help maintain the business; It is not intended to replace disability income insurance or disability buy-out insurance.
Covered expenses include those that are tax deductible to the business. Typically these expenses include employee salaries, utilities, professional fees, rent, mortgage payments, lease payments for furniture and equipment, premium for health, property, and liability insurance, laundry services, janitorial services, and maintenance services. Not included are the insured's salary, salaries of family members and depreciation.
Disability Buy-Out Coverage
