by John Bearss
Hi Jerry. Today, I would like to continue focusing on one of the 5 building blocks to a good financial plan and again that is Building Block number 2 – protection of the assets that God has entrusted to us.
If I were to ask you, What is your greatest asset? Most people would say their home or their 401(k) or their IRA. The truth is, during a person’s working years their greatest asset is their ability to earn an income. So today I would like to focus on the importance of disability income insurance.
According to the National Safety Council, there is a 1 in 5 chance that your automobile will be damaged in an accident. A 1 in 21 chance that you will have a disabling accident. A 1 in 96 chance that you will have a fire and a 1 in 114 chance that you will die.
No estate or financial plan can be considered complete unless there has been an evaluation of the risks of disability. Planning to live is as important as planning to die, and the risk is greater. For example, a male age 40, long term disability is 2.9 times more likely than death.
Before disability, most people are able to acquire savings so that their income is greater than their expenses. However, after disability caused by a sickness or injury, income will fall and expenses will rise due mostly to medical costs.
Let’s look at what can happen without planning. The expenses of a disability can quickly exhaust the family’s savings and create substantial debt. This is true despite the availability of Social Security after 6 months of continuous and total disability. For most people these payments will rarely fill the gap created between falling income and increasing expenses. When available, Social Security disability payments to a disabled wage earner with children will be substantially more than those to a disabled wage earner without children. The fact that a disabled wage earner is married and often responsible for the financial needs of a spouse does not result in an increase in Social Security payments.
With planning the cornerstone of any disability plan is disability insurance. Just as life insurance protects a family in case of an untimely death, disability income insurance protects both the insured and his family in case of the insured’s disability.
Being able to qualify for disability income insurance is based on several factors, your annual earned income, your occupation what group disability insurance you have, your age, your health at time of application, are there any pre-existing conditions and several other factors.
It is important to note that typically most disability income insurance companies will only allow you to buy up to 60% of your income. But keep in mind that this amount is not taxable.
I trust this financial insight has been helpful and I look forward to the next time when I can help you provide the foundation for a lifetime of financial independence.
About John Bearss: John R. Bearss is a Retirement Specialist with the Christian Financial Advisor Network. He has been helping clients and financial professionals understand financial strategies for 24 years.
Disclaimer: John Bearss is a registered representative of and does offer securities through Sicor Securities, Inc. Lifetime Decisions Management, nor it’s representatives provide legal or tax advice. Please consult your CPA or qualified tax advisor before making any decisions. Lifetime Decisions Management, Inc. is not a subsidiary of nor controlled by SICOR Securities, Inc.