How Do I Protect My Income?

Today’s guest post is brought to you by Chris Wimberly, a paid sponsor of DiverseFi.com.  Chris is a longtime physician advocate and brings years of experience working with doctors to navigate the complex web of disability insurance policies.  I have spent many hours worried about how to protect my income if something untoward were to happen, and believe that medical as well as and non medical professionals alike can benefit from his message.

Chris has helped hundreds of physicians and families.  His insurance practice is “independent”, meaning he works for you and not on behalf of any single carrier.  Chris brings a fresh approach to the table, and helps simplify the process of creating a plan.

Why is Everyone Telling Me to “Protect My Income”?

Protecting the things that are important to us seems to be in our DNA.  We purchase home insurance to protect our house from catastrophic floods and fires, and buy auto insurance to protect us in the event of an accident. We obtain health insurance so that we don’t get hit with a million dollar hospital bill. And, we take precautions as simple as encouraging our children to wear helmets when riding their bikes to protect them from injury.  Simply put, when something is valuable to us, we do everything in our power to make certain that it’s insured and/or protected.

So, the question then becomes, is protecting my income as important as insuring my home or car?  Some might argue that your ability to provide a living is in fact your greatest asset. If no cash flow is coming in the door, this likely presents a serious problem, requiring immediate attention.

My Family Experienced This Very Thing.

There was no way we could have anticipated that my dad would suffer from lung cancer in his thirties. He was not a smoker. He was a runner and enjoyed a healthy lifestyle. Because of the cancer, however, he had to have his left lung removed. The recovery process was very lengthy, which left him unable to work, and therefore unable to bring in income.

As a result of a work-related accident, my mom was exposed to asbestos, toxic mold, and sulfur gases. There was no way that she could have known that the floor of the office building where she worked would literally collapse and harmful toxins would permeate the structure due to a ruptured sewer line. It’s not an event that you schedule in your day planner. Inhalers, Prednisone, antibiotics and a plethora of other drugs lined our medicine cabinet for years.

My mother received benefits from Workman’s Compensation, but they were capped and significantly less than her salary. She was left with diminished lung volume, occupational asthma and damaged vocal cords. If you think there was a huge settlement, think again. Workers Comp doesn’t work that way.

Neither my father or mother had an “income protection plan” in place, and to say that these incidents caused financial difficulties in our household would be putting it lightly. It was rough. I‘ve personally and professionally witnessed that if you are the main breadwinner (or an income contributor in any regard), and you become too physically or mentally incapacitated to work, it can be crushing for you and your family.

It’s amazing how many people recognize the importance of life insurance, but fail to see the value of disability insurance even though the chances of an individual becoming disabled during his or her career are much greater than the likelihood of death.

Here are Some Common Rationalizations:

Rationalization #1: “I’m young, healthy and invincible! Get real, a disability isn’t going to happen to me.  Why do I have to protect my income?”

Reality: You actually have a 1 in 4 chance of suffering an illness or injury that keeps you out of work for 90 days or more at some point during your career (according to the “Council for Disability Awareness”). You can hope that you will never be a statistic, but there’s no guarantee. It’s a roll of the dice.

Rationalization #2: “I am covered with a group disability plan through my employer.”

Reality: Group insurance is certainly better than no coverage at all, but it can prove to be very inadequate. There are several important reasons why you might need to supplement group coverage with an individual plan. For example, group plans often have a weak “definition of disability” and very restricting contractual definitions. Here’s a short video regarding “group” insurance to give you a better understanding of why this is so crucial.

Rationalization #3: “I am pretty sure that Worker’s Comp or Social Security would cover me.”

Reality: Most disability situations are the result of an injury or illness that occurred while not on the job.  This means you wouldn’t qualify for Workers Compensation. And if you’re going to count on Social Security disability benefits, get ready for a lengthy and difficult process to get approved. Social Security on average pays less than $1,200 per month in benefit.  This would leave you living right around the poverty level.

With all of that being said, if you earn an income (and, especially if your family is relying on that income), it is clearly worth considering an adequate way of protecting it.  Suffering from an injury or illness doesn’t always have to prove the worse case scenario, if you take the right steps – emergency savings, managing expenses, and a solid income protection plan.

Here are a Couple of Suggestions to Consider:

* If you have “group” disability insurance through your employer, ask HR for a copy of the “disability booklet” and have an experienced insurance agent assess the policy for its strengths and weaknesses. If it’s weak, then please consider a small amount of supplemental coverage to fill in any gaps you have in your group coverage. This is more important than most people realize.

* If you don’t have a group plan, seriously consider purchasing an individual disability insurance policy that will stay with you throughout your career, providing sufficient income protection.  Disability insurance is complex. There are many plan designs and riders to consider, so make sure you are working with a trusted agent who can simplify the process and get you the coverage you need.

For more information, or to request income protection plans, visit The Disability Doc.