What happens when your paycheck stops?


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Long-term Disability Insurance is designed to protect about 60% of your earned income should an accident or illness prevent you from working. It is an income replacement plan that protects your most valuable asset – your ability to earn a living. In fact, if you think about it, your earning power is the one asset that allows you to have all the others. Consider the following example if you have employer provided coverage:

Ex: Income: $100,000

Disability Income Gross: $60,000

Disability Income Net Taxes: $42,000 approx. (30% taxes)

Would this pay cut have an effect on your lifestyle?

For most of our clients, those who work for the federal government or for a large contracting firm, the employer provides benefits through a group long-term disability contract. It may also provide some short-term disability benefits so that you could receive benefits almost from the first day you are not able to work. However, once you terminate employment, your disability benefits cease.

And what if you are self-employed or work for a small firm that does not provide disability benefit? Ask yourself this: if you were sick or injured and could not work, what source of income would you have to pay your personal and business expenses? Could you afford to keep your business open?Would you be draining resources needed for your retirement?

See how your Employer’s Disability works – Can you live off 42%?

The Real Cost of Disability

Your income is doing a double job – it provides you with the cash you need for basic necessities and luxuries as well as money you can use for saving and investing for your future.

What would happen if you became disabled?

  • You would still need to pay for the basic necessities of life.
  • Retirement plans and children’s or grandchildren’s education funding would need to postponed, if not forgotten altogether.
  • You would have to do without some, perhaps all luxuries, yet you would still be responsible for fixed expenses such as a mortgage, car payments, insurance premiums, and loan or credit card payments.

Securing Disability Insurance for the Small Business Owner

Are you an insurance agent or financial professional who has many business owner clients? Are you looking to get more business clients?

Disability Risk Management may be an area that you have overlooked with businesses, but when understood can be very lucrative to opening other doors.

Let’s look at a Case Study…

One Retailers Story –

Jake Riley owned and operated a small bicycle shop with four employees. At 42 years of age, and as the sole breadwinner for his family, Jake knew that disability protection was important. What he didn’t know was if he could qualify. Jake’s agent checked with Brookfield Insurance Partners (BIP) and learned that self-employed income documentation was simple. Those who want benefits of less than $5,000 monthly must submit one year’s tax return. Those who want benefits of more than $5,000 monthly must submit two year’s tax returns. It sounded easy – but was it?

Jake told his agent that because of all of the expenses and deductions that he claimed each year, his actual income was much higher than what showed on his tax return. While his tax return showed an annual income of $50,000, his lifestyle actually required a gross income of $140,000 or a net monthly income of $8,516. If his protection level was based on tax returns alone, he would be eligible to receive a monthly benefit of $2,910 (Modified Own-Occ policy with a 90-day EP; BP to age 67; Non-can, Residual, COLA and SSIB riders) – leaving him a monthly income gap of $5,606. Yikes!

Fortunately, Jake’s agent called the experts at BIP, who proposed three ways to enhance the DI policy and close the income gap:

Step One

First, BIP increased Jake’s benefit by applying the Earned Income Enhancer to his policy. This allowed him to increase his qualifying income by 20 percent. ($50,000 x 20% = 60,000). So, with the same policy he was now able to get a monthly benefit of $3,350 – $440 more than before.

Step Two

Second, BIP took advantage of the Business Owner Upgrade. This meant that Jake was able to move from occupational class 2A to occupational class 3A, lowering his premium. For the benefit amount of $3,350, Jake’s premium would have been $2,588.70 but with the occupational class upgrade, the premium decreased to $1,663.80 – A simple class change saved him $924.90 (35 percent) per year!

Step Three

BIP offered Jake a Business Overhead Expense (BOE) policy to further bridge the income gap. BOE benefits are based upon expenses – not income. They are especially helpful to business owners whose tax returns do not adequately reflect their income levels due to a high number of deductions. A BOE policy reimburses the business owner for any expense that he/she may have during a period of disability. Typical expenses might include rent, wages, insurance premiums, equipment leases and automobile expenses.

BOE policies have short waiting periods – usually 30 days. Benefit Periods are short – usually 12 months. If the owner learns that he/she is permanently disabled, it affords him/her some time to sell or transition the business and cushions the financial hardship.

Remember, Jake had stated expenses of nearly $90,000 each year, so the BOE policy significantly increased Jake’s disability protection. Plus, the occupational class change that Jake received for the DI policy also applied to the BOE policy, so he again enjoyed a significant savings.

Contact Us Today to Learn how to Grow your DI Business!!