Imagine showing up at court without properly preparing your case.
Or, arriving at a client meeting without first thoroughly researching their situation.
For a lawyer, the mere thought of being poorly prepared at a crucial moment is enough to send shivers up one's spine.
No matter how well you prepare your cases, there’s an all-too-common scenario that you may not have anticipated fully and warrants questioning...
Are you ready to be disabled?
Have you prepared for a disabling event with sufficient insurance to protect your income?
What would happen to you, your family, your clients, your firm if you became disabled?
Perhaps you believe that you’re fully covered by a group policy your firm has purchased. While group disability insurance is often relatively inexpensive and easy to administer, it can also fall short just when you need it most—leaving you in for some unpleasant surprises when it’s too late to correct the situation.
And, disability is far more common than most professionals believe. Even if you are young and careful, a disabling event can occur from an accident, an injury, or a lengthy illness. In a Consumer Disability Awareness Survey, only 1% of respondents felt they had a chance of becoming disabled during their working years. But, according to the Social Security Administration, almost one-third of Americans entering the workforce today will become disabled before they retire.
The right disability insurance (DI) policy can help you keep your household going, even if you suffer a long-term disability. Before you go shopping for a DI policy, you need to know what features to look for—and the language the insurance industry uses to describe them. The following terms describe high-quality policies, and are what you should look for to get coverage you can count on:
To avoid the possibility of losing your coverage just when you need it most, choose a policy that’s non-cancellable and guaranteed renewable to age 65—with premiums also guaranteed until age 65. With group or association group coverage, you run the risk of being dropped and left unprotected at a time in your life when, due to your age or to a change in your health, it would be very difficult to qualify for coverage from another provider.
Conditionally Renewable For Life
Although premiums may increase after age 65, your policy should be renewable for life, as long as you are at work full time.
At the core of any disability income policy is its definition of what constitutes being “totally disabled” and eligible for benefits. Though present in every carrier’s policy, it does not always mean the same thing. For example, some policies pay benefits if you are unable to perform the duties of your own occupation, even if you are able to work successfully in another occupation, while others pay only if you cannot work at all.
A policy rider that provides protection against the income loss you may suffer as a result of partial (residual) disability—even if you have never suffered a period of total disability. This kind of residual coverage is not available with most group plans.
Future Increase Option
If you're at a point in your career where your peak income years are ahead of you, consider adding the Future Increase Option (FIO). This rider that will allow you to purchase more disability insurance in the future without having to qualify medically. All that is required is proof of income that justify the increase.
Cost of Living Adjustments (COLA)
A cost of living adjustment rider is necessary for those early in their career. Without this rider, during a disability you'll experience a decreasing style of living as your dollars are worth less due to inflation.
For Law Firm Owners
There are additional terms specific to protecting your business, as well as yourself. If you own a firm, you must also protect the source of your income: the firm you worked so hard to establish and grow. Special policies offer your office protection while you recover from a disability.
Overhead Expense (OE)
This helps meet the expenses of running the office while you are disabled. Benefits reimburse your practice for expenses such as rent for your office, electricity, heat, telephone and utilities, as well as interest on business debts and lease payments on furniture and equipment.
Overhead expense insurance, specifically designed for professionals, pays some additional costs not included in most overhead expense policies, such as the salaries of employees who are not members of your profession. For example, the salaries of the receptionist and staff would be covered in many policies, but not the salary of your law partners or any junior attorneys. High-quality, professional overhead policies will then cover at least part of the salary of a professional temporary replacement for you, such as a lawyer retained to fill in during your total disability.
Disability Buy-Out (DBO)
Lawyers who are partners in a group should consider a DBO policy. In much the same way that life insurance benefits can be set aside to fund a buy-out by the remaining partner (or partners) if one partner dies, DBO is designed to fund the healthy partners’ purchase of the disabled partner’s share of the business. With the proper agreement in place before disability occurs, hard feelings and the conflicts of interest that result from a partner’s disability can be avoided.
Furthermore, in combination with the disabled partner’s individual Disability Insurance coverage and OE, a DBO policy can allow the business to continue to generate an income for the healthy partner, while the disabled partner is supported by the benefits from his or her individual DI policy. Any continuing share of the business expenses is reimbursed by the disabled partner’s OE policy.
Take the time to consider upgrading your DI coverage today. You know how valuable it is to be fully prepared—in all areas of life. Having the right DI coverage could be vitally important to your future economic well-being by protecting one of your most valuable assets: the ability to earn an income by practicing law.
In the case of DI protection, as in your legal work, a little extra planning and research in advance could prove invaluable at a later date. The truth is, successful professionals often need far more complete DI coverage than is provided through their firm’s group policy or through association coverage.
How does your coverage stack up? Contact Dira Group for a free consultation and audit of your existing policies. We'll help you compare your present coverage to an individual own-occupation policy for professionals, tailored to suit your needs.