What do you consider your most valuable asset?
When I ask most people that question, I usually get some sort of material possession.
My home.
My car.
My wedding ring.
Yes, all of those things are valuable, but the reality is, your most valuable asset is your ability to earn income. Think about it.
What happens if you’re unable to work?
Could you pay your mortgage or rent?
What about your car note?
All of your insurance premiums? Your utility bills?
What about the most basic of needs, groceries?
So what do you do?
Consider investing in disability insurance. Some folks call it paycheck protection. Basically, you are insuring your income in the event you are unable to work due to accident or illness.
Disability as a benefit
Short-term and long-term are great benefits for a business owner to offer their team. Both can be offered an employee-paid basis, or paid for by the company. Some states actually require employers to participate in a state-sponsored, short-term disability plan.
Generally speaking, disability coverage allows employees to insure 60 to 75% of their annual, base pay income. I have heard two schools of thought on how much coverage you need: the MUG method and the DIME method.
MUG stands for mortgage (or rent), utilities and groceries.
DIME standards for debt, income, mortgage and education.
While both methods are great, I would add lifestyle to the calculation and even legacy. Are dance lessons or swim coaches important in your family? And, what do you want to leave behind for your heirs?
Why think about your heirs? God forbid something happens, disability insurance can insulate other assets so you don’t have to dive into your savings or 401K and risk depleting those assets before retirement age. After all, you will still need those funds when you stop working.
Claims
In my career, I’ve had a number of clients file short-term disability claims for everything from maternity leave to cancer treatment, to knee reconstruction, hysterectomies and more.
While the reality is most folks who file a disability claim will be on and off disability within six to eight weeks, these paycheck protection plans give peace of mind about the family’s financial situation before, during and after those times. And, in the event of a more catastrophic situation, where you are unable to work permanently, a long-term disability plan could carry you through to retirement age.
Other types of disability
As a business owner, In addition to being a great benefit for you and the staff, there are a few other types of disability that a business should consider:
Key Person Insurance - This would pay the business to replace key personnel in the event of a disability. For example, if the sole license holder at an HVAC company becomes disabled and is unable to work, the company would have to cease operations.
Business overhead - This pays the business in the event of an owner’s disability to help cover fixed expenses, like rent, payroll, etc.
Have a question about disability coverage? Inbox me. I’m here to help!
