Thanks to a talking duck that shows up as “spokesduck” in commercials some people now have a vague idea about disability insurance.

But as in all types of personal insurance.  It is a real contract.  With many parts.

It’s important to get more acquainted with what you are getting and more importantly what needs to be protected.

For right now I am going to focus on Long Term Disability Coverage.  So that means a plan that kicks in 3/6 months after you are medically disabled.  And if you are a working professional with specialized training for your career (doctor, lawyer, pharmacist, architect the list goes on and on) and you have children, mortgage or a life style that you want to protect you fall into the category of needing long term disability. 

WAIT? WHAT? The duck made it sound like I just get money for all my bills.

Let’s dive to the bottom of the pond so to speak.

First thing you should know if you are a 1099 employee, like a real estate agent or any number of careers that make you an independent contractor the very first thing you need to do  is enroll in the state disability program.  Let’s say you broke a couple bones and couldn’t show houses for a while, or couldn’t cut hair, or …well you get the idea.  The state would then pay you a portion of your salary.  The amazing thing is most of you reading this don’t even know you are entitled to that because you never called to register probably because you didn’t even know it was even an option.  Call 1 800 480-3287 follow the prompts and get the elective coverage kit. This is the state of California hotline. You must be registered for two quarters before you can claim so register now. Not after you need the coverage! . ……GO DO THAT NOW…..I’ll wait.  (The price to enroll is one very inexpensive lunch out per month, fast food, not Chez Fancy Pants)

Ok now what about the rest of you that are W2’d employees.  If you are lucky enough to have a handsome benefit package at work that includes short and long term disability that is fantastic. You are partially covered.  Let me give you an example.  My new client Ms. Mallard, is a lawyer.  She makes $225,000 a year.  Her firm has a long-term disability benefit in her package. She will get 50% of her $18, 750 salary per month which would be $9,375 per month.  Or would she? You see this is an employer bought benefit that means the employer purchased it and they get that write off on their taxes so the employee who is now on disability will be taxed on the benefit amount. Bringing that benefit of $9375 down substantially. So it leaves Ms. Mallard with something near a $70,000 dollar a year income gap.  So that’s where a private policy comes in.  We “wrap” the policy around what you already have and the best part is because you are buying your policy with post tax dollars your benefit should you need it, is tax free. 

That duck didn’t talk about taxes.

Some other factoids you need to know:  You need a policy that covers you in your “Own Occupation” meaning no one can tell you in 3 years but you are “well enough” to go answers phones or sell shoes. Your policy covers you for YOUR own occupation.  If you are unable to do the job your training prepared you for you are not required to work at any other job.

Statistics show that one out of every three people will be disabled at some point in their working lives.

The cost of getting this coverage for professionals is 2 to 3% of your annual income.  When you think about keeping your home and your lifestyle close to what it is currently it truly is something you should consider.

Give us a call at Balanced Financials we will be happy to answer your questions!