Disability Income Insurance

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What is your most valuable asset? If you said your home, car or investments you’d be wrong. Your most valuable asset is your ability to earn income.

Your income guarantees that the bills are paid, college tuitions are provided, your families lifestyle is maintained – that, each and every month, the money is in your checking account to pay the mortgage, auto and other loans, buy clothes and put food on the table.

Here is a simplified rule-of-thumb method to calculate how much you are worth as a “money machine” to your family: simply multiple your present annual income by the number of years until you plan to retire.

Let’s Calculate Your Most Valuable Asset:

  1. Current Annual Income: $
  2. Years Until Planned Retirement:
  3. Your Most Valuable Asset: (Multiply Lines 1 & 2):

Example: If you are 38-years old, plan to retire at at 65 and have a current annual income of $45,000, your Human Life Value is $1,215,000 ($45,000 x 27-years to retirement). Keep in mind that this is your minimum financial value, based on the assumption that you live and remain healthy. It does not factor in (1) inflation or (2) real dollar increases in your income over time. So, your actual value is probably a great deal higher! Still, this amount does give you some idea just how much you are worth to your family.

What if you lost the ability to earn an income?

What would happen to your family if you became disabled and were unable to work? this question is more than just idle speculation. The possibility is real. The risk of disability – as well as the potential cost – is simply to great to ignore.

Example: If you are between the ages of 30 and 40, the probability that you will become disabled for at least 90-days before your 65th birthday is nearly one in five. The odds decrease with age, but only because the years, not the risks, are fewer.

Protecting Your Most Valuable Asset:

What are your options? If you become disabled, there are five possible ways to deal with the money side of your situation.

  1. Tap into savings. But, how long will the funds last? You could use up in a few short months, the assets that took years to accumulate.
  2. Borrow. But, who will lend you the money? Even family and friends can only help so much. This is a potentially short-sighed solution.
  3. Sell Assets. But, if you have the assets to sell, what price will you get for them? Will you sell your home? Your cars?
  4. Count on Social Security. But, will you claim be approved, and, if so, how much will you receive?
  5. Transfer the Risk to an Insurance Company. We recommend option #5. It’s cheaper, safer and smarter in the long run – especially when you look at the dollars and cents.

Here’s why: for the sake of discussion, say you are 25-years old and earn $30,000 a year, or $2,500 a month. After federal, state and Social Security taxes, you actually bring home approximately $2,000 each month. That is your potential loss if you become disabled.

Let’s say it actually happens – you become disabled, and remain unable to work for five years. To maintain your families current lifestyle, you may need to come up with as much as $120,000 (2,000 a month x 60 months)!

If you insure the risk, your out-of-pocket costs are actually miniscule. For the sake of our illustration, say a plan providing $2,000 a month would cost you approximately $2,000 in premiums each year – just under $170 a month. No small bit of change, to be sure. However, that premium guarantees that you and your family will receive $24,000 a year if disability strikes.

What are Some Common Causes of Disability? [click]

And, what if you don’t become disabled? To complain would be like carrying homeowner’s insurance and feeling cheated if your house hasn’t burned down.

Based on this illustration, if you paid premiums for 10-years and then became disabled, you would gain back your premium after 10 months of receiving benefits.

Other advantages of insuring the risk? it removes the uncertainty. When you buy disability insurance, you are buying peace of mind.

Recommendation: Take the steps to protect your most valuable asset by insuring at least part of your income against the danger of disability. we can help you analyze your needs and recommend appropriate solutions through insurance and financial products and concepts


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