The main purpose of business disability insurance is to to replace an employer and employee's income should they be unable to work as a result of either an accident or a sickness. In fact, People tend not to spend a lot of time thinking about the financial devastation that could result from a disabling injury or sickness therefore if disability strikes, the balance between personal earnings and expenses suddenly is upset, and the threat of financial disaster can quickly become a reality.
(Written By Kyle J. Norton)
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Disability Insurance For the Self Employed
As a self-employed professional, your ability to wake up and go to work every day is your most valuable financial asset - your sole source of earning an income and providing for yourself and your family. Among the many benefits of being self-employed, there are also many additional responsibilities. Protecting your income is one of these additional responsibilities. People who are self-employed cannot rely on an employer to provide them this coverage and instead must do so themselves. Prior to purchasing Disability insurance, you should consider some of the important provisions a self-employed individual should include in their Disability policy.
One of the most important provisions of a Disability insurance policy is the definition of total disability, which describes the circumstances in which a person may qualify for benefits. There are three definitions offered by insurance companies, but being self-employed, you want to be considering Own-Occupation Disability only. Own-Occupation Disability pays benefits when you are unable to perform the principal duties of your current occupation. Even better is the True Own-Occupation definition which provides benefits if you are unable to perform the principal duties of your current occupation, even if you decide to work in some other occupation. Depending on your specific duties, it may be more or less important to concentrate on obtaining True Own-Occupation vs. just Own-Occupation coverage. Whichever you decide to go with, Own-Occupation is the better definition as it covers your specific occupational duties.
In addition to a quality definition of total, there are also two optional Policy Riders that every self-employed person should have. The first is Residual Disability, which provides partial benefits for partial disabilities. As you can probably expect, partial disability claims are much more common than total disability claims. Therefore purchasing a policy that does not include Residual disability benefits simply does not make sense. In addition to adding Residual benefits to your policy, you want to make sure that this rider provides partial benefits and a recovery benefit for the full policy benefit period. Depending on your exact duties and even more importantly the structure of your business, the full benefit period option may be more or less important, but regardless, anyone who is self-employed should have Residual benefits included.
Lastly is a rider that can be referred to by many names, one of which is the Future Increase Option. This rider allows you to increase the amount of monthly benefit your policy provides in the future, regardless of any changes in your health. This rider is the only way for self-employed professionals to guarantee their insurability so that they can increase their income protection, as their income increases. Most people who are self-employed do not expect their income to go down or remain level, but instead expect it to continue to increase. For this reason, it is very important to include the Future Increase Option on your Disability Income insurance policy.
Possibly the most important detail that self-employed individuals should know, is that you must be in good health to qualify for Disability insurance. Therefore, if you are healthy now, you should not delay. Purchase a policy that includes the riders previously discussed and you will be able to protect your current income as well as your future income. The biggest risk you run, is not being able to purchase Disability insurance.
If you are self-employed and need assistance with your Disability insurance, contact the Offices of Michael Kortz. Michael has been providing financial and insurance planning services in the San Clemente area for over a decade. Visit his office or call (949) 226-8390. You may visit his insurance website at http://www.tfp8.com
About the author:
Michael Kortz, RFC, RR is a Registered Financial Consultant (RFC) who holds a degree in Economics from the University of California at Irvine. He has been an insurance broker since 1999 and has received the Health Insurance Professional designation from the National Association of Health Underwriters.
Michael offers complimentary insurance consultations for the self employed and can be reached at (949) 226-8390 or visit Self Employed Insurance Programs.
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