Monday, July 27, 2009

NEVER cancel your individual disability insurance policy

In the 15 years that I have been in business, I have yet to hear a logical reason from someone who wanted to cancel their individual disability insurance policy. The fact is there isn't any. A comprehensive individual disability insurance policy is the foundation to your whole financial portfolio. Without this policy, you and your family are subject to financial and personal catastrophe.

It really is that simple.

If you have any doubts, I suggest you read some common misconceptions that people have when it comes to disability insurance policy's and the real facts that follow. Additionally, I included a recent case study which happened to a client of mine. After reading his story, I think you will agree with me, "Never cancel your individual disability insurance policy.

Common Misconceptions vs. the Real Facts

"I went to work for a group, hospital or employer that offers long term disability insurance coverage, I do not need my individual plan anymore"

On the surface, this appears to be a very good reason to discontinue an individual disability insurance policy. The real fact is your individual disability insurance policy with own occupation benefit will pay you benefits if you become disabled, even if you are at work in another occupation. This is not the case with most group/hospital/employer long term disability insurance plans. The determining factor of whether you get paid a benefit or not in a disability insurance policy is the policy definition of "total disability." The link below explains this in greater detail.

"I do not feel I need my coverage anymore because it is unlikely that I will get injured, sick or disabled"

Nobody thinks they are going to get injured or sick and unable to return to work. Yet, as a physician, you work in a hospital and/or medical clinic all day treating injured and sick people. The real fact is the likelihood of YOU getting disabled in your lifetime is very high. The link below explains this in greater detail.

"I cannot afford to pay for my coverage anymore, it is too expensive"

Right now is a tough economic time for many people and I would not for one minute diminish this point. However, you must prioritize what is required and what is not when doing a monthly budget. The real fact is disability insurance is not expensive as there is nothing else you can obtain that will replace your income if you cannot work because of an injury or sickness.

"I was told by the human resource department and from fellow workers that my new job benefits cover everything including long term disability insurance. Since all disability insurance plans are the same why should I pay for my own"

When I hear this statement, I just cringe because there is so much misinformation on this topic. The real fact is that not all disability insurance plans are the same, as you found out by reading the link that was posted above a few questions ago. You pay more for a comprehensive individual disability insurance plan because it protects you and does not have the many limitations of group plans.

Do you think an insurance company that underwrites a hospital, association or group disability insurance plan and requires no health examination to obtain coverage is as comprehensive as an individual policy? The insurance company does not know your health and they are going to protect you for several million dollars of future income if you get injured or sick? The insurance companies would go out of business if this is how they operated.

"My parents/family would take care of me if I could not work"

Consider yourself very lucky if this is the case, especially in light of the economy today. Many households have lost considerable assets in their retirement plans and home values. The real fact is you are responsible for your own finances, so why would you unnecessarily place such an overwhelming burden on your family when you can easily protect millions of dollars of your future income with an affordable individual disability policy?


Here is a real life story that happened recently to one of my disability insurance policy owners. His individual disability insurance policy has the comprehensive own occupation, non-cancellable and guaranteed renewable, residual disability and cost of living benefits.


Over the years my client changed employers from time to time, yet he always kept his individual disability insurance policy that he purchased through me. Some employers offered him group disability insurance coverage, but it was not comprehensive like the individual disability insurance plan that he currently had. Although he made a six figure income for many years, there were times when he was financially strapped and thought about discontinuing his coverage. We spoke about this matter on a couple of occasions, and after careful consideration, he always concluded that maintaining his individual disability insurance policy was the right choice.

He kept himself in great shape by frequenting the gym. Happily married with 2 children, his level of income allowed his wife to stay at home with the kids. One night over dinner, he and his wife decided they should purchase a life insurance policy on him to protect the family. When he took his health exams for his life insurance application, they found out that he had acquired hepatitis and was subsequently denied life insurance coverage. Fortunately, his individual disability insurance coverage remained in effect because he had purchased the policy years before this newly diagnosed medical condition.

For the next several years he continued to work full time.


The faltering economy has effected people in every business sector in so many ways and this includes my client. He has been unemployed for over a year and recently exhausted his COBRA health insurance coverage. By law he was now eligible to get an individual health insurance plan for him and his family. One problem, he ran out of money. He had to go on Medicaid and move in with other family members.

On top of everything else, his hepatitis took a turn for the worse, and he needed to go on medication immediately. He now had to worry about how he was going to survive and provide for his wife and 2 children. Food, shelter, clothing, all the basics we take for granted, were suddenly in danger of being taken away from him.

Still, he had kept his disability insurance policy in force and scraped up enough money each and every month to pay his premium. At my clients last office visit, his physician informed him he was totally disabled and could not work anymore. Totally distraught, he walked out of the doctor's office not knowing what to do. Then he remembered he had a big safety net that was going to protect he and his family from financial ruin...his individual disability insurance policy.

He immediately filed a disability insurance claim. The policy's' tax free monthly benefits will now pay all his bills and allow his family to live in a nice home, eat well, and allow his kids to go to a good school. He told me that without that comprehensive individual disability insurance policy, he and his family would have been in the streets with nowhere to turn.

Thursday, July 2, 2009

How long do you need Life Insurance?

You would think the answer to this question would be straight forward. One might simply conclude, a life insurance policy should be in force at the time of the insured's death, so as to pay a tax free benefit to the beneficiary(s). For many years, this was the forgone conclusion.

However, the manner in which the consumer purchases life insurance coverage today is ever changing. I find that many people simply want to have coverage for a certain period of time. Common responses are, until my children get to college, until my mortgage is paid off, or until I retire. However, this line of reasoning has flaws.

In the link below, I found an insightful article that answers this question no matter what a person's age or situation is.