How much do you need? And what’s a waiting period? We’re going to break it down and help you navigate the complexities of Long-term Disability Insurance and what you should look for in a policy.
You’re probably thinking to yourself, “I’m young and healthy! I don’t need to worry about having coverage if I fall ill. I have time to handle that later.”
Are we right?
Well, how prepared would you be if you were to stop working right now? You may have some savings, but it may not be enough to cover all of your medical expenses, debts and monthly bills for an extended period of time.
The unfortunate reality is that life can change in a moment. It isn’t something we love to think about, but it’s important to be ready for the unexpected.
This is where Long-term Disability Insurance (aka LTD) comes in.
Long-term Disability Insurance is a type of coverage that provides financial protection if you are unable to work due to an illness or injury. Its purpose is to replace a portion of your income, typically between 60% and 70%, for an extended period, which can range from a few months to years. By securing appropriate coverage, you can safeguard your financial well-being and ensure that you and your family are taken care of should the unexpected occur.
But how much do you need? And what’s a waiting period? We’re going to break it down and help you navigate the complexities of LTD and what you should look for in a policy.
The importance of Long-term Disability Insurance for CPAs
Approximately one in four individuals will experience a disability before reaching retirement age. Without adequate long-term disability coverage, a prolonged absence from work due to an illness or injury could quickly deplete your savings and jeopardize your financial stability. This, in turn, could lead to significant stress and hardship for you and your loved ones. For self-employed CPAs and firm owners, the impact could be even greater, if there’s no one else to service your clients.
By securing Long-term Disability Insurance, you can mitigate the financial impact of a disability and maintain a steady stream of income, allowing you to focus on recovery and rehabilitation without the added burden of financial worries.
How to choose the right LTD coverage
Selecting the right LTD coverage can be daunting, as there are a number of factors we recommend reviewing in order to find the policy that’s best for you and your family’s needs.
The key elements to evaluate when choosing a policy
With a Term Life Insurance policy, beneficiaries have the freedom to utilize the death benefit in a number of ways. Your beneficiaries can decide if they wish to make mortgage payments, settle outstanding debts, or manage day-to-day living expenses.
- Coverage amount: How much coverage do I need? This is the question most often asked of our Advisors. This is a major part of your financial planning and should be discussed with your Financial Planner. If you didn’t have your income how much do you need to meet your basic requirements? How much savings do you have? A typical rule of thumb is two-thirds of your income.
- Term period: Consider the duration of coverage you require. Some policies offer benefits until a specific age, while others have a fixed benefit period.
- Waiting or Elimination period: This is the waiting period before benefits begin, typically ranging from 30 days to a year. A longer elimination period can lower premiums but may require more substantial savings to cover the initial period of disability. How long can you wait until you receive income support? This is often determined by other sources of income such as savings.
- Definition of disability and own occupation: Review the policy’s definition of ‘disability,’ as it can vary significantly. Some policies define disability based on your ability to perform your own occupation (like ours), while others will end coverage if you can perform any occupation after a specific period of time. Some policies also include partial disability (also like ours) for instances where you are still able to work in some regard, but not at the full-time level you previously maintained.
- Exclusions and limitations: Understand the policy’s exclusions and limitations, including pre-existing conditions and certain high-risk occupations or activities.
- Portability: If you plan to change jobs or become self-employed, consider a policy that is portable and can move with you, ensuring continuous coverage.
By carefully evaluating these factors and consulting with a Licensed Advisor, you can select a Long-term Disability plan that aligns with your unique needs and circumstances.
LTD Insurance for self-employed CPAs
As a self-employed CPA, securing Long-term Disability Insurance is particularly crucial, as you don’t have access to employer-sponsored group plans and rely solely on your ability to work to generate income.
Let’s explore some of the critical elements to consider when you’re self-employed and looking for a Long-term Disability policy that’s right for you!
Key Considerations for Self-Employed Accountants
- Definition of income: When calculating how much coverage you need, it’s also important to review the policy’s definition of income. At CPAIPW, because we’re designed for CPAs, we take into account all sources of your earnings, not just your “salary.” This is often an important differentiator for CPAs or business owners.
- Definition of Disability and Own Occupation: We mentioned it above, but it’s worth repeating—often, policies only cover your own occupation for a limited period, and then they require you to be re-trained for any job.
CPAIPW’s LTD insurance policy covers Own Occupation for life.
- Office Overhead Insurance: Office Overhead Insurance is a monthly payment for your office expenses in the event of a disability. If you are a sole proprietor or firm partner, this is definitely recommended in addition to LTD coverage.
- Contact an Advisor: Unlike the other guys, our team of expert Advisors doesn’t work on commission. What does this mean for you? You can contact one of our team members who specializes in disability insurance for self-employed professionals for help! They can help you navigate the complexities and find the best coverage options.
By taking a proactive approach and securing appropriate Long-term Disability Insurance, self-employed CPAs can protect their income and financial well-being, ensuring that they can continue to support themselves and their families, even in the face of a debilitating illness or injury.
We know we all don’t like to think about it, but a disability can strike anyone at any time, and if/when it does, the financial impact can be significant. By taking proactive steps to secure Long-term Disability Insurance, we can mitigate these risks and ensure that our financial futures remain secure, even in the face of adversity. Explore our coverage options today and secure the protection you and your loved ones deserve.