The ice bucket ALS challenge has become a national Facebook phenomenon, and meaningful fun for a great cause! Lou Gehrig’s disease, or Amyotrophic lateral sclerosis (ALS), creates both a debilitating condition for the patient and a potential financial catastrophe for loved ones. If an ALS disability strikes a breadwinner, the family may struggle to maintain financial order from the loss of income. Let’s explore…
First, understand that FinancialFamilies does not sell insurance. As a fee-only financial advisor, FinancialFamilies earns a clearly stated retainer fee in exchange for high quality financial advice. With this approach, there are no contract periods, assets under management (AUM) fees or commissions to create conflicts of interest or to sway insurance advice.
There are numerous debilitating disorders, diseases and conditions that can lead a breadwinner to lose their ability to earn an income. Risk management is an important component of financial responsibility. Proactively managing the financial implications of catastrophes helps to bring continued success home for families.
Many families rely on group disability insurance offered to them through their employer. Occasionally, these policies are sufficient. However, it is foolish to blindly rely on them to cover a loss of income that may result from ALS disability and other tragedies. There are important aspects of disability insurance policies to bear in mind, which are often not fully addressed by group disability plans.
Will benefits begin soon enough, and last long enough? Benefit start times are controlled by the waiting, or elimination, period of disability policies. The longer you can wait for benefits to begin, the cheaper the premiums will become. Benefits can last for a number of years or until a certain age.
What is the definition of disability in the policy? Some policies provide benefits if you are unable to retain employment in your “own occupation”, which means the occupation for which you are trained and gainfully employed prior to disability. Other policies provide benefits only if you are unable to work in “any occupation”. Still other policies initially provide coverage for your own occupation, then provide benefits, in later years, only if you are unfit for employment in any occupation.
Will your policy keep up with the cost of inflation? Some policies provide inflation increases to benefits, both before and after a disability strikes, others do not. If your policy does not account for inflation, it may become difficult to maintain a standard of living as prices for the things you need to purchase increase over time.
What is the amount of coverage? Insurance companies will only allow an individual to purchase so much disability insurance. This is a reasonable way insurance companies manage claim rates. As disability benefits approach income levels, a disability claim becomes too attractive an alternative to employment.
Is the policy paid before or after tax? Generally speaking, if the policy is paid with after-tax dollars, the benefits are received tax-free. If the policy is paid with income that has not yet been taxed, the policy benefits are taxable.
There are other important considerations to make when reviewing disability insurance, including offsets, partial benefits, covered risks, employment classifications, and renewal features. Unlike most other insurance policies, families should consider purchasing as much disability insurance as an insurance company will permit. Periods of disability are hard enough without added financial stress. Ice buckets should all come with reminders to proactively manage financial risks. Bring success home!