K—Disability – The Living Death

No estate or financial plan can be considered complete unless there has been an evaluation of the risks of disability.Planning to liveis as important asplanning to die, and the risk is greater.

Before disability, most people are able to acquire savings to the extent income exceeds expenses. However,after disabilitycaused by a sickness or injury, income willfalland expenses willrise.

WITHOUT PLANNING,the expenses of a disability can quickly exhaust the family’s savings and create substantial debt. This is true despite the availability of Social Security after six months of continuous and total disability. For most people these payments will rarely fill the gap created between falling income and increasing expenses. When available, Social Security disability payments to a disabled wage earner with children will be substantially more than those to a disabled wage earner without children. The fact that a disabled wage earner is married – and often responsible for the financial needs of a spouse – does not result in an increase in Social Security payments.

Attempting to reduce expenses by selling personal possessions, a car, or even the family home, is unlikely to eliminate the substantial debt which is created by a long-term disability, which is often referred to as “the living death.”

WITH PLANNING,the cornerstone of any disability plan isdisability insurance. Just as life insurance protects a family in case of the insured’s death, disability income insurance protectsboththe insured and his family in case of the insured’s disability. In addition, before disability strikes, the purchase of a comprehensivemajor medical expense planoffers one of the most effective ways of paying the major expenses of many disabilities. Awaiver of premium rideron existing or new life insurance policies will provide for payment of premiums after a stated period of disability.

Disability, although a common reason for a business owner to leave a business, is often ignored or not addressed when funding a buy-sell agreement. Planning for disability can be as important as planning for death when advising a client on business succession and buy-sell matters.

Today, many life insurance contracts can be purchased with riders that also protect against long-term care events or chronic illness. While these hybrid life products are not disability insurance they can provide a lower cost alternative that can protect against some of the same risks.