Protecting Your Biggest Asset- Your Income

May 4, 2009.

Whether you just got drafted into the NFL, are an actor or an entrepreneur, protecting your income should be high on your list of priorities. Life offers many surprises and even a minor injury or illness can lead to temporary disability and derail your plans and your finances.

Disability insurance is generally offered through the workplace, but it is subject to restrictions under Employee Retirement Income Security Act (ERISA). Those restrictions can leave you in the cold if you become disabled and are wrongfully denied your benefits, says Frank N. Darras, the nation's leading disability and long-term care insurance lawyer.

If you are a large or small income producer, protecting your earning ability will give you peace of mind and should be well worth the investment. Two major factors to consider are 1) protecting your lifestyle and 2) protecting your equity.

Lifestyles need not be extravagant or expensive to be protected. Consider the value of your income in everyday life and things you hold dear, like a roof over your family's head, food on the table, clothes on the children and gas in the family car. Losing an income source can be expensive and turn your life upside-down, fast, says Darras.

"Consider that people 35 years or older have a 50% chance of becoming disabled for over 90 days, before turning 65. Throw in the average $722 a month you will receive if you are one of the fortunate few (35%) disabled applicants awarded Social Security Disability Insurance benefits and you see where I am going," says Darras. "Few folks can survive on $722 per month and an individual disability policy is a very good safety net."

Darras suggests:

  • Get individual disability coverage when you're young.
  • Buy an "own occupation" policy that protects you until age 65
  • Beware of the "limitation clauses," 12 months for a mental nervous claim or self reported claims like headaches, chronic fatigue syndrome or fibromyalgia.
  • Buy from a company with a stellar claims paying history
  • Group disability coverage from work does not protect you and it's taxable.
  • Compare features, advantages and benefits of different policies. Get competent advice and determine where your financial risks are the highest. Once you prioritize your risks, purchase an individual policy to protect yourself and your family.

Darras says, "Never buy from a company you don't recognize! Paying really cheap premiums to a company that low balls the market is a destination to Disasterville."