Disability Insurance: Options for High-Income Professionals

Disability Insurance: Options for High-Income Professionals When it comes to high net worth individuals, there is a grim irony in the way disability takes its toll. Conventional wisdom suggests that low- and middle-income workers are hit hardest when disability strikes, and the large number of bankruptcies among these income tiers that result from disability-related expenses are testament to that devastating reality.

Yet it is the high achiever who has the most to lose if he or she is unable to work fulltime. And while the lower-income individual may be able to subsist on an income stream from employer- and government-provided disability benefits, the high earner’s expenses and needs are much more substantial. In addition, most group plans end payments whenever a disabled worker has recovered sufficiently to take any job.

The answer for many high net worth individuals is disability income insurance; but even here, the available options can at times seem limiting. Private policies often come with a maximum monthly benefit, and will likely cease payments at a certain age.

At the elite end of the carrier spectrum, it is possible to find policies with higher monthly benefits, but such policies are short-term. These so-called “term disability insurance contracts” range in duration from less than a year to five years.

Although a high income earner may find it difficult to acquire a long-term disability income insurance product that will pay 70 percent of lost income, the decisions he or she makes when purchasing a policy can help maximize coverage.

For example, selecting an “own occupation” rider will ensure that the monthly benefit does not decrease when the disabled professional takes a job outside his or her profession. Cost of living adjustment provisions will help guarantee that benefits keep pace with inflation, and “increase in benefit” riders provide the opportunity of later increasing coverage to accommodate income gains.

Partial disability and residual disability riders can keep reduced benefits flowing if the policy holder is only partially disabled or returns to work part-time after a disabling illness or accident (or returns full-time, but at a lower rate of pay). A “waiver of premium” rider allows individuals to stop paying the policy premium at a certain point after the onset of the disability.

Another important consideration is whether the policy is “guaranteed renewable.” Such a provision can help prevent the possibility of losing coverage when advanced age and

deteriorating health make it unlikely the professional will be able to qualify for a new policy.

Finding the right combination of policy provisions can be a daunting task for the high net worth achiever. But a rewarding variety of options do exist to help ensure that income, assets and lifestyles are not casualties of an unexpected injury or illness.

Important information about mutual funds is found in the Fund Facts document. Please read this carefully before investing. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Unit values and investment returns will fluctuate.

Insurance products, including segregated fund policies, are offered through Beyond Business Financial Solutions Inc., and Investment Representative Nathan Garries offers mutual funds and referral arrangements through Quadrus Investment Services Ltd.