By Lucas Bucl

Wealth protection is an important component of any financial plan.  I believe the most overlooked area of wealth protection for a working person is disability insurance.  Depending on which study read, about 30 percent of working adults will experience a disability for 90+ days before they are age 651.  That is a pretty sobering statistic.

Most individuals assume that they are adequately covered, either by Social Security or their employer’s group insurance plan.  Each of these programs can be a source of income in a disability situation, however the requirements may difficult to meet and the benefits might be inadequate compared to income needs.

Social Security disability has very strict qualifying requirements.  You can find the details on their website here. In short, you must be completely unable to work and your disability must be expected to last at least one year, or result in death.

Many employers provide group insurance coverage that may provide a benefit equal to a percentage of your base salary, such as 60 percent up to certain maximum limits.  If the employer pays the premium for this coverage, any insurance benefit received when you are disabled would be considered taxable income. After paying the income taxes, your income replacement percentage would likely be closer to 40 or 45 percent, depending on your tax rate.  This level of benefit is likely insufficient for most people to meet their needs.  If your paycheck was cut by 55 to 60 percent, would you be able to make ends meet?

Another often overlooked consideration is the need to keep saving in the event of a disability.  Most people think about replacing their current income through insurance.  However, most disability insurance plans stop paying benefits at age 65 or 67.  If you do not have enough retirement savings built up now, you will need to keep saving while you are disabled.  Even if you expect your disability to shorten your lifespan, the healthy spouse of the primary wage earner could suffer if the breadwinner is disabled without adequate coverage to continue saving for retirement.

You can purchase additional disability insurance to help provide the level of income needed to protect against this risk.  We suggest reviewing your disability insurance need as part of your overall financial plan.  This will help make sure you have considered all of the angles to protect one of your most valuable assets – your earning potential.

For help starting the evaluation process or to assess your current situation, schedule a meeting by clicking below, contact Lucas Bucl –, or call (913) 345-1881.

1 Social Security Administration, 2007; Health Insurance of America, 2000
Photo credit: SalFalko / / CC BY-NC