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Smart Advice for When You’re Not Healthy

By Barbara Ballinger, REALTOR® Magazine

Think you won’t need disability insurance before you retire? Unfortunately, the odds that you will are much better than winning the lottery. Nearly one-third of all Americans suffer a serious disability between ages 35 and 65, according to the American Council of Life Insurers in Washington, D.C.

Yet, only a small number of the self-employed buy it. Some say they’re too busy to make the decision; some consider the premiums too pricey; and some believe they already have it in their worker’s compensation. (They don’t. Worker’s comp helps you when you’re at work and not if you slip on an icy patch outside your residence.)

Many financial gurus think you can’t afford notto have it. But if you’re responsible for your income, you won’t have commission dollars flowing in if you’re unable to work for an extended period.

Several books offer healthy advice about disability insurance, as well as health, life, and long-term care insurance. You should weigh the advantages vs. the costs of these insurance options, particularly as life expectancy gets longer. One rule of thumb: You don’t need to buy different insurance policies from a single carrier, but having one person coordinate your benefits so you don’t have overlapping coverage is smart. Following are five books to get you started:

  • Working for Yourself: Law and Taxes for Independent Contractors, Freelancers and Consultants by Stephen Fishman (Nolo Press, 2002). Disability coverage can be tough for the self-employed to secure. Fishman, an attorney, provides a good tip to make the purchase easier: Show an insurer you operate a successful business. Some ways to do that are a list of employees, long-term contracts with clients, a detailed financial forecast statement with expenses and earnings, and good credit references. Another good tip is to carefully find out about an insurer’s financial health (so you get funds if you need them) by checking its solvency through Best’s Insurance Reports, Moody’s Bank and Financial Manual, Standard & Poor’s, or Duff & Phelps. The back of this book includes useful forms and documents. Buy this book from Amazon.com.
  • Hassle-Free Health Coverage: How to Buy the Right Medical Insurance Cheaply and Effectively by The Silver Lake Editors (Silver Lake Publishing, 1999). This is a practical volume in a slim format that can be tucked into your briefcase or taken with you when interviewing insurance agents or brokers. It’s full of information for anyone confused about buying the right insurance, in part because of the many changes in health-care delivery, the complicated jargon, and the great number of acronyms. Although its focus isn’t the self-employed who buy insurance on their own, the book touches on this subject and provides enough background information to help a real estate practitioner make more informed decisions. Among its strongest suits is the chapter on key terms, acronyms, and definitions, such as UCR (usual, customary, and reasonable fees paid for specific medical treatments) or EP (the elimination period or time, usually expressed in days or months, during which benefits aren’t paid). It also points out key features to consider when buying insurance. Example: the percentage of income provided by a policy after the EP usually is only 60 percent to 70 percent. Buy this book from Amazon.com.
  • Insurance for Dummies by Jack Hungelmann (For Dummies, 2001). Being disabled is difficult enough without having the added financial drain and heartache of changing your lifestyle because you didn’t have coverage to protect your monthly expenses, writes author Hungelmann, a certified financial planner and claims adjuster for more than 25 years. Hungelmann is a big advocate of avoiding risks, and writes, “Don’t risk more than you can afford to lose.” He strongly advocates disability coverage both for employees and the self-employed. Among the key points to consider when purchasing a policy are coverage for both incomes if you’re part of a two-career family and need both paychecks to get by; enough monthly insurance to pay your essential bills but not so much that you cover expenses that you won’t need when you’re not working; as long an elimination period as you can afford to pare the monthly premium; and a policy from a financially stable company since a number of carriers have shuttered in recent years. Buy this book from Amazon.com.
  • The Complete Idiot’s Guide to Buying Insurance and Annuities by Brian H. Breuel (Alpha Books, 1996). Bruel, an attorney with 30-plus years experience in the insurance industry, understands this topic well and devotes a chapter to individual disability policies and another to business disability insurance. Breuel is good at addressing features you want and sometimes may have a tough time securing, as well as some features you may not want. Example: Many insurers have experienced heavy claims in recent years due to a policy feature that’s very appealing to the insured but expensive for the insurers to offer. It’s the ability of the insured to renew yearly at the same guaranteed premium if they have a noncancelable policy. As a result, Breuel writes that this feature has become more difficult—and more expensive—to find and buy. He also suggests opting for own-occupation coverage until age 65, if you can afford it since it defines your disability as an inability to perform the major duties of your occupation, not just any job. If you can’t afford that feature, consider a policy that gives you as many years as you can pay for, he writes. Breuel also covers business disability insurance, which is useful for brokers who need insurance to pay their business bills to keep them afloat if they become seriously ill or have a major accident. To buy it, you’ll have to itemize your business overhead expenses (BOE), such as rent, employee wages, taxes, utilities, insurance premiums, supplies, subscriptions, and professional fees. The book also has an excellent glossary. Buy this book from Amazon.com.
  • Personal Finance for Dummies by Eric Tyson (John Wiley & Sons, 2003). Formerly a financial planner and now a full-time author, Tyson is, like many real estate practitioners, an entrepreneur dependent on himself for his income. In a chapter titled, “Protecting What You’ve Got,” he describes the importance of disability insurance. He writes, “Being without disability insurance is a risky proposition, especially if, like most working people, you need your employment income to live on.” His biggest selling point is that people under age 45 suffer more than a third of all disabilities, and most of these disabilities could not have been predicted. He also adds an acronym to our expanding vocabulary: COLAs, or cost-of-living adjustments, which, when included in a policy, automatically increase your benefit payment by a set percentage or according to changes in the inflation rate. One good caveat: If you purchase disability insurance through a local agent, be careful. Some may try to load your policy with so many extra bells and whistles that it’ll pump up your premium, and up their commission, too, he writes. Tyson also offers two reasons you may not need this insurance: if your spouse earns a large enough income so you can do without yours or if you’ve accumulated enough savings for your future years without working. Buy this book from Amazon.com.

At the end of the day, the biggest incentive to buy disability insurance may be many experts’ belief that not doing so is equivalent to a “living death” because you’ll be unable to cover many essential expenses if you are unable to work for an extended period of time.

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This post was contributed exclusively for REALTOR® Magazine.

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