About one in eight workers will experience a long-term disability lasting more than five years, according to the most recent study by the Integrated Benefits Institute (IBI). Musculoskeletal disorders, such as injuries and chronic conditions affecting the back, knees, shoulders, hips and spine, accounted for 27% of long-term disability claims in 2020. Neoplasms, including malignant tumors and melanomas, made up 14% of claims, while nervous system disorders represented 7%.
These figures highlight just how common and far-reaching disability risks can be, regardless of age, occupation or health status. Yet often it’s one of the most under-protected, including for high-net-worth professionals, whose earning potential is often their most valuable asset.
While most professionals are covered for long-term (LTD) disability through employer-sponsored plans, these policies leave a significant income gap in the event of a prolonged illness or significant injury that prevents you from working altogether or in your specific field.
Individual disability insurance offers a critical layer of protection, uniquely designed to fill those gaps and safeguard the financial foundation that you have worked so hard to build.
Group Disability Plans Fall Short
Group LTD policies are typically offered to corporate employees, including executives and professionals like physicians and attorneys. They are designed to cover around 60% of pre-disability income, which may sound adequate until you realize that most group plans cap benefits at a fixed monthly amount. For high-income professionals, that cap kicks in long before you ever reach 60%.
Take, for example, a professional earning $250,000 per year. At 60%, you’d expect a benefit of about $12,500 per month. However, most group LTD plans cap benefits at $5,000 to $6,000 per month, which is equivalent to only $60,000 to $72,000 annually. Instead of replacing 60% of income, the actual replacement drops closer to 25% to 30%, leaving a devastating shortfall.
This is the reality most high-net-worth professionals don’t realize until it’s too late. The cap creates a large, hidden gap between what you think your coverage will provide and what it actually delivers. For professionals with ongoing obligations, such as mortgages, business expenses, tuition and retirement savings, the gap can quickly destabilize even the strongest financial plans.
Individual Disability Insurance Helps Close the Gap
This is where individual disability insurance comes in, providing supplemental coverage that works in tandem with group LTD benefits, effectively closing the gap and helping professionals maintain their lifestyle if they are unable to work.
Let’s say a group policy pays out $5,000 a month. An individual policy can be structured to provide an additional $10,000 in monthly benefits, bringing the total coverage closer to the desired 60% to 70% range of pre-disability income. Importantly, this coverage is portable, meaning it stays with the individual even if they change jobs, leave a firm or start their own practice.
Occupation-Specific Policies Are Available
Another key advantage of individual policies is the “own-occupation” definition of disability, which is particularly important for specialized professionals.
For physicians, especially those in surgical specialties, protection is available for their specific field of medicine. If a surgeon can no longer perform surgeries due to a disability but could still teach or consult, he or she would qualify for full benefits under an own-occupation policy.
The best individual policies protect exactly what someone does. An orthopedic surgeon who can’t perform surgery due to a disability would still receive full benefits, even if he or she could do something else within the field.
Attorneys benefit from the same type of nuanced coverage. A trial lawyer, for example, who loses the ability to speak clearly after a stroke, may still be cognitively intact but unable to argue in court. Under a well-written individual policy, the attorney would be considered totally disabled and eligible for full benefits.
Financial Obligations Don’t Pause for Disability
Many high-net-worth professionals carry substantial financial obligations, from student loans to mortgages, business expenses, and private school tuition. For example, physicians often graduate with significant medical school debt that must be repaid regardless of employment status.
Without sufficient disability coverage, a long-term illness or injury could jeopardize not only a professional’s current lifestyle but also their long-term financial goals, such as retirement planning, wealth accumulation, or legacy building.
Understanding the Social Security Myth
A common misconception is that Social Security Disability Insurance (SSDI) will provide adequate income in the event of a long-term disability. In reality, SSDI approval rates are extremely low, with only about 1 in 10 applicants approved. The definition of disability is also stringent, and benefits are minimal, barely making a dent in a high earner’s financial needs.
Protecting Your Future with a Strategic Investment
Individual disability insurance policies generally provide benefits up to age 67, aligning with the typical retirement age. For a 35-year-old who becomes disabled, that could mean over 30 years of income replacement. The ability to lock in rates early is another major advantage.
These policies are medically underwritten, and once approved, the rate is guaranteed for the life of the policy. Buying early, especially during a physician’s residency or early career stages, ensures lower premiums and protects future insurability.
Many policies also offer riders that allow for increased coverage as income rises, without requiring new medical underwriting. For example, young professionals earning $100,000 can buy base coverage now, then add more later when their income reaches $500,000—without new exams or questionnaires.
HWP Partners with Leading Disability Insurers
Professionals across various fields have specialized roles and income levels that demand equally tailored insurance planning. HWP, a leading insurance agency that offers customized solutions for successful individuals and families, represents all of the top-tier disability insurance carriers in this niche market and can provide coverage to fit your profession, financial situation, and long-term goals. With a strong presence in Washington, D.C., Annapolis and Southern Maryland, we offer guidance to protect what matters most. Learn more at hwphillips.com.
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