Professional Disability Insurance
What It Is
So-called professional disability income insurance can address a combination of business and personal needs since the professional person's work is the source of income that pays for both business and personal expenses. For insurance purposes, professional DI policies are those written for people in certain occupations that generate incomes over 0,000 annually. Insurers write professional policies for individuals who need income replacement in the range of ,000 to ,000 per month. Since not every insurance company is willing to provide monthly benefits in these amounts, you will want to locate those that do in order to serve this market.
Income, however, is not the only characteristic that defines this group. Eligibility is generally restricted to professionals who are independent and self-employed, but highly compensated executive employees might also be considered.
Aside from the large dollar benefits involved, professional DI policies operate essentially like any other individual policy. As indicated in an earlier chapter, professionals are eligible for the most liberal benefits of any occupational group. Chapter Eight of this text discusses the various occupational classes more fully. Because of the high incomes involved, one of the major differences between writing professional DI policies and others is that social insurance benefits are not large enough in comparison to actual earnings to interfere with the income replacement calculations and cause over insurance problems.
The Key to the Professional's Livelihood
Reading the list of typical professional occupations above, you can see that these are people who provide vital services for society and who are frequently self-employed. Performing these services is the key to the professional person's livelihood. The inability to earn income by performing these services affects not only personal finances, but also the very life of the business itself since it is those services that keep the business operating.
Consider, for example, a self-employed physician, operating without partners and employing a small staff. If this individual is unable to work, first of all, no income is generated to pay for personal expenses. Second, no income is generated to continue the medical practice by paying ongoing business expenses, including a substitute physician to see the disabled doctor's patients. If a medical practice shuts down temporarily, patients must look elsewhere for services and there's no guarantee they will return even if the disabled physician recovers. The physician is likely to suffer a double loss: current loss of income and loss of the business he or she might have spent years building. There is no substitute for disability insurance to overcome these problems. Later you'll also learn about some specialized disability policies that address ways to keep a business intact during the disability of someone whose active working presence is key to the business.