Let’s say you’re a professional football player and you get injured. You won’t be able to compete at a high level, but you can do other things and have a successful career.
Salary gap: Probably $75,000 versus about $1 million a year. In addition, you will be ineligible for disability insurance because there are other things you can do to earn a living. Notably, he has had a short NFL player career, averaging about three seasons. Injuries and tough competition take their toll. Buffalo his Bills’ Dumar Hamlin suffered a high-profile injury last week.
The same is true for high-paying jobs that require specialized skills, such as movie action heroes, CEOs, surgeons, and dentists.
Jen Grant, a financial adviser at Perryman Financial Advisory in Dallas, has what she calls “my profession” disability insurance to cover his salary while he recovers from injuries and finds a new path. I had a dentist client who
“He was very grateful that he was able to pivot and build a new career as a teacher and consultant while receiving disability benefits,” says Grant.
Although 40% of employers offer group insurance, only 20% of workers have some form of disability insurance, according to LIMRA, a life insurance industry association. If the average he’s 20, there’s a 25% chance he’ll need it at some point before he retires.
“My Occupational” disability insurance is not the standard that comes with employer-sponsored insurance. It’s like putting a checkmark on an open registration and quickly forgetting about it. Most insurance only covers “all occupations” at 60% of your salary, and if you take another type of job, it will not cover you. Because of the extra steps and costs involved in seeking out the “My Occupation” policy, few people, even those at high risk, have this extended coverage.
“If an injury or illness might prevent me from performing the substantive duties of my profession, but would not prevent me from practicing my profession, I would want to have a policy for my profession. says Loretta Waters, vice president of media relations for the Insurance Information Institute.
cost
Special high-income earners, such as football players and actors, often purchase standard insurance and then turn to specialized insurers to add additional coverage.
“It’s a very niche market,” says Frank Zuccarello, partner at Exceptional Risk Advisors based in Mahwah, New Jersey. “We basically educate people through their business managers, agents or financial advisors about the need for disability insurance and make sure they live like they do at home.”
Policies are tailored to each individual based on income and risk.
“If you have a football player on a $20 million three-year contract, you try to come up with a policy that covers the taxable amount in case that player becomes disabled and won’t sign future contracts,” said Zuccarello. say.
Jeremy Renner’s recent snowplow accident is one example of a situation that can befall an entertainer. Zuccarello’s Entertainment Several of his clients had voice problems and were unable to perform. Some have had to stop working because of cancer treatment. One fell and broke his hip. Mental health and substance abuse are typically not covered as targeted hazards, Zuccarello said.
We know that costs are typically less than 1% of revenue, so for $1 million, that could be $6,000 or $7,000 a year, adds Zuccarello. Entertainers usually have a 90-day exclusion period during which they must pay all costs until the policy kicks in, whereas for athletes he has a year or so. Benefits can last for years, depending on the person’s age and willingness to pay.
For ordinary occupations, costs vary greatly depending on the job involved, age, location and gender. Jobs that involve manual dexterity, such as medical professionals, are particularly at risk. And “women pay higher premiums than men, but everything else is the same. It’s the opposite of life insurance,” said his manager of brokerage sales at The DI Center in Allen, Texas. says Jim Coyle.
Coyle estimates that a 40-year-old female architect earning $200,000 would pay $390 a month for a “do it your job, don’t work anywhere else” policy that brings in $9,700 a month in profits. but the man will pay $270. On the other hand, dentists of the same age and salary pay $650 for women and $450 for men.
A 50-year-old lawyer earning $500,000 can earn $18,000 a month, and is expected to pay $790 a month for women and $660 for men.
“Dentists slouch, lean, and work at difficult angles. They have a high percentage of disabled people and they seem to have a lot of problems with their backs and necks,” says Coyle. says. Architects and lawyers, on the other hand, are less risky because they spend more time at their desks.
Now, as a note
When Frank Summers, 53, started his career, he had a health problem that kept him out of work for a year. When the doctor told him to go back to a part-time only job because the bills were piling up, he didn’t listen and he ended up getting injured again and became disabled again. owed about $30,000 and paid it off over the years.
Summers, now a financial adviser based in Charlotte, North Carolina, shared the story with his client when he was trying to research his insurance coverage and explain to his client about the need for self-employment coverage. I’m here. does he have this for himself?
“Oh yeah, are you kidding me? Every month when that bill comes in, I write a check and ship it right back to my mailbox,” he says.
Summers actually covered this risk for quite some time, he says, and only pays about $700 a year because he had the insurance for so long. He believes this type of compensation should be sought not only by high-income professionals, but by anyone who relies on their salary for living expenses.
“It’s a relatively small addition to the cost of overall coverage. But the more specialized it is, the more important it becomes,” he adds.
Some clients are reluctant to think about disability at all and don’t like the pitch, so Summers’ most compelling argument is to send them back to their employers to find out what the included disability benefits actually cover. When you find out what you can get without specifying “my profession,” it often means that you are faced with many caveats and benefits limitations, which are usually , sign up for additional coverage.
“A lot of it is just understanding,” Summers says.
Have questions about how investing works, how it fits into your overall financial plan, or strategies to help you get the most out of your money? Contact us at beth.pinsker@marketwatch.com.
