SCP – USES FOR SPECIALIZED ULTRA-HIGH-LIMIT DISABILITY INSURANCE
People think of “disability insurance” as insurance that replaces income in the event of accident or sickness. Disability insurance can be an individual policy or a Group LTD policy. But there are many situations of disability financial risk that can’t be covered by traditional disability insurance, and fortunately there are other alternatives!
High Earners Income Replacement Disability Insurance.
Traditional Disability Insurance companies generally offer the most comprehensive policy wording but there is a structural deficiency: Insurance companies have “issue limits” that restrict the amount of disability insurance a person may purchase. Those issue limits will not allow a high-earner to purchase enough Disability Insurance to replace their income and protect their lifestyle. The answer is to “top-up” using Special High-Limit Disability Insurance from a specialized insurance provider.
Case Study: Mr. S is a successful businessman with a wife, three children and an annual income of $300,000. Although he has the maximum monthly disability benefit available through the traditional insures, it only replaces 47% of his income in the event of disability. This would not be enough income to cover his mortgage, living expenses and the private-school tuition for his three children.
Through our High-Limit Disability Insurance provider we can “top-up” his disability insurance to roughly three-quarters of his income.
Disability Insurance for Buyers with Insurability Challenges
As well as financial restrictions placed by traditional Disability Insurance companies, some people are deemed uninsurable because of their age, their employment in a risky occupation, location of their workplace, their medical history, “risky” avocations, or frequent international travel.
In addition to providing large dollar amounts of disability insurance, our specialized High-Limit Disability Insurance sources will provide disability insurance for these “risky” people, and plans can be custom designed for clients from most industries and financial backgrounds.
The intention is not to compete with traditional disability carriers who offer excellent Disability Insurance products, but to supplement coverage where needed, and to offer coverage when other carriers cannot provide enough.
Business Overhead Disability Insurance
When a self-employed person is unable to work due to a disability, his personal finances will not be the only victim. Personal Income Replacement Disability plans will keep a wage earner and his family living comfortably, but what will happen to the business while the owner is unable to work? Companies need cash flow to pay the rent, keep the lights on, fulfill monthly payroll and take care of other business expenses. If a disability keeps the owner or professional from working, his company could be forced to close for a short time, or even permanently. Businesses that close temporarily, even for a few months, often cannot regain their footing. Customers and clients can drift away, and good staff may look at job alternatives. High Limit Business Overhead Disability Insurance will keep a disabled person’s business functioning smoothly until he returns to work.
Case Study: Ms. C. is a partner in a law practice with Ms. D. There are four other lawyers in the firm. Traditional disability insurance companies do not want to offer Business Overhead to the partners because there are other lawyers to “do the work”. But the partners know the firm will suffer if one of them is disabled. A specialty Disability Insurance carrier will issue Business Overhead Disability coverage to the partners, because they understand that the other lawyers are already working at full capacity, and cannot take the overflow if one of the partners is disabled.
We have sources for up to $50,000 per month of Business Overhead Disability insurance, so there is no reason to be underinsured.
If your work is crucial to your company, obtaining a Business Overhead Insurance Plan is highly recommended and responsible. The plan will provide business stability during an unstable time for the company, and help to reassure the company’s clients that despite the hiccup, the company is strong and reliable.
Buy-Sell Disability Insurance
Businesses with more than one owner usually have a buy-out plan should one of the owners die. In the event of an unexpected death that buy/sell plan ensures the stability of the company. While most people plan for an unexpected death, many overlook the possibility of an injury or sickness permanently disabling one of the partners – even though a disability is much more likely! Buy-Sell Disability Insurance is invaluable in this type of situation, and can fund the buyout of a disabled shareholder, or be a down-payment for a purchase.
Case Study: Mr. S. owns half a business with Mr. A. The owners decide, for the good of the company and both families, to write up an agreement that says if a shareholder is disabled, his interest will be purchased by the still-healthy shareholder. The firm has prospered and is now worth $4 million.
In order to make the transaction go smoothly, Mr. S. and Mr. A. are each insured under a Disability Buy-Out policy for $1 million payable in the event of disability. It will not fund the full purchase, but will be a large enough down-payment to enable the transaction to complete.
For a company, the sudden disability of a partner can be more detrimental than his or her death. In the Case Study, a disability buyout plan was in place. Without a buyout, the disabled partner can burden the healthy partner. For example, the disabled shareholder probably wants their salary continued, and probably wants to take money out of the company. The still-working owner probably wants to keep money in the company for expansion or to hire a replacement for the disabled owner. Implementing adequate amounts of Disability Buy-Sell Insurance is a perfect solution to this problem, and an effective way to save the company from financial distress.
Buy-In Disability Insurance
When an individual is invited to become a partner in a professional practice or business, there is usually a period of time, a few months or years, for the buy-in to complete. A disability during the buy-in period could throw a wrench in the plan.
Should the person becoming a partner become disabled during the buy-in period, the deal might not complete due to lack of money. At the same time, the shareholders who have invited the new partner into the firm might have made financial arrangements that depend on the money from the buy-in. Or, very likely shareholders won’t want the disabled person in the firm, but haven’t a way of compensating her for withdrawing. Unfortunately, because the disabled person is not a full partner or shareholder at the company, a traditional Buy Sell Disability Insurance plan will not cover her. A specialized High Limit Disability Buy-In Insurance policy would cover the Buy-In situation either to fund the completion of the buy-in, or to pay-out the disabled person who is part-way into her buy-in. The shareholder agreement would reflect all possibilities.
Case Study: Mr. E. owns a successful manufacturing business. Mr. E. would like to sell his business to his son Mr. E. Jr., who has been working at the business for the last 15 years. The plan is that E. Jr. will buy 10% of the business each year for the next ten years just by reducing his salary 25%. Mr. E. has a wife and other children to consider, and all his financial and estate plans depend upon the completion of the Buy-In by E. Jr.
Traditional Disability Insurance companies do not like the idea of insuring family members in a Buy-In/Buy-Sell situation. Second, since the Buy-In is not complete but is in stages, traditional Disability Insurance carriers will not underwrite the risk.
In order to allow E. Jr to complete the buy-in, even if disabled, we have a source for Buy-In Disability Insurance that will guarantee completion of the buy-in and that the financial obligations stated in the contract will be fulfilled.
Key Person Disability Insurance
Many companies have key people who are essential to the success of the business. Whether these people are valuable because of their expertise, connections, innovativeness or information, losing them (even temporarily) could be detrimental to a company. Key Person Disability Insurance provides crucial benefits to protect the company financially in the event that a key employee can no longer work due to a disability. Key Person coverage provides cash flow to help companies move forward and maintain a profit in the event that a key employee becomes disabled. In this situation, High Limit Disability Insurance is invaluable, because traditional disability companies only offer Key Person coverage in limited amounts.
Case Study: A consulting firm was doing a total remake of a client’s accounting system. The project was to run roughly one year. Two months before completion, the partner coordinating the program was lost from service due to cancer. Despite plans to “backup” at every stage of the project, with both computer protection and intellectual backup, it was discovered that there were some aspects of the project planning process known only to the now-unwell partner. It cost the consulting firm several hundred thousand dollars to cover completion penalties, replacement personnel, and lost productivity with key employees spending time re-doing parts of the project. If Key Person Disability coverage was in place on the partner who became disabled, losses would have been minimized.
Pension Completion Disability Insurance
If disability strikes while one is building a pension plan, the results can be catastrophic. Suddenly, with no income, or living on Disability Insurance proceeds, the disabled person can no longer contribute to her retirement plan. A disability does not just create immediate financial troubles; the future becomes uncertain as well. Pension Completion Disability Insurance will ease these concerns so the disabled person can stop worrying about the stability of her future and focus on the present. Most importantly, if you do become disabled, with proper disability insurance plans in place, you can concentrate on getting healthy again, without letting fears and concerns about your income during retirement affect your judgment about the proper path of treatment and recovery.
Contract Guarantee Disability Insurance
Signing a contract obligates two parties to an agreement. Unforeseen circumstances can inhibit people and companies from carrying out the terms of the contract. One party’s inability to fulfill the terms of the contract could mean the other party takes a huge financial loss and calls in the lawyers.
Needless to say, somebody’s disability could cause non-completion of an obligation. Whether a contract is between a company and employee, business partners, or divorced couples, almost all contractual relationships dependent upon a person’s ability to work can be considered under this disability insurance program. Make sure your contracts are secure and protected against the disability of a participant, with Contract Guarantee Disability Insurance.
Spousal and Family Support Disability Insurance
In today’s world of remarriages and second families and financial obligations to a first family, the disability of an income-earner poses a threat to everybody in the disabled person’s world. For example, often a divorced income-earner will have financial obligations to his ex-spouse and children. Many separation agreements have terms that are so onerous to an income-earner that, if disabled, all of the person’s disability insurance will be going to another household, leaving no way for the disabled person to support themselves. Traditional disability insurance issue limits do not take into consideration this special set of circumstances.
Case Study: Dr. M., age 55, earns $350,000 per year as a Surgeon. He has the maximum amount of disability insurance available from traditional carriers. In the event of disability it nets him roughly 45% of his income. Under the terms of his separation agreement, he is obliged to pay most of that to his former wife for ten years. He has remarried and has two children under age 10, and a second household to run. If he becomes disabled, he will have less than 10% of his income, after separation payments, to clothe and feed his second family and young children.
Special Top-Up Income Replacement Disability Insurance can be found to enable Dr. M. to satisfy his separation agreement and provide for his second family in the event he becomes disabled.
Loan Indemnification Disability Insurance
When a bank lends money to a business, they will often require the borrowers to provide life insurance to cover the outstanding loan amount. This is sensible, however there are significantly more disabilities than deaths. The banks should be asking for disability insurance to cover the payments.
Alternatively, if you are a borrower, because of probabilities, you should be more concerned about the impact of disability than death. If a business owner is disabled, aside from trying to recover their health, there are major concerns for the business. To know that the bank will be satisfied removes what will be one of the greatest areas of concern for a disabled business owner.
Case Study: Ms. G. runs a successful advertising and marketing firm. She employs fifteen people. They are all highly skilled but she is the marketing person, has the client contacts, and co-ordinates and oversees all projects. Because of cash-flow fluctuations (common in her business) and a recent expansion, she is using part of her $600,000 bank line-of-credit. If she becomes disabled, income and cash-flow will be severely impaired, meeting payroll will be a challenge, some staff will take one of the job offers they are constantly receiving, and the bank will be very antsy about the loan.
A High-Limit Loan Indemnification Disability Insurance Plan will satisfy the bank requirements, and give Ms. G. a chance at business survival. Monthly benefit periods from 1 year to 10 years are available and there are also lump sum benefit options.
Severance Agreement Disability Insurance
An interesting problem develops when the termination of an employee involves a severance package and part of that package is the requirement to continue benefits such as Long Term Disability Insurance. Under most Group LTD contracts, the terminated employee cannot be kept on the group LTD plan. Unfortunately, finding traditional individual disability insurance is not an available option since the person is currently unemployed.
Case Study: Mr. P. age 57, an executive of a bank, had in place a severance agreement in the event of a “change in control”. Finding his job to be redundant, the new management terminated Mr. P. Under the severance agreement the continuation benefits included the group LTD plan. When HR contacted their group carrier to arrange for this change, they were advised that they would not be able to provide continuing coverage due to the fact that Mr. P. was no longer on the payroll. The HR department reached out to the traditional disability insurance market and was advised that they too could not help since Mr. P. was currently unemployed.
What would work in this tough situation? Special High-Limit Disability coverage for a terminated employee is available to fulfill a severance agreement! Severance Agreement Disability Insurance will keep the terminated employee and his family safe, as well as keep the company from a major financial loss.
Summary
If you have a disability concern that is not acceptable to the traditional disability insurance companies, don’t assume you’re out of luck. Contact us to see if we can help.