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Rob and Diana Brady seemed to have it all. They were high school sweethearts, inseparable from the time they were 18. Rob graduated from the Culinary Academy in St. Helena, and worked his way up to become the executive chef at one of San Francisco’s most popular restaurants. Life’s good. They live in a beautiful home, and Diana has been able to stay home with their two children, 6-year old Arya and 4-year old Leo.


The couple was so excited that the kids were finally old enough to hit the slopes. The family was in day 3 of a week-long vacation to Whistler. The kids were doing great! All was going well, until… you guessed it. Rob went down a run he had no business being on. The fall, they say, was spectacular!

The good news is that Rob had his helmet on, and did not suffer any neurological damage. His left leg was shattered, however. This meant several surgeries, months-long physical therapy, and a complete inability to return to work for at least nine months.

The family has excellent medical coverage, and Rob and Diana did not have to worry about paying their doctor and hospitalization bills. Health insurance doesn’t pay the mortgage, though. The prospects of having no paycheck coming in for several months would be terrifying to anyone!

Fast forward a few months to Rob and Diana’s annual 4th of July party and you might be wondering why Rob is sitting by the pool with a cast on his leg, a glass of wine in his hand, and apparently, not a care in the world? Because…

Rob and Diana are both savvy about their finances and risks. They had done their research, and knew that the risk of disability was not insignificant. They were aware that:

  • Over 1 in 4 of today’s 20 year-olds will become disabled before reaching age 67.
  • Over 39 million Americans, or 12.6% of the population, have disabilities (2014 Disability Status Report).
  • Actuarial studies show that the risk of disability far outweighs the risk of premature death at every age.

The couple also understood that Rob’s profession requires his physical well-being. His bringing home a paycheck depends on his ability to stand at the stove, command a kitchen, and create. They have always maintained a “rainy day” fund of about 6-months of expenses to help through short-term emergencies. They also familiarized themselves with other potential sources of disability coverage, including:

  • Social Security Disability
  • CA State Disability
  • Group Disability Insurance (through employer)
  • Individual Disability Insurance (such as Aflac)
  • Auto Insurance (if disabled from an auto accident)
  • Workers’ Compensation Insurance (if disabled on the job)

Rob was among the fortunate few (only 37% of American workers in private industry have access to short-term disability coverage, and only 29% to long-term coverage) to have group disability coverage through work. That and the benefits provided from the CA state disability plan provided Rob and his family with benefits replacing approximately 60% of Rob’s pre-tax earnings.

Hmm… the couple thought, 60% of pre-tax earnings, and we have to pay taxes on the group disability portion? That won’t get us too far. We’d better up the ante a bit.

The couple sat down with their insurance agent when the kids were little and the house was brand new. They discussed their cash flow needs, and assessed their sources of income should something unexpected happen. They very wisely purchased a private policy that would pay a benefit of approximately $2,500 per month. That, along with the state and employer coverage, would bring their monthly benefit close to Rob’s regular earnings.

Their insurance agent further explained the importance of understanding the policy provisions, including distinctions in how disability is defined and ultimately how benefits are paid. Rob’s occupation is specialized and the standard “off-the-shelf” disability policy wouldn’t respond adequately if something were to happen.

And, alas, the need did arise. Rob is comfortably recovering at home, getting in Diana’s hair, because of their careful planning. Where would you be? Some suggestions:

  • Take the time to identify your disability insurance needs and current assets.
  • Identify and review any existing policies to assess coverage levels and fit. Discuss the findings with your advisor.
  • Identify other sources of income available to you should you find yourself without a paycheck.

The role of insurance is to provide protection against losses that we otherwise cannot afford to sustain. The loss of our human capital is one such loss and discussing your disability coverage with your Advisor could prove beneficial should something occur. Feel free to reach out if you wish to discuss how disability insurance may fit within your complete picture.

Filed under: Insurance

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