The Risks of A Long Term Disability
Let us first define what a "fee for service professional" truly is. There are thousands of possible occupations that could use this tag, the important part for this article is that you are clearly able to distinguish between a professional who generates income based upon his or her ability to perform a service, and somebody who is going to earn a salary for the year simply by being employed. People who have occupations that result in income only when he or she performs the duties of their occupation are considered fee for service professionals. Physicians only get paid after they have seen patients and treated them, lawyers get paid for working with clients on all sorts of legal matters, realtors get paid only when they sell a home, and consultants get paid for working with their clients. The systemic problem we have is that so many professionals don't realize just how vulnerable their financial worlds are. One long term disability could wipe out all of their savings in a short period of time, and most professionals don't realize that without them going to work their is no further source of income.
Some Professionals Understand
It is not entirely fair to say that all fee for service professionals don't understand how vulnerable they are. While some occupations seem to walk around with blinders on like consultants, salesman, and attorneys, physicians and nurses all understand just how vulnerable they are. There is a reason physicians buy disability insurance more than any other occupation, they see how people become disabled every day. While a computer consultant may think that if they can think and type that they can work, and physician knows that is just not true. Disabilities are most often illness claims, not accident claims. Many professions think of becoming disabled from a car accident or other accident, reality is that most claims come from illnesses like cancer, diabetes, back problems, heart disease, and hundreds of other diseases. Every professional needs to know that a disease does not care what you do for a living, and will most likely disable everybody in the same way, regardless of what you do for a living. I don't know any computer engineers that are still able to generate new business, and perform consulting services while dealing with something like ALS, Parkinsons, or cancer.
What to Look For as a Professional
There are a decent amount of quality disability insurance policies on the market today. Most of the good policies are Non-Cancellable and Guaranteed Renewable, and I believe you should also own a pure own-occupation definition of total disability. The real key, in my honest opinion, is the residual disability benefits offered to you. You need a disability insurance policy that has a very long recovery benefit, and most of the major carriers differ greatly when it comes to the recovery benefit. While many carriers have Non-Can benefits, and a few good one's also offer a pure own-occupation definition of total disability, there are only a couple that have a recovery benefit for the entire benefit period. Most disability insurance companies have to specify their recovery benefit period in the contract. Some will offer 6 months, some will go out to 2 years, but the best have a residual disability benefit that allows for an unlimited recovery benefit.
Ask Yourself One Question
If you were totally disabled for a period of one year, and one day you were miraculously recovered back to work full time, how long would it take you to achieve your pre-disability earnings level? Many fee for service professionals, when faced with this question, realize it would be a matter of rebuilding their entire business again. Clients and patients typically cannot wait for you to recover from your disability, and end up moving on to your competition while you are disabled. It may have taken you a decade to achieve the level of earnings you had before you were disabled, and it may be another decade before you get back to that level again. Many times you end up starting over when recovering from a long term disability, or even worse you may never financially recover. This is the exact reason why fee for service professionals need to have an individual disability insurance policy that has an unlimited recovery benefit. An unlimited recovery benefit will allow this person to receive monthly disability payments every month while they set back to rebuild their business.
Scary Thing About Some Policies
The scary thing about some disability insurance policies is that they require a loss of time or duties in order to pay any residual or partial disability benefits. Make absolutely sure that the disability insurance policy you end up purchasing does not require a loss of time or duties in order to pay a recovery benefit, or residual disability benefit. If the policy requires a loss of time or duties, when you are back to work full time the disability benefit would be over. As we just reviewed, it may be years until you financially recover, so make sure to buy a disability insurance policy that will pay you until you financially recover with an unlimited recovery benefit, not just until you physically recovery.