Your most valuable asset – It’s not what you think
When I ask the question “What is your most valuable asset?” I get various responses. If we narrow the list to financially related topics, frequently I’ll hear “my home, or my 401k”. Some people think out of the box and answer “my family, or health, or even time.” All of these are great answers.
For many of the high performing sales executives that I work with, their most valuable asset is their ability to keep making money, aka future earnings power. A 40 yr old making $200,000 a year with simply cost of living raises for the next 25 years will earn just under $6.5m before they retire!! $6.5 million dollars!!! And that’s a conservative number since most high performers don’t settle for a simple 2% annual raise.
Anyone under the age of 60 should be looking at how to protect your future earnings with disability insurance.
Here are some things to consider when shopping for disability insurance.
It’s expensive. I’m not going to sugar coat it. It’s expensive for two reasons.
- It’s insuring your most valuable asset.
- It’s commonly needed. Roughly 50% of Americans aged 35 will be disabled for at least a 90 day period before the age of 65.
It’s also confusing. There are terms and conditions that you may not be familiar with, but can make a huge difference and even nullify the benefits completely unless you are careful.
Benefits you want
- Own Occupation. Review the language in the policy. Make sure that the policy is an "Own Occupation" policy. This ensures that you are covered if you are unable to perform your former job duties. If your policy does not have this provision, your coverage may state that because you are able to perform the duties of another job, perhaps those of a significantly lower income threshold, that you are ineligible to receive disability payments.
- Cost of living adjustments (COLA) that are built into the policy – If you don't add this feature to your long term disability policy, the default is that your benefits will not increase with inflation. Imagine if you took out the policy and did not need benefits for 20 years, but then have a coverable event. Due to inflation, expenses would not be anything near what they were when the policy was originally taken out. I recommend nearly everyone strongly consider a COLA rider.
- Elimination period – Think of this as a deductible. You want the longest period of time where you can afford to pay your own expenses before requiring coverage. For example, if you have an emergency fund that will cover six months of expenses, you should have a 180 day elimination period.
Coverage offered through your employer
Most people have disability insurance offered through their employer and think they are all set. I caution people to look over the policy as it often doesn’t do the trick. If the employer is paying for the coverage, then the benefits are fully taxable when paid to the insured.
Also, most employer coverages are any occupation definition. In other words, if you are able to perform ANY work at all, your disability benefits will stop. We described earlier the importance of having own occupation coverage.
Ratings of the insurance company
Similar to the way we all have credit scores that tell lenders whether we can pay back our loans, insurance companies are rated by credit agencies. The three ratings agencies most widely used are A M Best, Moody’s, and Standard & Poor’s (S&P). You want to make sure that the insurance company has an “A” rating. Don’t mess around with anything lower than that.
Boost Your Energy and Performance
Another important way to not only insure, but to boost your performance is to take care of your physical and mental health.
“High performers often think that they can exist in a vacuum, that as long as their business is healthy, they don't need to worry about their physical or mental health," says Nate Palmer, founder of www.n8trainingsystems.com.
“But the truth is that a morning workout will not only improve your health markers long term," Nate adds. "BUT early AM exercise will also give you the energy needed to make the money and create the life that you want. It's inseparable from high performance in every other area of your life."
Disability Insurance as a Sales Professional
Being successful as a sales professional often requires an extraordinary amount of self-confidence and an unusual comfort with taking risks. Don’t fall into the trap of allowing those tendencies to carry over into your personal finances. Protecting and maximizing your most valuable asset should be at the top of your to do list.
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