Luke and Diana are both lawyers with a thriving law practice. They have engaging work in a business they own and the kind of flexibility to raise their two children most working lawyers only dream of.
Luke and Diana came to talk to us about better life insurance. They’d recently purchased a new home, just in time to welcome home baby number two. Although Diana still practiced law, her main focus was raising their two young children. This meant the family relied primarily on Luke’s income for their lifestyle. If Luke wasn’t around, the financial struggle for Diana and the children would be real. Life insurance would ensure this wouldn’t happen.
Luke and Diana are vibrant, active and in their early 40’s. They live a healthy lifestyle and take care of themselves. They’d never been sick with anything more than a cold and weren’t planning on it in the future. They believed they were in control of their health and their family’s wellbeing. They couldn’t image either of them suddenly ill or injured and unable to work. They are not alone in this belief. Most people can’t imagine having a disability. However hard it is to imagine, statistics show that about 30% of working adults will be out of work for 90 days or more during their working life due to a disability.
Your Paycheck is a Valuable Asset
Without a paycheck, how long would you and your family be able to make mortgage payments, buy groceries and continue to pay your bills without feeling the pinch? If you’re like most, it wouldn’t be long. Most people don’t have emergency savings and would start to struggle within a month. Luke and Diana thought they’d be fine because they couldn’t imagine Luke not being able to work.
Luke’s paycheck is their family’s most valuable asset and needs to be protected. Luke expects to work another 20 years, at least. Conservatively, his after-tax income each year is $150,000. Over the next 20 years of working and earning, Luke and his family are expecting $150,000 to continue to flow into the family bank account each year so they can live and enjoy their lifestyle. In simple math terms, that’s $3 million.
If you had a home, a cottage, jewellery or another valuable possession worth $3 million it is very likely you wouldn’t hesitate to insure it. You’re not expecting your house to burn down or your jewellery to be stolen. But, they are valuable possessions and you’d want to protect them from sudden loss.
Think Living Benefits
It can be difficult to think about your paycheck as an asset because it is not tangible. You can’t pick it up or look at it and say, “there it is”. But, your ability to earn your income is an asset, Your income is what pays for your home, your cars, your holidays, your kid’s education and your lifestyle. Without it, you couldn’t pay for all these things.
Luke and Diana knew they wanted life insurance. They knew they wanted to protect their family’s lifestyle if one or both of them weren’t around. They didn’t want to add financial hardship to the heartache of such a loss.
As self-employed professionals, Luke and Diana had to also consider the possibility of a serious accident or illness preventing Luke, in particular, from working and providing for their family. With the advancements of modern medicine, recovery is more likely than death. Luke and Diana refused to consider the possibility and declined disability insurance. Sadly, they are not unique. Most people think illness or injury won’t happen to them. The possibility may seem remote, but reality tells us otherwise.
Then Life Happens
Three years after Luke and Diana had put their life insurance policies in place, Luke suffered a life altering concussion. He had been renovating their home, stood up too quickly and cracked his head on an overhead beam. Many complications resulted from the injury. It meant Luke could not work to full capacity.
Without disability insurance to replace his income, Luke forced himself back to work earlier than he should have for optimum healing. In the months that followed his concussion, his business revenue dropped in half.
Luke and Diana not only experienced a financial setback, they also experienced relationship strain and stress that goes along with financial challenges. It was a very difficult time – financially and emotionally.
Disability Insurance Can Reduce Financial Stress
Now that Luke was back working full time and his concussion was mostly behind him, he .wanted to explore disability insurance options. Being older, insurance premiums are now higher. Having had an injury, Luke would likely have an exclusion on his disability insurance for any related illness or injury due to his concussion. We explored the options for Luke and came up with solutions that would work for him today. They are not as good as they could have been. But, they are as good as they possibly can be. He even added critical illness insurance.
Luke and Diana had invested a lot in their education and their business. In hindsight, they realized they hadn’t protected their investment of Luke’s income as well as they could have and should have. Luke does regret it took a personal injury experience to recognize the wise investment of living benefits like disability insurance.
We get that disability insurance is not the most exciting thing to talk about. In fact, it’s probably a pain to take the time in your demanding schedule to consider your options, decipher the terminology, get answers to your questions, gather the required documents, complete the medicals and then pay the premiums.
However, we also know that you want to be a super spouse to your partner and a super parent to your kids. Having disability insurance can ensure you, your spouse and your children can maintain your lifestyle if the unthinkable occurs. And, you won’t have to scramble and try to figure out how to survive financially while you’re trying to get well.
I wish it hadn’t taken an actual event for me to see the value in having disability and critical illness insurance,” Luke told us. “Reducing my income today by a fraction to cover the premiums is well worth the 100 percent guarantee that income will flow if something happens in the future. Thank you for not saying ‘I told you so’ and for helping us fully protect our lifestyle.”Luke