Personal Disability Insurance
Just suppose that you are a working person and you get disabled and can’t work. There is coverage for you that can supplement your state disability coverage and really protect you. Disability insurance would pay you while you didn’t work. The amount they pay us is usually 65% of your regular pay (they don’t want you to stay on disability coverage forever, so they don’t pay the full amount of your paycheck.) You can select the elimination period (how long until you start getting paid,) the term of payment (long term or short term,) and there are add-ons such as keeping up with the cost of living, partial disability payments, and more. Each of these has an effect on the premium.
There are some other factors such as guaranteed renewable (premium can go up,) and non-cancellable (premium can’t go up nor can the benefits be reduced.) The type of work done and the other parameters above will affect the premium, as will health.
Disability Insurance for Business
Imagine that there are two or three other good friends who are all pretty competent in business, but they decide that a partnership between them all would make for a successful new business. So, they all get together and form a partnership or a corporation and start a business.
Things go along just fine until one of the partners gets sick or becomes disabled. Then the questions arise:
- Who is going to hold up his or her end of the business?
- Is that partner married?
- Wow! Now you are in business with a spouse, and if that spouse is not contributing to the business, he or she is still getting paid and has basically a free ride. Is that fair to the business?
- What if the spouse is liked personally, but not as a business partner?
That could be even worse and could end a successful, ongoing business. Business disability can be structured to assure the remaining partners, corporate shareholders, or managing members that the business will go on, mostly as designed, but without the former partner’s spouse to interfere. That spouse could be bought out and walk away happy and feel well cared for.
A sole proprietor could buy a business disability policy to protect his ongoing overhead if he/she is unable to work the business for a while. This can also be put in place for a key employee, where either the business gets replacement income for the absent employee or the employee gets replacement income while not working, or both. The same types of features and underwriting exist as for individual disability coverage. Chapter Summary/Key Takeaways This type of coverage also requires an agent who specializes. If you need business disability coverage, do find a company that has a large “backroom” with tax lawyers and other specialists.
Umbrellas – More Liability Coverage When You Need It
The term, umbrella, is a metaphor for what the project covers. An umbrella is a type of insurance coverage that adds extra liability coverage on top of the underlying coverage of a group of policies. It adds to liability limits. It is not property coverage. Automobile coverage usually tops out at $500,000 of liability coverage, as does homeowner insurance. If you have lots of assets, you may want to protect yourself with higher limits. That would protect you in the event of a large lawsuit.
For personal insurance policies, it would enhance the limits of your autos, homes, rental properties, motorcycles, jet skis, and other such possessions. It is overarching, and thus, it is called an umbrella. Many celebrities and other wealthy people have $10 million and $20 million or higher limits to protect them. How much value have you amassed by this time in your life? Maybe an umbrella is for you.
Underlying coverage of highest limits may be required, or slightly less than maximum limits may be required for more premium. The form is the following form, so it covers whatever the underlying coverage is. There may be some coverage added to the underlying coverage, in which case, it might have its own deductible, called a “drop down.”
Commercial umbrellas are very similar to personal umbrellas, except that they go over commercial general liability, auto liability, and workers compensation coverages. Some municipalities and very large companies require them if a vendor is going to do business with them, or a contractor is going to do work for them. They may require very high limits.
Excess liability policies are also available, sometimes from the same insurance carrier that provides the underlying policy. The difference is that the coverage only goes over the policy over which it is written, so it is not a true umbrella. It is also a following form, but its character is more limited.