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Value in private disability insurance for young professionals

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If you work and rely on your paycheck, which is almost everyone, you need private/individual disability insurance.

For every 17 working people, one is disabled. People are 240 times more likely to incur a disabling injury than suffer a fatal injury, which should bring home the need for private/individual disability insurance.

Many students or recent graduates probably are unaware that many insurance companies offer a new professionals program for disability insurance.

Many employers may offer group benefits of only up to 60 percent of your base salary (reduced by other benefits, including Social Security), without regard for bonuses and commissions, with an average of a 90-day elimination period, and it is often not portable or convertible.

If you should become disabled, benefits will be based on current salary, which is often low for those just starting their career. Plus, disability often is defined as unable to work in any occupation (not just your occupation).

HIGH-INCOME PROFESSIONALS

Disability insurance can be very useful in protecting income, as Social Security disability on average replaces less than half of your income.

Disability insurance can be especially valuable for high-income professionals such as physicians, who would have a difficult time finding work with a similar salary in the event they can no longer perform their own occupation.

The new professionals program allows professionals to qualify for private/individual disability insurance while looking at their earnings potential and locking in their existing occupation and insurability, including medical condition.

GRADED PREMIUMS

As valuable as this protection is, private/individual disability insurance has a gap for some professionals who are not receiving the salary they will earn in the future.

The limits for the new professionals program help certain professionals obtain disability insurance based upon future earnings.

Graded premiums can make the cost of coverage more affordable while establishing your career and paying off student loans.

Many insurance providers offer disability insurance through the new professionals program. It’s available for medical people and other professionals.

EARLY ENROLLMENT

Medical professionals generally are able to enroll in the program as early as their third year of medical school and for about two years after graduating.

For nonmedical professionals, benefits generally are lower and often available for about two years after graduating.

As a case study, consider David, 32, a third-year resident pathologist with a salary of $60,000.

He would qualify for about a $6,500 monthly benefit ($78,000 annually) with a level premium of $3,646 annually or a graded premium of $2,070 annually in the first year.

STUDENT LOAN REPAYMENT

Also available as a separate rider is student loan protection in the event of disability.

It makes the insured student’s loan payments in the event that he or she is unable to work and is receiving benefits under the policy.

The benefits of disability insurance in general, and with this program, vary for different people.

However, protecting future income, especially when young, makes this something professionals should consider when planning for their future.

John D. Rossi III is a business leader, lecturer, accountant and financial planner with more than 30 years of business and academic experience. An associate professor of accounting at Moravian College in Bethlehem, he is president of JR3 Virtuoso Solutions Inc., specializing in financial reporting, taxation, professional training and consulting services. He can be reached at jdrossi3@verizon.net.

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