Summary: Professionals and business owners are often admonished to purchase disability income insurance to replace the income lost if they become sick or disabled, business overhead insurance to keep their practice afloat, and perhaps disability buyout insurance to fund the buyout of a disabled partner. So you’ve paid all 3 premiums dutifully for years and unfortunately suffer a debilitating illness which derails your career, dreams, and worse. The process of collecting on these can prove daunting.
√Just diagnosed? Get someone not emotionally vested to shepherd you through the process. If you’re dealing with the emotional trauma of a new diagnosis or injury you need someone methodical and objective to deal with what might be several independent insurance companies. The paperwork can be voluminous. The technical issues (medical, tax, legal) may be complex. If your hands are full dealing with treatment plans, rehab, etc. get help. Paying for your accountant and a disability attorney to handle the submissions will cost a bit up front but can avoid tremendous difficulties. As a layperson, your imprecise use of terminology could delay or derail your case. You need to make sure the facts are appropriately and clearly presented.
√Your planning should have involved more than just a disability income policy. You should have had an exit strategy from your business or professional practice. Don’t defer selling or transitioning your practice or business for too long if you’ll have to do so. If you run it into the ground there will be little to sell. If you have buy sell and other business agreements in place get your accountant and corporate attorney on the case as quickly as possible as there may be critical deadlines.
√ If you have a business overhead policy it should protect you if you cannot work full time. These policies are sold to help cover your fixed costs, like rent. You may have to prove partial or total disability to collect on them. You also have to corroborate the expenses you are incurring. Often these are geared to expenses that are deductible for tax purposes. It can be good as gap insurance while slowing down. The definitions and calculations may differ from those under your disability income policy. Again, the concepts are likely to be technical and the paperwork substantial. Consider involving your accountant. If you are totally disabled and close down your practice or business the coverage may prove ephemeral.
√Try to be consistent with what you report to your business overhead insurer, disability company, the IRS, credit and mortgage applications, etc. The insurance companies will get access to all these documents. Consistency, unfortunately, is probably impossible given the different definitions and purposes of the financial and tax reporting you might be involved in. The confusion can be substantial and differences may have to be reconciled.
√Your disability income company wants to know quality and nature of your work. They need to determine how you derive your income (e.g., surgery, office hours, lecturing). The quality and quantity of work you do defines the “duties of your occupation.” This might require some fancy cost accounting analysis that no one had ever focused on before.
√Working while you are disabled, especially at earlier stages of a progressive illness, is common. You want to maintain normalcy as long as possible. Your business overhead coverage may be a huge help if you’re only partially cutting back. But be wary, disability income insurance companies may view your working initially as an indication that you can continue to work even though you’re sick. This could shift the dynamic to you if you cut back further in the future, or cease working, to demonstrate that even though you previously worked with the disability you can no longer do so. You may have to demonstrate a new development that has created the new change (e.g., no available job with the necessary accommodations, a worsening of your condition).
√Be carefully about sending Emails. It’s too easy to hit that [send]. Instead write a Word document and attach it so you can review it make certain that the facts are listed correctly. If there are tax or accounting issues, have your CPA review it. If there are policy definition issues, consult with your agent. Have a disability attorney review everything before it is sent.
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