Can you afford not to have it?
By Timothy S. Barkley, Sr.
Special to The Equiery
You are a stable owner, riding instructor or trainer. You are the primary-or only- source of income for your family. You have children. You suffer a horrible fall and are now paralyzed. Presuming you have health insurance to cover the medical bills, who will provide for your children? Who will provide for you?
You are a vet, or a farrier, or you break and train horses. You get slammed by a horse and break something, or your back goes out, or you have emergency bypass surgery and you cannot work for months. Your income dries up until your health is restored. Bills pile up, as do late charges, interest, and poor credit scores.
These are not hypothetical scenarios. It is, unfortunately, all too real in the equestrian community.
And anyone who is self-employed owes it to themselves-and to their families-to have adequate insurance-and not just health insurance.
Because while health insurance will pay for medical bills, it will not replace income.
There are two possible solutions to the “loss of income” quandary. With an aggressive savings program, you can save to cover the loss of income through disability. But because you never know when disaster will strike, or how long it will prevail, you can never know whether you’ll be able to accumulate enough before you need it.
Or, you could take out a disability income replacement policy. Disability income replacement insurance shifts the risk of loss of income to someone else, a large corporate someone who has he immediate resources to replace your income should you become disabled shortly after taking out the policy, and the deep pockets to make those payments for a very long time.
The premium cost of the insurance will be based on your health, income needs, duration of the payments and vocation and avocations, among other factors. The lowest premium is not always the “best buy,” because a company who prices you aggressively might not be able to meet its obligations when you need it most.
Generally, a policy will replace about sixty percent of your income. Payments generally run until age 65, when you traditionally receive Social Security-but the Social Security start date might be later if you’re younger. Moreover, if you’re disabled at a young age, your social security payments might be lower. Therefore, a policy with a cost-of-living adjustment is important.
Because disability income replacement insurance pays, not at death, but at loss of income through disabling illness or injury, insurance underwriters base premiums on the risk of serious illness or accident. Some accidents or illnesses have nothing to do with your vocation-such as the risk of a disabling auto accident, common to us all. Other accidents and illnesses are related to our choice of activity, such as the risk of a fall during a steeplechase or foxhunt.
If our equine activities are an avocation rather than a vocation, you might be able to get disability insurance base on your vocational classification. Because equine activities are risky, underwriters generally require a significant premium payment. Different companies price their policies differently, and you might find that the premium increase related to your equine risk is less if you use a broker who has access to multiple companies.
Either of the above scenarios (you are a stable owner, trainer, vet, or farrier) AND you have employees; the income you generate provides the bulk of the cash flow to pay your employees.
If you are temporarily or permanently disabled, does your business generate enough cash flow-without you-to pay your employees? If you are a business owner, you can actually purchase coverage to underwrite the overhead costs of your business. Business overhead expense insurance provides funds so that if you are disabled, your business can keep running, can keep paying your employees, can hire someone to provide the services you provide to the business, and can remain viable until you either return to it or find a suitable buyer, preserving and protecting your investment in the business. This coverage is purchased in conjunction with disability income replacement insurance for you, the business-owner.
If you have employees whose services are vital to the business, providing them with disability insurance can be an incentive for them to remain with you. They know that they are valued, since you have taken steps to provide for their family if they are unable to work.
Your New Year’s Resolution
Disability income replacement insurance is the insurance most often overlooked by consumers, despite the fact that, during your working years, you are three times more likely to be disabled than to die-with that likelihood increasing if you work with horses. Consult with your insurance professional or financial planner to determine the cost of this valuable benefit.
If you are not doing it for yourself, do it so you don’t become a burden to others, do it so your family can be provided for, if, God forbid…