One of the exposures not often accounted for by small firms is the possibility of a key player suffering a disability. In a firm of 4 or 5, our experience tells us that one of you is likely to suffer a disability. If you’re ready to tackle this issue, we’ve outlined our Four Part Disability Income Review for Attorneys below:
- Determine the Scope of the Exposure: Review your income, not simply for the past year, but determine a rolling average for the past three years, along with partner distributions or other sources which could be impacted by a disability. In addition, for partners in the early stages of their career, thought should be given to anticipated increases in income in the future. Considerations should also be given to retirement contributions the partner is making, which also would be impacted by a disability.
- Assess Existing Resources: Typically, individuals do not have enough savings to cover an extended disability. However, a careful review of existing disability coverage along with social security can provide a benefit baseline and define the income protection gap which needs to be addressed.
- Develop a Disability Protection Solution: Once the income protection gap is defined, there are a number of vehicles that can be utilized to solve the gap, including individual disability policies, association disability plans, even upgrading the existing employee group plan. Plus, if three or more partners are interested in securing disability protection at the same time, additional benefits can be obtained such as premium discounts or guaranteed benefit levels. This phase also involves ensuring that there is an “own-occupation” definition of disability for which one receives benefits when they are unable to perform the duties of their occupation (as opposed to any occupation), and evaluating the scope of residual or partial benefits, COLA riders (which protect the purchasing power of your benefits), Future Purchase Options riders (which guarantee your insurability when you want to increase your benefits as your income increases), Retirement Contribution riders and other riders to maximize your protection.
- Integrate your solution with the Partnership or Corporate agreements. An important step is to make sure that you understand how your firm’s agreements treat partner / principal disability. In certain situations, it might be appropriate to evaluate Buy/Sell Disability protection which can assist the firm in buying out a partner’s interest in the case of a disability.
If you’d like help with this process, please fill out the form on this blog or call 1-855-874-0816.