Life insurance should be thought of as a way to offset financial liabilities should the worst happen. Whenever you have a life event that adds financial responsibilities, it’s a good time to consider acquiring coverage or adding to what you have today. Let’s take a look at what some of those life events might be.
When you get married, you start making financial decisions based on your combined income. You may be a dual-income household, or perhaps only one of you works outside of the home. If something happens to either one of you, the other spouse would likely not be able to maintain your current lifestyle without either the other income or the household and childcare help. Life insurance can be a way to offset this.
Having children means high hopes for their future. For many, this means the ability to send them to college. However, if one or both parents weren’t around to provide this support, it may make going to school difficult financially. Life insurance can be a way to make sure the money is there for this important aspect of your child’s future should you not be there to help pay for it.
Buying or Upsizing a Home
Buying a home is a way to put down roots. It’s generally a long-term commitment that comes along with a mortgage. Most families buy because they want their family to establish memories in a particular area and live a certain lifestyle. Again, this might be difficult to maintain on a single income. Whether you are purchasing your first home or upsizing, it’s a good time to look at your coverage.
Getting a Big Promotion
When there’s a big change in the amount of money coming in, it’s a good time to revisit your coverage. As much as we all like to think we’ll maintain the same lifestyle on a larger salary, the reality is that we tend to increase our expectations and financial commitments. Perhaps you buy a bigger house or a new car. These are new financial obligations and income that your loved ones will come to count on. Increasing your coverage can make up this gap.
When You’re Young
Life insurance premiums are based on age at entry and that means the sooner you buy, the less you’re going to pay. With policies that have 10 or 20 year terms, the savings to you could be substantial. Another reason to buy young is that you never know what your health situation will be when you’re older. Health issues may crop up that make securing coverage at an older age difficult or more expensive.
In short, whenever you have life circumstances that either add to your income or add to your financial obligations, it’s a great time to review your coverage. Don’t forget about looking at your beneficiaries at the same time.
It’s fairly common to have at least a small understanding of life insurance, but it’s not often we hear about disability insurance. Every now and again, you’ll hear that a friend is “out on disability,” but what does that really mean and what types of disability insurance are out there?
There are two very different types of coverage – short term disability and long term disability. Depending on your policy and your state’s laws, short term coverage generally covers a period under 1-2 years – although many policies cover a much shorter timeframe, say 3 months. Short term coverage is only available through an employer. Many plans allow you to carry over a limited amount of unused vacations days (up to a maximum) to add to your “short term disability bank.” If your employer doesn’t offer this coverage (or if you’re self-employed), you may want to consider having a 3-6 month savings set aside in the event that you suffer a disability.
Long term disability (LTD) is meant for illnesses or injuries that prevent you from working for at least several months. Coverage may be available from an employer and/or from an outside source, such as an association to which you belong. This is where things get tricky.
Employers like to tout that benefits like LTD are paid on a pre-tax basis. While that is attractive when you are paying your premiums, those benefits have to be taxed sometime – and that sometime is when they are paying out. What that means is that if your policy replaces 60% of your income, that 60% payout is going to be taxed – meaning less money to pay bills. Another caution with employer plans is that they are not portable. If you leave the company, the policy will cease to exist.
If you purchase an external plan, the inverse is true. Your benefit amount will not be taxed and you keep the policy so long as you remain eligible and continue to pay your premiums – regardless of switching employers. You may also find better rates if you’re purchasing through an association group plan.
Long term disability policies differ in pricing based on a “waiting period” (sometimes called an “elimination period”), or the period you have to wait from the time you incur your disability until the time the policy starts paying. 30, 60 and 90 day waiting periods are very common. Prices decrease for longer waiting periods. This gap is where your emergency fund or STD policy can be critical to staying afloat financially.
It’s important to note that disability coverage isn’t health insurance. The money is not earmarked to only pay medical bills. It should be thought of as income replacement that allows you pay for your normal bills until you get back on your feet again.
A feature you will want to look for is called “own occupation.” In other words, the policy considers you to be disabled (with some other stipulations, such as the inability to do certain activities of daily living) when you cannot do your exact job, not just any job.
You will not find a policy that will replace 100% of your income and insurance companies require you to disclose other policies to ensure the addition of their policy does not equal a high percentage of your income. Policies will generally pay around 60% of your income – with some plans going as high as 80%.
LTD insurance typically requires full underwriting, which means you will fill out an application and undergo some medical testing. On occasion, group plans may offer a limited benefit amount to which you can secure coverage with only answering a few short questions (known as simplified underwriting). These offers cannot be made frequently, so you may want to consider them when you receive one.
Disability insurance can be confusing, but it’s coverage that most of us should consider. After all, how many of us could afford not being able to work while incurring medical bills? Feel free to message us if we can answer any additional questions about disability insurance.
Lawyers are frequently approached by friends, family and clients to give advice regarding a legal matter that is outside their area of practice (AOP). While it can be difficult to say no to such requests, there is one valid reason to do just that: you could be increasing your risk of a malpractice claim.
According to the American Bar Association (ABA), failing to know or apply the law is the number one most common legal malpractice claim made against an attorney. While you may be vaguely knowledgeable about an unfamiliar area of law, you likely are not aware of what else may be lurking there, such as a shorter notice requirement or an obscure statute of limitations. Missing those important details can lead to an ethics complaint, even against a well-meaning attorney who was just trying to help someone out.
So how can you minimize the risk of a malpractice claim stemming from a foray into an unfamiliar practice area?
- Just say no. Don’t take on a case outside your customary area of practice – no exceptions.
- Refer all cases in a recognized specialty to a recognized specialist.
- If a current client refuses to allow you to make a referral to a recognized specialist, withdraw representation.
- If you are unable to withdraw representation, hire a recognized specialist out of your own pocket.
- If you can’t afford to hire a specialist, immediately immerse yourself in that area of practice and prepare to provide competent representation. That’s the standard you will be held to by the ABA.
Don’t Fail to Act with Competence
Failing to act with competence is not only a basis for a legal malpractice claim, but is also an ethical violation. Rule 1.1 of the Model Rules of Professional Conduct states: A lawyer shall not fail to provide competent representation to a client. "Competent representation" is defined as having the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. Time and effort are required to become competent in a particular AOP, and cutting corners to do someone a favor is usually not worth the risk.
For more information about the risks of practicing outside your practice area, contact USI Affinity today.