Disability Issues

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.