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Teaching Pro Income Replacement for Disabilities By Dave McKinney, USPTA When you think of insurance coverage, the two most common types—home and car insurance—are often the first that spring to mind. Because the mortgage company requires the former, and the law requires the latter, you don’t have much of a choice when it comes to deciding whether to be insured. However, it’s your ability to earn an income that allows you to afford these items. In fact, without earning potential, it would be difficult for many of us to maintain our homes and automobiles while still providing for ourselves as well as the family. The solution for supplementing this missing income in the event of a permanent or temporary disability is known as disability insurance. Disability insurance, along with life insurance, should be an integral part of your financial plan and what you’ll need to consider when choosing a policy to protect your income. Physical Abilities of Teaching Pros As tennis teaching professionals, our physical ability to teach tennis lessons and coach is a large part—if not all—of our earning potential. What happens if we are physically unable to teach for a longer period of time, such as three months or more, due to a major accident or illness? How will we pay for our mortgages, cars, utilities and other necessities that we depend on? For you and your family, it’s very important to have life insurance in place. When considering the importance of disability insurance, keep in mind that individuals are three times more likely to become permanently disabled than die from a major accident. Don Gomsi, executive director of the USPTA San Diego Division, once told me that at a period of time when USPTA offered optional disability insurance, he signed up for it. Shortly after that, he was in a major automobile accident that injured his knee and required two surgeries. He was off the tennis courts for over six months. However, his disability insurance kicked in after one month and covered his loss of income. Good for Don at that time for signing up for disability insurance. Unfortunately, USPTA does not offer that insurance option anymore. Social Security and Disability Many U.S. workers take disability risk management for granted because they assume that Social Security will take care of everything should they become disabled. Contrary to popular belief, qualifying for Social Security disability benefits can be quite difficult, and it can take a long time for benefits to start. To qualify, you must prove that you are incapable of performing any job, not just your primary occupation. As long as you can be gainfully employed, even if it’s at minimum wage, you won’t be able to collect Social Security disability payments. Protecting Your Income and Your Family When reviewing your risk management objectives, take a close look at your emergency reserves and liquidity capabilities. According to the U.S. Census Bureau, the average median monthly household income was $4,200 in 2010. This data strongly suggests that a supplemental income source would be a necessity for many Americans if they were to become disabled. It’s important that you understand the benefits provided, if any at all, by your company, as you may be covered under a short-term or long-term disability policy through your employer benefits plan. When it comes to disability insurance, “short-term” refers to periods of 90 days or less, while “long-term” refers to periods of more than 90 days. The Bottom Line What would happen to your household income if you became disabled for a long time? Hopefully, you and your family would be taken care of, but if you’re not sure that’s the case, now might be the time to cover that risk. Once you’ve determined what disability risk management you have in place, you can then make an educated decision as to whether you are fully insured or underinsured. If you lack the appropriate income replacement, you may want to consider buying a personal disability policy. Dave McKinney is the tennis director at Spanish Hills Country Club in Camarillo, Calif. He is an also an advisor with Heritage Capital Strategies, a consulting firm specializing in planning strategies to help clients create and preserve wealth. Dave can be reached at dmckinney@nfpsi.com. LineCalls 15
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