CPAs / Accountants Need Disability Income Insurance
-All CPAs / Accountants need to consider and purchase Disability Insurance, to protect their income in case of accident or illness. To make sure their personal family budget stays funded.
-And CPAs / Accountants who are practice owners need to also consider Business Overhead Expense Disability Insurance, a policy that would fund your practice’s monthly budget in the case of your disability because of accident or sickness.
But many accountants feel they do not need Disability Insurance!
One’s occupation factors in how insurance companies price and offer Disability Insurance. Insurers consider the risk of the occupation in part, as Disability Insurance does cover you while you are working.
So some CPAs and accountants we talk to assume they don’t need Disability Insurance…they probably will not be injured on the job, right? It is rare to suffer a disabling injury due to an accident in an office setting.
But, only 10% of disability insurance claims that insurers pay were due to injury, at work or anywhere else!
-90% of disability insurance claims are due to some type of illness.
-18% of those are due to a disability to cognitive ability and 15% of those claims are due to a mental health disability.
If you suffered a disability that affected your cognitive ability, you would not be able to act on all the knowledge you have worked to master, understand and distill in clear, concise terms when communicating to your clients. You would not be able to earn a living. Your family budget would not be funded.
Disability Insurance will fund your family budget if you are disabled and cannot work as an accountant, no matter the type of injury or illness.
Can’t I just choose the Disability Insurance offered through the AICPA LTD Income Plan (Prudential)?
It is endorsed by the AICPA, so it has to be the best choice, right?
You may want to choose the AICPA plan as secondary group disability Insurance. But it is not true individual Disability Income Insurance.
There are group Disability Insurance policies (one policy type for all, a contract between a group and the insurer, not you, few promises made) and individual Disability Insurance policies (underwritten to your specifications, many options to choose from, a contract between you and the insurer, many promises made). The AICPA LTD Income Plan is a group plan.
The stronger DI coverage is individual Disability Insurance. There are many differences, but the one to focus on are the “promises made” by the insurer. The promises made in the case that a disability prevents you from working. Below are four (4) main “promises made” differentiating factors with individual Disability Insurance policies vs. the AICPA offering.
Individual DI policies are “non-cancellable and guaranteed renewable.” The AICPA plan is not.
Individual Disability Insurers offer policies that are "non-cancellable and guaranteed renewable." This promise means the coverage can be terminated only for your non-payment of premium.
The AICPA plan makes no such promises, reserving the right to cancel the coverage if they no longer sponsor the coverage, or choose to work with a new insurer.
The promise of non-cancellable and guaranteed renewable ensures you always have access to DI coverage, the exact same coverage you have now. This what individual DI policies do.
The AICPA LTD Income Plan group rules could mean a sudden ending of coverage, leaving you without income protection. This would force you to scramble to apply for new coverage, hoping your current health and income would warrant it.
Individual DI policies promise optional benefits important to CPAs. The AICPA group plan does not.
Many strong insurance companies offering individual Disability Income Insurance have begun to offer two additional options (for an extra fee) that suit CPAs:
-Student Loan Reimbursement Option: This optional rider, if the proposed insured becomes disabled and begins receiving the monthly benefits makes additional payments to a disabled insured’s student loan provider while the insured is out of work, covering all or part of the student loan payment due.
-Retirement Savings Option: This optional rider, in the event of disability, while the insured is receiving benefits, other monies are set aside to help the insured continue to save for retirement.
The AICPA group plan does not offer either of these two optional benefits in their “Disability Income Plan” group disability insurance offering.
Individual DI policies offer a much stronger definition of residual disability than the AICPA plan.
The AICPA LTD group plan offers the option of residual disability (called “partial disability”). This means if you are not totally disabled and can still work some of the time, the residual disability option pays you a portion of your monthly benefit to replace a percentage of lost income.
But the trigger of the AICPA plan is a loss of income, 20% or more, to receive the partial (residual) disability benefits. CPAs, especially CPAs who are business owners, may not suffer a loss of income for months if they cannot work due to a partial disability!
Many of the strong individual DI insurers we work with base their residual disability benefit payments not on income lost, but loss of time worked, or duties they can not perform due to disability. This better suits the way CPAs / accountants work, and disability benefits would be triggered much earlier.
Individual DI policies promise that costs cannot rise for any reason. AICPA group coverage does not.
When you apply for and accept an individual Disability Income Insurance policy, the insurer makes the promise that the initial premium cost you pay each month is set for life. For the coverage applied for the cost will not rise as you get older, or develop a health issue, or just because a year has passed and costs have moved up. The rate is the rate!
So rate-wise, according to your DI policy, you are always the age you were when you first applied for Disability Insurance with your DI insurer.
The cost of AICPA group DI coverage can rise anytime, in two ways. First, the rates go up as you age, in five year age bands, just like employer-sponsored group coverage. The older you are, the more you pay.
Second, the insurer can raise the rates on a class-wide basis. (“class-wide” means for everyone in the group) At any time.
CPAs / Accountants, You Should Remind Your Clients of the Importance of Disability Insurance.
As an accountant your mission is to guide your clients to a solid financial footing and to keep them there. May we boldly suggest Disability Income Insurance is the solid rock foundation of that work!
See The Principal’s (a disability insurer) illustration we think is such a great way of explanation. The goals of home ownership, business ownership and success, comfortable retirement, and wealth transfer to the next generation, they all rest on a foundation of income protection, of making sure the client can earn an income to fund their insurance costs, and their savings for the future, in health and in sickness (or injury).
You need Disability Insurance to protect your income and future. Your clients do too.
If you own your CPA practice you need to consider a “Business Overhead Expense” policy.
Disability Insurance companies also offer a secondary type of disability insurance specific to business owners called “Business Overhead Expense” or “BOE” insurance.
Business Overhead Expense insurance, if the insured becomes disabled, steps in and pays the business’s bills; lease or mortgage payment, staff salaries, insurance, utilities, etc.
Think of it as Disability Insurance that funds your business’s budget, just as your individual Disability Insurance policy funds your family budget.
Consider the Cost of Living Adjustment (COLA) benefit rider to keep pace with inflation.
When you design and purchase a Disability Insurance policy you choose a monthly benefit to receive if you are disabled. But what happens as costs (in your family budget)rise over time?
The Cost of Living Adjustment (COLA) option helps you keep up. The rider states that while you are disabled and receiving benefits, your base monthly benefits will be increased once each year. These increase percentages vary with the different insurers.
One very popular choice is 3% per year simple interest. There are also compound interest options.
You can buy individual Disability Insurance while just starting your accounting practice.
Insurance companies that offer individual Disability Insurance offer special programs for young professionals, including CPAs.
Proving current income (part of the DI underwriting process) is difficult for a brand new business owner, but you need Disability Insurance to protect your income from the start.
These young professional programs allow you to purchase a Disability Insurance monthly benefit without having to prove a current income. Then you can add to the monthly benefit as your income increases over time.
We Partner With Many Disability Insurance Companies, Including:
The importance of CPAS / Accountants choosing the "own occupation" definition of disability in their Disability Insurance coverage.
"Definition of disability" is very important when considering Disability Income Insurance. Most people purchase a policy with a definition that says the insurer will pay the benefit if they are disabled, but will stop paying the benefit when the person can go back to work in a job “they are suitable for because of education and prior experience.”
This definition can be inadequate for someone who invested a great deal of time and money in their specialized occupation (accounting, then CPA).
The better “Own Occupation” or “Your Occupation” definition states the insurer will pay the benefit for as long as the person cannot work in the exact occupation they were previously working in. And, that if the disabled person cannot do just one of the main, material duties of their job, then the policy still considers them disabled, and continues to pay the benefit.
This means if you cannot work in all capacities of your current practice, you are disabled according to the definition of the disability.
You can even choose a “pure own occupation” (also called “true own occupation”) definition of disability that adds to the above that you can even work in another occupation and still be considered disabled in your original occupation, accounting.
With this strongest definition of disability, the “pure” or “true,” if you are disabled and cannot work in the occupation you were engaged in and had Disability Insurance for, then you receive the policy’s benefits while disabled, even if you are working in another occupation. Two client examples:
-An OB-GYN with a back disability is unable to deliver babies. His pure own occupation definition policy pays benefits even as he teaches in medical school.
-A veterinarian disabled and no longer able to perform surgery receives benefits even as he returned to school and became a CPA!
Note: The AICPA LTD Group plan does NOT offer the “pure” or “true” own occupation of disability as an option.
Ready to See Quotes of Disability Insurance Specific to CPAs / Accountants? Request a Free Quote Here.
Note: Chip only helps North Carolina residents choose and enroll in Disability Insurance.
Privacy is something we take seriously. The minimum of information is shared with an insurance company to put together a detailed free quote and illustration for you.