135: One Injury Away From Financial Ruin: Disability Insurance Explained

Your Paycheck Is The Asset

Jessica 0:00

Your ability to earn money is your biggest financial asset. If you couldn't work for the next six months, would your life fall apart financially? Most people insure their phones, their cars, their homes, even their pets, but not their paychecks. And that's what we're talking about today. Why you should be considering disability insurance. Stay tuned.

SPEAKER_03 0:22

Sugar Daddy Podcast, yo. Learn how to make them pockets grow. Financial freedoms where we grow. Smart investments, money flow.

Jessica 0:32

Welcome back to the Sugar Daddy Podcast, where we help you build a clear financial plan so you can feel in control and confident about your money. Thank you for coming back if you're an OG. And if you are new here, welcome to the show. We release episodes every Wednesday, and we hope you will stick around. Hey babe, what are we talking about today?

Brandon 0:55

So today we are talking about what I think is one of the most overlooked aspects of financial planning, and that is disability insurance. I think a lot of people overlook it, and also it is more complex, and a lot of people don't understand it, even if they do have some form of coverage.

Jessica 1:10

Um, I'm just gonna say that I don't think that most people know disability insurance is a thing.

Brandon 1:16

I think they do. I think they just also often confuse it.

Jessica 1:20

No, I think that you give people too much credit. And I know people who who have disability insurance through work, which of course is limited, and I know we'll get into that. But it's free through their work, and they have declined it simply because they did not know what it was.

Brandon 1:37

That part's crazy to decline. It's crazy to the thing is I always tell people if it's free through your employer, go ahead and accept it.

Jessica 1:45

If it's free, if if it costs you nothing.

Brandon 1:47

If it costs you nothing, always accept it.

Jessica 1:49

Yeah. Okay. Ooh, you said always. That's not very like you.

Brandon 1:53

Well, through your employer benefits, if it is a free thing, I pretty much say always sign up for it.

Jessica 1:59

Okay. Well, I do not agree with you on the fact that you think people are aware of disability insurance, because I think if people understood what it is, why they should have it, when to use it, how to get it, more people would.

Brandon 2:13

Because I I well, the reason I was saying that is because often if I ask somebody about, you know, do they have disability insurance of some sort, they often send me like accidental death and dismemberment policies. And I'm like, that's not the same thing.

Jessica 2:26

You're not accidentally dying here. This is so why don't we get into it? So today we're going to talk about what it is, why it matters, and how to know if you actually need it. And then by the end of this episode, you'll know exactly how to protect your income. And of course, without the jargon and all the complicated stuff.

SPEAKER_01 2:44

Yeah.

Jessica 2:45

So let's start with what is disability insurance? You just told us it's not accidental death and dismemberment.

Brandon 2:51

Well, it is a type of insurance that replaces a portion of your income if you can't work due to injury or illness.

Jessica 2:58

That is Okay, so we are still alive.

Brandon 3:00

100%. And that's the biggest thing.

Jessica 3:02

That's the key, right? We are still alive.

Brandon 3:04

Well, that's one of the biggest things that I do want to stress is when you are still alive. All right. So, you know, there are two main types of, you know, well, actually, most people do have some form of what's called group disability insurance.

SPEAKER_01 3:21

Okay.

Brandon 3:22

If you are a W-2 employee, often a lot of employers provide this as a free or highly subsidized, which means that you pay significantly less for it, benefit as part of your employee benefits package. So often what's kind of like the baseline for that is is that it's 60% of your salary.

Jessica 3:40

Base salary.

Brandon 3:42

Correct. And that's one of the nuances to it because there are some a lot of nuances to the policy that I also want to make people aware of. So with the group disability insurance that she was talking about, um, it's normally 60% of your base salary. Now, the thing I also want to keep in mind is that that 60% is before taxes. So taxes are still going to be taken out of a group disability insurance policy if your employer pays for it. Because what's actually happening is that your employer is paying for the policy, but then they're writing it off.

Jessica 4:09

Oh, of course they are. Yes. Yeah.

Brandon 4:10

So then you are taxed on any, if you want on claim, you're taxed on that. So it's not actually going to be 60% of your, you know, after taxes can be even less than that, technically.

Jessica 4:18

So don't get mad at me. But I feel like I technically, you know, for when I had I was in sales, I had my base salary, then I had my bonuses and commissions and things. So this is base salary only. But we had both of our babies when I was in a sales role. I know that I filed FMLA to keep my my job safe, but then I also utilized disability, which I don't know why pregnancy is considered a disability, but that is where my 60% income came from.

Brandon 4:46

Well, see, that depends because that depends on the policy and also depends on the state that you're in.

Jessica 4:50

Okay.

Brandon 4:51

So you also have short-term disability versus long-term disability.

Jessica 4:54

Okay. Which is now different than disability, disability. Oh, two different kinds of disability insurance.

Brandon 5:02

So for example, through your employer, or most people have when I say group disability insurance, I mean that it's a policy for the group, for the all the employees. For the employees, yeah. All right. Now, with that, you also have short-term and long-term.

Jessica 5:13

Okay.

Brandon 5:13

So the most, you know, most policies kind of do short term from zero to 90 days of being disabled.

Jessica 5:19

Okay.

Brandon 5:20

And then anything after that would be long term.

Jessica 5:23

Okay.

Brandon 5:24

All right.

Jessica 5:25

Okay. What else?

Brandon 5:26

Did that answer?

Jessica 5:28

Um, yes. I was just I was like thinking about women who are delivering or are planning on, you know, being pregnant.

Brandon 5:37

That's more of a nuanced conversation because hopefully your employer has some form of a um maternity leave policy.

Jessica 5:44

Mm-hmm which doesn't fall. Okay.

Brandon 5:47

Yeah.

Jessica 5:48

All right.

Employer Plans Taxes And Pay Caps

Brandon 5:48

But the idea here is that, you know, kind of on like the very basic level, you're gonna have, you know, most people are gonna have their group disability insurance policies. Now, also you can, in addition, have an individual disability insurance policy.

Jessica 6:01

Not through your employer.

Brandon 6:02

Correct. Not through your employer. So you can actually have one through your employer and have an individual one. It's not either or.

Jessica 6:09

Okay. It's supplemental. Correct.

Brandon 6:11

You can have both.

Jessica 6:12

Okay. And is that something you recommend?

Brandon 6:15

I 100% recommend that because as you were kind of getting into it before, depending on the type of disability insurance, group group disability insurance policy you have and how it structures, it's really going to dictate how much of your actual income it covers. So for example, you said before, since you were in sales before, that it covers your base salary. Yeah. 60% of your base salary. So for example, if you're someone that makes$200,000, but you're on a$50-50 split where$100,000 is your base salary, and then the other$100,000 that you normally make in a given year comes from commission, bonuses, whatever it may be, then that additional$100,000 that you very much depend on is not covered by your disability insurance policy.

Jessica 6:52

Right.

Brandon 6:53

Only that initial$100,000 in your base. So your salary is not adequately covered.

SPEAKER_01 6:58

Right. All right. Yeah.

Brandon 6:59

Now, also sometimes too, if you're a highly compensated employee, you might also have a cap.

Jessica 7:05

Oh, okay.

Brandon 7:05

So for example, like if 60% of your salary equaled$10,000 a month, but it has a cap at$5,000. So those are things that exist in those policies as well. So knowing the details of that policy makes a big difference. Whereas, for example, you can also have an individual policy which can make up that difference.

Jessica 7:26

So you because you need to kind of bridge the gap that might be there.

Brandon 7:29

Because the thing is too, even if none of those nuances exist, where for example, you are a W-2 employee, you don't have any real bonuses or commissions, or say you make$100,000, and that's all salary.

SPEAKER_01 7:40

Okay.

Brandon 7:40

And then you have a group long-term disability insurance policy that does 60% of your salary. All right. So that's going to be roughly$5,000 a month before taxes that you have covered if you go on a long-term disability claim. You can also get an individual disability policy that's going to give you also an additional almost$2,000. So it's actually going to be$7,000 worth of coverage rather than just the$5,000 to your employer.

SPEAKER_01 8:04

Okay.

Brandon 8:05

And with an individual policy, since you're paying it yourself, it's actually tax-free if you go on claim.

Jessica 8:10

Um, I have a couple of questions. How people who are traditional like W-2 employees that are listening, where do they find this information of A, do I have short or long-term disability? And what do I need to look for to understand? Well, okay, if something happened, how much am I actually going to get paid?

Brandon 8:31

This would be part of your employee benefits package. Okay. And there should be PDFs available to you that you can receive from your HR department to have all that information.

Jessica 8:39

With all the calculations and any kind of caps that they might have, etc.

Brandon 8:44

So you should be able to get the broad overview of the policy from that information. But then also you should be able to actually have the physical like you know, the PDF of your specific policy that has all the details. That thing that you might have gotten, it's like 30 pages, 40 pages long, has all the details in there.

Jessica 8:57

Okay. And then who needs disability insurance?

Brandon 9:01

Unless you can a unless you can afford to stop working today, and I mean stop working where you're not bringing any more additional income in, and you can afford to live the rest of your life. If you can't do that, you need disability insurance.

Jessica 9:15

So 99.9% of people need disability. I'm like, who can do that? Okay.

Brandon 9:21

Because the idea that we we're thinking about here is that remember you said this is about living, not dying. Whereas a life insurance, because I always I almost say that disability insurance is more important than life insurance. And the reason I say that, you need both, but if I was going to have to choose one, I might choose a disability insurance for this reason that when you die, it's finite. You know, if unfortunately, if one of us passed away, we're gone, no more incurred expenses, done. Now, obviously, there's a lot that comes with that, but it's done. As compared to a disability, if you have a long-term disability and maybe even a permanent disability, one, you are still here, you're no longer bringing in an income, and now you have more expenses.

Jessica 10:01

Right.

Brandon 10:01

Because they're so ultimately it's gonna probably cost you more over that time period with a disability than someone just simply passing away.

Real Disabilities And Real Consequences

Jessica 10:08

Okay. So what kind of disabilities are we talking about? Am I like, I'm here and I'm alive, but I'm like in a coma. So then I need disability insurance, or like, what are we talking about? I broke my wrist and now I can't do my job because I type at a computer all day. Like, break it down for me.

Brandon 10:25

All the above, but it also depends on your policy. So it depends. Yeah. So what most people think about is I think when most people think about a disability, they think of like, I'm paralyzed now.

Jessica 10:35

Right. I'm in a wheelchair, I'm getting fed through a tube.

Brandon 10:38

And it's not even that.

Jessica 10:39

Okay.

Brandon 10:40

It could be simply, so one of the things I wanted to stress too, I mean, we're going to talk about is like knowing the details of your policy. And that's going to dictate what they determine a disability to be.

SPEAKER_01 10:52

Okay.

Brandon 10:52

All right. But it could be simply as, for example, like if you are if you're someone that has part of your key part of your job is being able to type at your computer and you break your wrist and you can no longer type. That's a key part of your job. You could be, depending on the policy you have, that could be determined as a disability. Okay. Um, a lot of the things honestly aren't necessarily injuries. There's more or less illnesses. So I could think of this as probably like a little bit of an extreme scenario, but the one that like I remember several years back um when I started, you know, diving into disability insurance was um I was at a conference and they had a woman come up and speak to us about her specific situation. And what had happened was, and she was probably at the time that it happened, I believe they were in their early 30s. Uh the woman was speaking, her husband was an attorney, they had two young kids, you know, seemed like great life, you know. The husband starts feeling ill. All right, starts feeling sick, goes to the hospital. To make a long story short, because of having such a spiked fever for an extended period of time, called some um some um brain damage?

Jessica 11:59

Yes, mental cognitive impairment.

Brandon 12:02

There we go. Words are allude to me. Mental cognitive impairment that was now permanent and long-lasting. So the worst part was is that he was there enough that he can remember kind of in some aspects the person that he used to be and realize that he's not that person anymore. So something's kind of wrong. That's awful, but not enough to fix it. So he was no longer able to practice as an attorney.

Jessica 12:23

Um high income role.

Brandon 12:26

To a certain degree, he wasn't the same person that he was before the marriage in regards to helping off the kids, being a spouse, stuff of that nature. But luckily they had some dis they had disability insurance that helped out with that. Because I think when people also think about the disability, they only think about the person that the disability has happened to, and they don't think about maybe, you know, the family surrounding that person. So, for example, in a marriage scenario, that scenario that I was just talking about, the wife also was able to take some um counseling and therapy because now she's, you know, in a marriage that the caregiver and also she has he's not the same person she was when he married, but they have kids together and she's like, I'm not leaving him.

SPEAKER_01 13:03

Right, right.

Brandon 13:04

So there's things to work through on that aspect as well.

unknown 13:06

Yeah.

Brandon 13:06

But a lot of the actually, a lot of the uh disability uh claims are actually illness and not necessarily injury.

Jessica 13:12

Oh, okay. Well, I'm also thinking like you, a cup, you know, a couple of your clients are physicians and doctors of various kinds, like that perform surgery or are very like physical. So like if you can't perform surgery, and that is a key component of your job, right? Or if you're like a dentist or a physical therapist or a vet or et cetera, like I need my hands to do this job. So does disability insurance, if I broke my wrist skiing, what happens then? Like, is that what I'm talking about here?

Brandon 13:45

100%. And I've used this example before for those people that are Marvel fans out there that maybe have seen the Doctor Strange series. Doctor Strange was a phenomenal world-renowned uh, I think, brain surgeon or neurological surgeon, whatever, something of that nature. And he was a Playboy, you know, making millions of dollars being a surgeon, and he ends up getting in a car wreck, and he can no longer, and his hands are so messed up because he broke them and everything like that, that he can no longer perform surgery. And he didn't have any type of disability insurance.

Jessica 14:14

So when people talk about like insuring their body parts, is that what they're talking about? Like, or even like athletes, or is this different?

Brandon 14:23

Yes, to a certain degree, yes. That that's just that's the more specific niche of it, but it's the same idea.

Jessica 14:29

Okay. Cause didn't you just tell me, and I'm I know I'm not gonna get off topic, but like, didn't you just tell me that there's some like high school up-and-coming football player that is like has just insured his hands or something for something crazy?

Brandon 14:43

So there are ways now, and like I said, this is very niche. This is for like less than one percent of the population where professional athletes are able to ensure their ability. Like if you're a college athlete, they you're insuring your ability to be able to make it to the pros in case you get hurt.

Jessica 14:57

Okay. That's very niche. Okay. But for anybody who's, you know, I mean, again, even doctors and surgeons and stuff, I mean, that's a niche group of people. But I'm assuming that they should absolutely have disability insurance. But bottom line, if you or somebody is going to depend on your income, you should consider disability insurance.

Brandon 15:18

Oh, 100% too. Because the way to really think about putting certain protections in place is you have to put it in the right framing. Okay. So you have a significantly higher probability of experiencing some form of a disability that's gonna prevent you from working than you do of dying during your prime earning years. Because majority of people still life expectancies, you know, 84 to 87 years old. Okay. So this is a significantly higher probability of occurring. And the thing is too, you have to think about the ribble effect. So if you are unable to work and bring in any type of money, you're gonna have missed bills. That's gonna accumulate. If you're investing for retirement, you're not gonna be able to do that. So you have to think about all those things because during this time period, for a majority of people, your ability to bring in a future income is your most valuable asset.

Jessica 16:07

Right.

Brandon 16:08

And you want to make sure that we put, like I said, we put insurance in place for so many other things. Why not put insurance on your paycheck?

Underwriting Exclusions And Mental Health

Jessica 16:15

Right. Okay. Okay. I like this. This makes perfect sense. Um, dare I ask? And I know that it depends because there's so many different kinds of policies, but you know, we're thinking we're everybody's already spending so much on everything's so much more expensive. Can you give us an idea? Like, do we have to go through underwriting for this? Is this like I'm spending$400 a month on this policy, or am I spending like$55 a month on this policy? Like, what does that look like?

Brandon 16:44

So I always like to say start where it's either free or significantly less. And that's gonna be through your employer. Okay. So if you have any type of, you know, long-term, short, all that disability insurance through your employer, go ahead and get it.

SPEAKER_01 16:57

Okay.

Brandon 16:57

That's gonna be the best place to start. Yeah. Now, after that, we assess your assess your situation and see does it make sense to have an individual policy because you need that additional coverage and one, can you afford it? All right.

Jessica 17:11

Yeah. Well, especially so once you analyze, okay, this maybe you're in a sales or commission or bonus-based role, and that's where a lot of your income comes from, but your base is maybe not super high.

SPEAKER_01 17:23

Correct.

Jessica 17:24

And then you're only getting, you know, is the 60% like that is the number, or could it sometimes be 40% or 50%? It could be less. Okay. So you need to be able to do that.

Brandon 17:31

60% through your employer is normally going to be the highest.

Jessica 17:34

Standard. Okay.

Brandon 17:35

And like I said, it's a d it's going to be a determination on what actual part of your total compensation does it cover? Does it cover any bonuses or commissions, or does it only cover base salary? Because 90% of the time, it's only your base salary.

Jessica 17:48

Right. Okay. So go to your HR handbook, understand do you have disability insurance? Did you enroll in it? And what does it cover and how much is it going to pay out? And then analyze, okay, if I get, in the event of having to utilize this, I get$4,000 a month, but I have$8,000 worth of bills, then you need to call Brandon and have a conversation.

Brandon 18:10

Well, the thing is too, is that I always say get the one through your employer as well because there is no underwriting.

Jessica 18:16

Okay. Oh, that's perfect. Yeah, no underwriting.

Brandon 18:19

Disability insurance for the base packets that most people are giving is no underwriting.

SPEAKER_01 18:24

Okay.

Brandon 18:25

Um now they some employers do offer actually, you know, more than the 60% that you have to pay for, but that also entails underwriting.

unknown 18:32

Okay.

Brandon 18:32

And the same way with individual disability insurance, getting a policy on your own that has nothing to do with your work, that one has extensive underwriting.

Jessica 18:41

Okay.

Brandon 18:41

Now, we've talked about underwriting in the past for life insurance. This one for disability insurance is actually more detail because for life insurance, they're simply looking at anything that could cause you to die prematurely.

Jessica 18:52

Okay.

Brandon 18:53

With disability insurance, they're looking for anything and everything that can cause you to have a disability claim. And that's going to be anything from also mental health to, you know, preseason conditions. And by pre-season conditions, I mean anything from an illness to also injuries. So for example, like if you're somebody who already had back surgery and you went through the underwriting process now after having back surgery, that's in your medical records. So more than likely, that's going to be what's called an exclusion. And what exclusion means is that if you have an injury in the future that is involved and this is the basis of that injury, we don't cover it. So you already had back surgery. If you have something happens to your back and you can't work, we already told you we're not covering that.

Jessica 19:34

Okay. You mentioned mental health. So like if somebody's feeling burnt out, they're like having panic attacks, and they are like, I just need a break. Disability insurance could cover something like that?

Brandon 19:47

It could. The biggest thing is the underwriting process leading up to having that policy. And do you already have that in your medical history? Okay. So if you have that in your medical history, that might be once again an exclusion. So one, you have to be eligible for a, you know, disability insurance policy, and that's going through the underwriting process. That's submitting an application, and then they're going to go through underwriting by looking at, you know, the main part of it, looking at your current health and also your health history from your medical records. Okay. All right. So if you have if you don't have anything like that in your medical history, then you're good. Then you're good because it's probably it's not going to be an exclusion.

Jessica 20:20

Okay.

Brandon 20:21

But that's one of the things too, when we say about life insurance, the sooner you get it, the better. Because get an individual disability insurance policy, when you're, you know, earlier in your career, you have less ailments, less things that have happened. And so therefore, you have a broader coverage.

Jessica 20:37

Right. Uh another reason why being young and getting these things in place matters.

Brandon 20:41

Because like I said, there are I've seen things where people and the thing is also, too, is one of the things that it's kind of a sidebar here that I want to stress to people is that if you're going to see a you know a medical professional about something, you also maybe want to be a little bit more proactive in understanding what they're writing in your notes. Because I've seen scenarios where like you would have thought this person was about to, you know, hurt themselves. And that's what the doctor wrote it up as. Where, and I talked to the person, you know, I was like, this is what came back in your medical record from the underwriting. And the person's like, I just had a baby and I was just overwhelmed, the normal overwhelming of, you know, being a first-time mother.

Jessica 21:17

Yeah.

Brandon 21:18

I don't know why they wrote this other stuff. Oh my god. I was a little stressed. That was it.

Jessica 21:22

Do you know how many times I've cried in my doctor's offices? Like, yes.

Brandon 21:25

And that's why it's very that's why you I always I've now become an advocate for it's your medical records.

Jessica 21:30

Ask to see the ask to see what they're writing. Right, right.

Brandon 21:33

Because if they're not going to show you what they're writing, I would leave that doctor. Yeah. Let me see what you are writing. Because, like I said, I thought this person had like extreme depression and all this stuff. And when she explained it to me, what it sounded like to me, obviously, I'm not a medical professional. It sounded like normal mom. She's a new mom. She was a new mom.

Jessica 21:50

She was a normal new mom.

Brandon 21:52

All the new all the first time moms that I've ever been around, this sounds like basically the norm. Yeah. And then she's like, I didn't take anything, I didn't have to go to any counseling afterwards. I was just feeling over. Overwhelmed, talked about it, and went about my life.

Jessica 22:03

Oh my gosh. Okay. Yeah, that's a really great call out. Okay.

Brandon 22:06

So as far as you know the underwriting process goes, like I said, you have to be approved. And based upon that, is also going to be also one additional thing that comes in because you're asking about price. I can't really just give a blanket because there's a lot of factors that come into price.

SPEAKER_01 22:20

Okay.

Brandon 22:20

One is going to be how much coverage you get.

SPEAKER_01 22:22

Right.

Brandon 22:23

More coverage you're trying to, you have a higher income, you're trying to cover more of your income, you're going to pay more.

Jessica 22:28

Sure. That makes sense.

Brandon 22:29

Uh individual policies have things called riders, which are additional features you can add on to make the policy better.

SPEAKER_01 22:36

Okay.

Brandon 22:37

So if the more features that you're going to add on, it's also going to, you know, add some additional costs to it. Also, your occupation. Are you in a quote unquote more dangerous occupation?

SPEAKER_01 22:47

Oh.

Brandon 22:48

As compared to, like, for example, like as compared to like say someone that sits behind a desk as compared to a police officer.

Jessica 22:53

Right. Okay. Makes sense.

Brandon 22:55

Your occupation, you know, is going to also make a difference in how much it costs. But the nice thing is that you can make adjustments to fit within people's budgets. So it's not just a one size fits all. It's like, hey, we took you through the underwriting process, you got approved for this amount. Maybe you don't have the budget to pay for that full amount. We can make adjustments to still have a good policy that is worth you having and beneficial, but fits better into your budget.

Own Occupation Riders And Policy Design

Jessica 23:19

Right. Like I heard one time you were talking about, I think, and correct me if I'm wrong, but I think it was a writer that allowed this person, I think they were in the medical field, to have access to disability insurance if they couldn't do that specific job. Yes. Because sometimes they're like, well, you can still go and, you know, get a desk job and do XYZ with one hand, but it's like, no, that person can't do their job that they are specifically licensed and trained for. So then you made sure that the policy covers exactly what they do in their work, something like that.

Brandon 23:52

And this is one of those things that I talk about. These are the key things that you need to look for in your policy and understand are they there? And if they're not, maybe do you need another policy to do have those? So what you're talking about is own occupation versus any occupation. And that is a definition of the insurance company defining what it means to be disabled. So with own occupation is what you want. This means that whatever your chosen occupation is, can you do the key integral parts of that job?

Jessica 24:20

Okay.

Brandon 24:20

And if you cannot do those parts of that job, you are considered disabled. Any occupation means that can you just do any job?

Jessica 24:27

Like you can go get a job at McDonald's making French fries.

Brandon 24:30

Correct. Like, oh, I was I'm a trained surgeon, but can I work at, you know, making fries?

Jessica 24:36

I mean, yes, but I don't want to thank.

Brandon 24:38

Exactly. So you want to make sure that your um disability insurance policy has own occupation. Can you do the key parts of your job? And if not, it doesn't matter if you could do another job. You do your job. And if not, then you're considered disabled.

Jessica 24:50

Okay. Now I know we're not going to talk about price because it varies, um, but I'm assuming this is a policy I pay monthly.

Brandon 24:57

And then do I You could choose just like a life insurance policy. You can choose monthly, quarterly, annually.

Jessica 25:03

Okay. And then do I have to go through underwriting every year, or am I signing up for this for like a five-year plan, a 10-year plan? You know, like if I do a term 20-year life insurance, what does this look like for disability insurance?

Brandon 25:16

So once again, that kind of goes into the key features of the policy that I want people to understand.

Jessica 25:20

Okay.

Brandon 25:20

So what you're talking about is the benefit period.

Jessica 25:24

Okay.

Brandon 25:24

So how long the payout's going to be. So there's two different things there in the sense of benefit period is how long would you actually go on claim, and as long as you're still disabled, would you receive money?

Jessica 25:36

Oh, that's not what I was talking about.

Brandon 25:38

But the policy itself, once you put a policy in place, as long as you were paying it.

Jessica 25:42

It's in place.

Brandon 25:42

It's in place.

Jessica 25:43

Okay.

Brandon 25:44

So it doesn't matter. The price is like if I put in a policy with a$3,000 bene monthly benefit, if you go on claim, as long as you're paying for that policy, it's in place for the rest of your life.

Jessica 25:54

Okay. So I don't have to re Well, not the rest of your life.

Brandon 25:57

It's in place to a certain age because once it gets to pass a certain age, those policies would no longer pay out. And so therefore you don't have the policy anymore.

Jessica 26:04

Okay. But for a good amount of time. Yes. For those of us in our 30s and 40s.

Brandon 26:08

Correct.

Jessica 26:09

Okay. Got it. And then do I have to go through underwriting again every year? Are they going to re-pull my medical records?

Brandon 26:15

Once you put the policy in place, it's in place.

Jessica 26:17

Okay.

Brandon 26:17

So literally, you could be completely healthy and fine.

Jessica 26:20

Yeah.

Brandon 26:21

And two years two years later, something happened to you which would make you technically uninsurable moving forward. But you already have that policy in place.

Jessica 26:27

Again, which is why timing and doing things like that. Putting it in as soon as possible. Got it. Okay.

Brandon 26:32

Now there is one thing to take into account too that it um I'm gonna I'm gonna talk about since we're on this, I'm gonna talk about this one first, but there is something else to take into account because a disability insurance policy is proportionally based off of your income, how much money you make. Okay. All right. So if you're making, say,$100,000 and you get a uh individual policy making$100,000, fast forward, you know, five years, and you doubled your income. Now you're making$200,000. That original policy is no longer adequate. Now some policies would require you to go through the medical underwriting again to increase it.

SPEAKER_01 27:07

Okay.

Brandon 27:07

And that's where some of like, you know, you're leaving yourself open from a risk standpoint because something could happen where that makes you uninsurable, or something can happen where it's just gonna cost more, or more exclusions are gonna be included in that policy.

SPEAKER_01 27:19

Okay.

Brandon 27:19

As compared to the policies that I like to put in place, once again, we talked about those things called writers, which are additional features you could put on the policy to improve them. One of the ones that I like is what's, you know, the wording could be a little different depending on the carrier, but uh future increase writer option.

Jessica 27:33

Oh, okay. Sounds very like what you just described.

Brandon 27:37

Yeah. So what it allows you to do is that this future increase option allows you to have a pool of money that isn't necessarily part of your policy yet, but you've access to at future dates if your power if your um income is increased.

SPEAKER_01 27:51

Okay.

Brandon 27:51

And all you have to do is submit financial evidence that you've had this increase in income, but you don't have to go through medical underwriting again. So for example, if you know that you're gonna be advancing in your career, everyone should have it because you know, more like nobody wants to make less year over year. Especially if like say you're like, you know, in your you know, late 20s, early 30s. Yeah. And let's just say, you know, you're like what we used before. You have a policy that has$5,000. All right. Now you might also have a pool of money over here that's like$10,000 worth of increase.

SPEAKER_01 28:21

Right.

Brandon 28:21

It's not part of your policy yet, but say a few years down the road, you've increased your income. You're like, hey, my policy is no longer adequate. I need some more coverage. Now you can submit the financial proof and say, you know, you want an additional$3,000 of coverage to bring you up from$5,000 to$8,000. You submit that financial proof, they approve you for it, and you don't have to go through any of the medical underwriting. So literally you can have all these ailments that you've had since you first put the policy in place, and they're still going to be covered.

Jessica 28:46

Yeah. So that's a smart one to have. Yeah.

Brandon 28:48

So it's that's that's why I don't, I like outside of getting obviously the policy that you have through your employer, don't do this on your own.

Jessica 28:55

Do not do this on your own.

Brandon 28:56

If you don't understand all the features, because also there's other things in there as far as, like I said, the benefit period can vary. Yeah. You might have a policy that allows you to, if you are as long as you're disabled up to the age of 65, set 67, or 70, they might have that as long as that. Okay. You also, depending on your medical history, you might be eliminated where they looked at you and like, oh, we'll insure you. But if you go on a claim, we're only going to pay off for five years.

Jessica 29:18

Yeah, we don't want that.

Brandon 29:19

So you just want to know these this information. Okay. It's also important to know the elimination period. And what that is, is how long you have to wait before you actually receive any of the benefits. So you have your injury. What is the time period to wait before you receive those benefits? You want to know what that timing period is because, for example, I don't want to wait 90 days to get paid. Well, with a long-term disability, that's you, you mean that's going to be kind of the average. Okay. Now you can do less, but it might not make sense.

SPEAKER_01 29:44

Okay.

Brandon 29:44

So you could look at the elimination period, because it could be 90 days, 180 days, a year, all these different nuances to how the policy is. And that's also going to change the cost. The sooner you're going to get the money, the more you're going to pay.

Emergency Funds Are Not Disability Plans

Jessica 29:57

The more you would pay. Yeah. Okay. So this is amazing information. Obviously, everybody listening, you probably need a disability insurance prob uh uh policy on top of what you might already have through work. Shameless plug, because he's not going to do it for himself. But Brandon does this. So I still, I still to this day get text messages from friends and family that are like, Do you know somebody who can do da-da-da-da-da? And I'm like, Yes, Brandon. Like, hello, this is what he does. Um, because this is all part of comprehensive financial planning is protecting your income, protecting, you know, the money that you've been saving so diligently. For those people that are like, well, isn't this what I have an emergency fund for? What do you say to them? Like, if people are like, I don't need this, I have an emergency fund.

Brandon 30:42

An emergency fund is not for something permanent. Like an emergency fund, like, think about it. Kind of the like the average is like, oh, six months worth of expenses.

Jessica 30:50

Plus, I don't want to drain my emergency funds. Right?

Brandon 30:53

You but it's also the unknown. If you have some type of disability claim, you might not always know how long that disability is gonna last. So what if that you only have a six-month emergency fund, but it lasts eight months, nine months. What are you gonna do for those additional two or three months?

Jessica 31:07

Mm-hmm. Well, and then you're starting at zero. Like if you I mean, it's great to have an emergency fund, and this could be an emergency. In my head, I'm like, the emergency fund is like, oh crap, I need new tires.

Brandon 31:19

Oh crap, my dog needs his The emergency fund is not for if I cannot work.

Jessica 31:24

Right.

Brandon 31:24

Now the only way that the emergency fund works if you cannot work is if you're unemployed, like if you get laid off and you're like, laid off.

Jessica 31:29

Yeah. Yes.

Brandon 31:30

But as far as like I physically unable to work, that's not what emergency funds for. That's what disability insurance is for.

Jessica 31:37

Got it. Okay. Um, and then what about? I mean, for people who maybe realize, like in my last role, I you kept asking me, you know, what's the disability insurance policy? And I'm like, there is not one. I was working for a really small company, um, coming from Cisco, Fortune 500 company, where of course I had it, but then I went to one where that wasn't even an option. Um I mean, what do you say to people that are like, oh, I thought I had one, but I don't. Get an individual one because then as soon as possible.

Brandon 32:08

Yeah, because then that it cause then you're not that one's not relying upon you being employed. It's yours.

Jessica 32:12

Right.

Brandon 32:13

So you have it as long as you're paying for it.

Jessica 32:15

Yeah. Okay.

Brandon 32:16

Also, one of the biggest things, too, is that I want to stress this enough that like, because I've had this conversation so many times where people are like, it's not gonna happen to me. It's not no one's plan like any insurance week you have, you're not planning for the negative. Even if it's your phone insurance, I'm not planning on breaking my phone.

Jessica 32:31

Right.

Brandon 32:31

But it's a possibility.

Jessica 32:32

Or planning on getting a car insurance or car.

Brandon 32:35

Because also the thing is, too, it's with it's with like any type of accident. It's not just like dependent upon what you do and how safe you are as a person. You're out in the world. Yeah. It's you know, you're depending, like, for example, you could be in a car crash where you were doing exactly what you're supposed to do and somebody else wasn't.

SPEAKER_01 32:48

Right.

Brandon 32:49

And now you have some form of disability claim that needs to happen because you're unable to work for a period of time.

SPEAKER_01 32:54

Right.

Brandon 32:54

So like you need like people need to change that mindset that it won't happen to me. Also, the thing is so it's also people wait too long. You know?

Jessica 33:02

Which is a common theme with all of these finance conversations that we have.

Brandon 33:06

Yeah, because I mean, you can't insure it after something bad's already happened. Right. So I've had people come to me, we're like, oh, well, you know, I'm like, well, you've you're coming to me after this. Now this major medical thing has happened in your life. And it's like, I can't do anything like this. Is an unin for the time period from this happening, it's an uninsurable um scenario.

Jessica 33:25

Right. Oh, yeah. So don't don't wait on this.

Brandon 33:28

No.

Jessica 33:29

Because we've all, especially as we're getting older, we've all had things or we know people where unfortunate things have come up, right? And like we were healthy at one point and now things are starting to surface. So get these policies in place before those things surface.

SPEAKER_01 33:44

Yeah.

Jessica 33:45

Right? Okay. Any final words on disability insurance? Because I feel like this was a lot for people to kind of digest and process. Really good information, really helpful. Any kind of final, final thoughts?

Brandon 33:59

The main takeaway that I would like everyone to do listening to this episode upon completing it is review the coverage that you maybe have through your employer or a lack thereof coverage. So if you're not sure, reach out to your HR department, find out, do you have it? If you do, make sure you understand the details of it because then you can determine, hey, is it adequate coverage? Or am I in a position where a good portion of my income is still not covered by this policy? Because in that scenario, and also if you don't actually have any type of group disability insurance policy, then you need to look into getting an individual one.

Jessica 34:31

Okay.

Brandon 34:32

So first is understanding your current situation. Do you have it? If so, what is it? If you don't, now you know that you don't have it, and you need to look into getting an um individual policy. And if you're looking into getting an individual policy or you have questions about it, you can obviously reach out to us, reach out to me more specifically.

Jessica 34:48

Not us. Not me. Do not reach out to me.

Brandon 34:50

Reach out to me.

Jessica 34:51

Um, one question for those who are like, okay, I I feel like I need it or I don't have it through work, so I definitely need my own policy, but I need to know how much it costs. Just to be clear, there's no cost in applying or going through the underwriting.

SPEAKER_01 35:07

Not at all.

Jessica 35:08

So you can go through this, at least explore your options. And sometimes what I like to do in these situations is all right, like give me the Cadillac, right? Like what does that cost? And then I'm like, ooh, I can't afford the Cadillac. Give me the Toyota.

Brandon 35:21

Well, what I do with anybody that I'm taking through underwriting, you know, through an application process, whether it's life insurance or disability insurance, I apply for the Cadillac.

Jessica 35:29

Okay. Yeah.

Brandon 35:30

I apply for the Cadillac because the reason is that I apply for all the type of features that would be beneficial to you that you could possibly be eligible for. Apply for everything. Right. Because the best of the best. Because it was because the thing is, we can always take those features off.

Jessica 35:42

Exactly. Okay. None of this costs anything until you sign.

Brandon 35:45

But if I apply for the basis and then you're like, oh, it came back way less than I want. I want more of these things. With you go through the underwriting process.

Jessica 35:51

No, no, no. Okay. So we start at the top.

Brandon 35:53

Start at the top. Okay. And then you can tailor it down. Yeah. And it doesn't cost you anything to go to submit an application. For Brandon's time and your time. Well, if I'm if I'm doing life insurance or disability insurance for somebody, I don't charge for that. Right. I don't charge at all for that. So we take you through the um underwriting process. And I never quote prices to people because I don't know. Because the biggest determining factor on both of these is your medical history. And regardless of how on top you are with you know your you think you are with your medical history, I always have people that come back and there's things in there that they never even mentioned because it never was top of mind to them. Okay. And it makes a drastic difference. We're like, hey, you didn't mention this and it double the cost.

Jessica 36:31

Okay. Okay.

Brandon 36:32

So I don't ever give anybody some preconceived notion of what they think it's going to be. Take you through the underwriting process. If it comes back, you're, you know, approved and it's the Mac Daddy and you can afford that. Awesome. If not, then we can make some changes.

Jessica 36:44

Okay. Okay. So you can reach out to Brandon if you're like, yep, I need life insurance, need disability insurance, want to understand what this would potentially cost. Brandon can do that for you. Um, and that way you have all of the information. Um, now one thing that I know has come up a few times is people who have gone through underwriting and then take too long to make a decision. And then what is that window? Like you get your results, or I don't know if they're called results. So you get your answer, your rating.

Brandon 37:13

Some of them are like maybe like 60 days. And then it's not that they it necessarily so like what they want you to do is the ideal scenario is like once you're approved um for a policy, we go ahead and put that in place.

SPEAKER_01 37:24

Right.

Brandon 37:24

Some people take too long for whatever reason may be, and then what ends up happening is is that say 60 days, 60 plus days have passed, they might make you have an additional process where you they're re they're um kind of taking you through underwriting slightly again to make sure nothing's changed. Yeah, to make sure that nothing has come up in your medical history that would alter the policy.

Jessica 37:46

Okay.

Brandon 37:46

So my thing is like have an idea of a budget-wise what you're able to comfortably afford, go through the underwriting process. As soon as it's approved, go ahead and accept the policy that you know works for you and fits within your budget.

Jessica 37:57

Right. And then are you insured once you sign and you pay your first premium?

Brandon 38:01

Yes.

Jessica 38:02

Okay. So there's not like a waiting period or anything like that. Okay, cool. Okay. This is really, really great. So call to action, go look at what your employer offers and if there's something available to you. If there is, but you didn't enroll, what is that usually like an an open enrollment type of time?

Brandon 38:21

I would like to say I would like to say most um employers, that's automatically there. You don't necessarily have to enroll into it. Oh, okay. But there are, I have seen some where you have to enroll because I've known people, like you said, who declined it, which is crazy. But if you declined it, you're gonna have to wait till anyone enroll open enrollment to the next one.

Jessica 38:38

Okay. So know that it's upcoming if you declined it for some reason or don't have it. And then also remember that you need to run your numbers, figure out what that would cover for you. And there's a very strong chance that you would need to supplement with your own policy outside of work.

Brandon 38:56

Well, basically everyone would be eligible. If you have like if you're eligible to like up from a policy from a health standpoint, you would be eligible to get an additional amount. I used the example of the$100,000, 60% to their employer, right? Which equates to about$5,000 before taxes. And then you're able to get an additional two thousand dollars a month in coverage.

Jessica 39:14

Okay. Okay. So this is hopefully this is good information. I mean, I feel like I learned a ton and I already knew a lot about disability insurance.

Brandon 39:22

So from a mathematical standpoint, that scenario, it went from like 60% to about 83 to 84% coverage. That's huge. Of your income. Yes.

Jessica 39:29

That's huge. Um if you have any questions, obviously let us know. If you need to schedule some time with Brandon, check the link for the show notes. Check the show notes for the link, is what I meant to say. Um share this episode with your partner, with your spouse, with a friend or family member, and remember that Brandon can help you with putting these policies in place. We hope that you'll consider him in your search. And we will talk to you next week. Don't forget, Benjamin Franklin said, an investment in knowledge pays the best interest. You just got paid. Until next time.

SPEAKER_03 40:04

Sugar Daddy Podcast, yo. Learn how to make the pockets grow. Find news of freedoms by a week, bro. Smart investments, money flow.

Jessica 40:14

Thanks for listening to today's episode. We are so glad to have you as part of our Sugar Daddy community. If you learned something today, please remember to subscribe, rate, review, and share this episode with your friends, family, and extended network. Don't forget to connect with us on social media at the Sugar Daddy Podcast. You can also email us your questions you want us to answer for our past the sugar segments at thesugardaddypodcast at gmail.com or leave us a voicemail through our Instagram.

Brandon 40:43

Our content is intended to be used and must be used for information for the public. It's very important to do your own analysis before making any investment based upon your own personal circumstances. We should take independent money to advise from a license professional and connection with or independently research and verify any information you find in our podcast and which you rely upon whether for the purpose of making an investment decision or otherwise.