Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

Disability Insurance is Critical Defensive Financial Planning

A new study released May 18, 2009 by the LIFE Foundation and America's Health Insurance Plans (AHIP). looks at the consequences facing individuals who become disabled and can't work, and the level to which various types of disability income protection can help to reduce the financial impact. The findings reveal that in the absence of insurance, a majority of Americans would likely have to make difficult financial decisions, or even drastic lifestyle changes, in order to cover the costs associated with disability, regardless of whether the disability is short- or long-term.

Lawyers and settlement professionals are used to evaluating economic losses for their clients ought to mindful of the exposure that they themselves may have to long term disability.

The aforementioned study, which was conducted by Milliman examined four representative scenarios of newly disabled individuals, finding, for example, that the financial impact of a disability - equal to lost income plus expenses - to be as high as nearly $1 million for a 40-year-old, single male earning $50,000 per year who suffers a long-term disability lasting until age 65 - nearly 20 times his pre-disability earnings. The study also showed that the costs associated with short-term disabilities can be quite significant - equaling one to nearly two times income in some cases for a disability lasting just two years.

As a result of the recession, many Americans have less savings and investments to fall back on should they become disabled and can't work. According to a recent national survey conducted by LIFE, more than a 27% of Americans admit they would begin having difficulty supporting themselves financially "immediately" following a disability, while 49% would reach that point within a month.

Disability Insurance provides a financial backstop to replace lost income if you were suddenly out of work due to sickness or injury. In 26 years this author has significant experience placing disability insurance in addition to seeing the difference it can make in a person's life who, due to life's misfortunes, has to use it.

A variety of disability forms are available to cover income on an individual or group basis, to cover overhead expenses to keep a practice or partnership running, disability buyout insurance and more. There are also specialty DI policies to cover high income earners.

For further information on disability insurance and to assess your exposure please contact John Darer at 888-325-8640.

Would You Take Advice From A Settlement Planner Who Had Problems Managing His Own Money?

A Free Money Finance blog posted  "Would you take advice from a financial planner who was doing poorly financially himself?" is a very interesting read, particularly the comments. It and the Chapter 7 bankruptcy filing I read today which showed an abundance of Neiman Marcus, Bloomingdales, big credit card debt, home equity line "to the max" etc., in an area that is a heck of alot cheaper to live than where I do, made me adapt the question in relation to those who advise tort victims.

Should tort victims work with settlement planners whose spendthrift proclivities mirror those who they are duty bound to protect? What about plaintiff lawyers who refer the spendthrift settlement planner to one of their clients?

I've been doing this gig for a long time and I love it, but I never forget those salad days back in the early to mid 1980s. One has to start somewhere. But then where do you go from there?  How do you buildy our business? How do you establish and maintain credibility? I think alot of it has to do with knowledge leadership and your ability to articulate it. The business is dynamic and you have to invest in your head. You need to innovate. You also need to inspire confidence and how you carry yourself, how you manage the financial aspects of your own business and your life is a big part of it.

Prudent risk management is important in any financial plan, particularly those that are doling out advice to anyone, let alone tort victims with catastrophic injuries, who likely have little to no means to earn back mistakes.

Anyone can have unforeseen medical bills. Isn't that why plaintiffs need liquidity in their settlement plans? Do you have insurance? Do you have an HSA? Do you need a special needs trust?

What sort of risk management have you done to protect a drop in income or wealth? Do you have a budget and adhere to it? Do you have a reserve fund? Do you have disability insurance? In dual income households, have you planned for the contingency that one spouse may die prematurely.  But for "Sully" Sullenberger some families of US Airways 1549 might have been looking at that question in hindsight.

The old adage "people don't plan to fail, they fail to plan" resonates.

Structured settlement annuitants who spend recklessly on material items and fail to budget are susceptible to the sirens of financial crack dealers and cash now pushers. It is clear how the New York Judiciary feels about tort victims mismanaging their money. Which is worse "the squandering tort victim", or the "squandering settlement adviser?".

Why should we not question the credibility of those who emphasize "extensive financial services careers" or "spearheading multi million dollar portfolios" in their sales pitch to tort victims, yet demonstrate a reckless lack of discipline with their own finances?

 

 

It Happens Suddenly and Kills Your Finances

In the settlement industry we often talk about "Sudden Wealth Syndrome". What about "Sudden Retirement Syndrome", "Sudden Disability Syndrome", "Sudden Accident Syndrome" (you're a paraplegic and the at fault driver had only $100,000 of liability coverage that must be shared between you, his passenger, the lawyers and lien holders)? It could all happen at once.

Emily Brandon's article "Getting Ready For A Surprise Retirement" in the June 12, 2008 US News and World includes a haunting discussion of a study by the Urban Institute that "looked at people who were 51 to 61 years old in 1992.  A decade later, over three-quarters of them had lost their jobs, become widowed or divorced, developed new health problems, or were confronted with frail parents or in-laws."

"A third of the participants had a health condition that limited their work, and 19 percent went through a layoff or business closing.  And laid-off employees who managed to get a new job were less likely to get health insurance and earned about 25 percent less per hour."

Now throw in increasing gas and food prices and the looming increases in home heating oil.

The message in the article is that financial planning is essential, even for the unexpected. Among other questions:

1. Are you living within your means?
2. Could you live within 1/2 your income?
3. Do you have a reserve fund?
4. Are you saving money in a retirement plan or other tax favored savings plan?
5. Do you have disability insurance?
6. Do you have long term care insurance?
7. Do your parents have long term care insurance?  If they qualify medically. but don't because they can't afford it have you and your siblings chipped in to buy it?
8. What form of life insurance do you own? What's your strategy for maintaining it if you become disabled or after you retire?

Tort victims confront many of the same issues as the aforementioned sudden retirees and many more, even at younger ages.Tort victims need to be especially careful and consult with settlement planners or recovery management specialists.  Strategy for preservation of the recovery must be discussed. Many have no means to earn back their mistakes. 

For questions about any of these items please call John Darer** toll-free at 888-325-8640

** Business solicited only where licensed. If you are from another state will attempt to refer you to other licensed practitioners.