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Most High-Income Professionals Are Underinsured — And Don’t Realize It [Podcast]

Most High-Income Professionals Are Underinsured — And Don’t Realize It [Podcast]

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 As a disability-insurance specialist, I meet high-earning professionals every day who carefully insure their homes, cars and health needs, yet overlook the one asset that makes everything else possible: their income. The ability to get up in the morning and earn a living underpins every financial decision a household makes. When that ability disappears, even temporarily, the effects are immediate and far-reaching. That reality is at the heart of a conversation I’m having on the latest episode of the Income Protection Podcast, produced by Income Protection Journal. I’m speaking with Michael Sir, the president and co-founder of One Protection, about why income protection remains misunderstood and why so many people underestimate the risk. What becomes clear in our discussion is that most individuals have never stopped to calculate the true value of their future earnings—an oversight that puts their entire financial plan at risk. In the episode, Sir walks through a simple example. A 35-year-old earning $300,000 today, with modest income growth each year, will earn close to $20 million by retirement. Economists call this a person’s “human life value,” and it is almost always the largest asset a household has. Yet it is the asset people insure the least. If someone purchased a $20 million home, insurance would be required. But when it comes to protecting $20 million in future income, most people delay the decision or assume their employer benefits will be enough. That assumption rarely holds. As I explain on the podcast, employer-provided long-term disability plans often replace only a portion of income and usually cap benefits far below what high-earning professionals bring home each month. Because employer-paid benefits are taxable, the real income gap widens further. The definitions built into group plans also create problems. Partial disability is often not covered, and “own-occupation” protection—which is critical for physicians and other specialists—is usually missing. The shortfall can be significant. Using the example from the episode, someone taking home around $18,000 a month would receive only about $7,200 under a typical group plan. The remaining $10,800 must come from savings. I’ve seen families bridge that gap by draining retirement accounts, dipping into college savings or taking on debt. Health-related income loss remains one of the leading causes of bankruptcy and home foreclosure in the United States, and the pattern often begins with a single disabling event. Optimism bias drives much of this. People tend to believe that serious illness or injury is unlikely to happen to them. But disabilities during working years occur more frequently than premature death. And when income stops, expenses often rise. Health insurance costs can jump under COBRA. Out-of-pocket medical bills escalate. Sometimes a spouse or partner must reduce their work hours to provide care. The financial consequences ripple outward. Over time, the damage reaches beyond the immediate crisis. Once a disability occurs, retirement saving stops. College planning freezes. Emergency reserves begin to drain. Even well-prepared households can find themselves destabilized, not because they made poor financial decisions, but because an uninsured income event destroyed the foundation their financial plan depends on. This is precisely what individual disability insurance is designed to prevent. A well-structured policy can replace a meaningful portion of tax-free income and protect a professional’s ability to work in their own occupation. Individual coverage stays with the insured regardless of employment changes and can continue through retirement age. On the podcast, Sir and I discuss why these policies are especially important for physicians, attorneys, business owners and other high-earning professionals whose financial trajectory depends heavily on their ability to work. Still, disability insurance can feel abstract until people see the numbers clearly. That is where One Protection’s software becomes helpful. During the episode, Sir demonstrates how visualizing the projected lifetime value of income, the size of the gap caused by a disabling event and the long-term consequences of lost earnings changes the conversation. Many of my clients only grasp the full scope of their risk once they see the data displayed in a format that mirrors real life. One of the concerns we address in the episode is how seldom the industry raises this topic openly. Many financial advisors acknowledge the importance of income protection but fail to initiate the conversation. Some are unsure how to explain the nuances; others assume employer benefits are sufficient. As a result, consumers often do not receive the guidance they need. The message of the episode—and the reason I’m sharing it with readers now—is straightforward. A person’s ability to earn an income is the foundation of every financial plan. If that ...
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