Disability Insurance for MBA students
As you embark on your journey to pursue your MBA, it is crucial to consider the potential risks and uncertainties that may arise in the future. While you may be focused on building your career and achieving financial stability, it is equally important to protect yourself against unforeseen circumstances that could impact your ability to work.
Disability insurance provides a safety net if you become disabled and are unable to work. It offers financial protection by replacing a portion of your income, ensuring that you can meet your financial obligations and maintain your standard of living.
Here are a few reasons why disability insurance is particularly important for MBA graduates:
- Protecting your investment: Pursuing an MBA requires a significant investment of time, money, and effort. Disability insurance safeguards this investment by providing financial support if you are unable to work due to a disability.
- Income replacement: As an MBA graduate, you are likely to have a higher earning potential. Disability insurance ensures that you can continue to receive a portion of your income if you are unable to work, allowing you to maintain your financial stability.
- Peace of mind: Knowing that you have disability insurance in place provides peace of mind, allowing you to focus on your career and personal growth without worrying about the financial consequences of a disability.
While many individuals believe that disability insurance is only necessary for physically demanding professions, the reality is that disabilities can occur to anyone, regardless of their occupation. Accidents, illnesses, or injuries can happen unexpectedly, and having disability insurance can make a significant difference in your ability to recover and move forward. According to recent statistics, more than one in four individuals will experience a disability that prevents them from working for at least 90 days during their working years.
The Bloch Agency developed a specialized program for MBA students along with MassMutual. This premium discounted program encourages you to obtain individual disability income insurance. It is a proactive step towards safeguarding your financial well-being and ensuring that your hard-earned achievements are protected.
What is Supplemental Disability Insurance?
What is Supplemental Disability Insurance?
Many employees will be automatically enrolled in a Group Long Term Disability Insurance policy program. This is typically designed to replace 60% of base salary up to a specified monthly maximum such as $5,000, $10,000, or $15,000. When the employer pays the premium for this program, any benefits paid to the insured during a claim are taxable as ordinary income. This leaves an employee with a significant income loss. We use an individual disability insurance policy to alleviate the tax loss.
Here’s an example:
If you earn $200,000 of base pay with an additional $50,000 bonus, the group plan typically only insures the base pay. So, 60% of the base pay would be $120,000 or $10,000 per month. If the group plan is capped at $10,000, most employees will incorrectly assume they are fully insured. However, since the premium is paid by the employer, the $10,000 monthly benefit is taxed as ordinary income leaving the employee with closer to $7,000 after tax! There is a significant income shortfall and in addition, the $50,000 bonus is not covered. This amount is equal to only 48% of income.
In addition to the $2,000 monthly tax-free benefit already in force that you purchased when you were an MBA, you can purchase approximately $4,500 more coverage without any medical underwriting, bringing your policy monthly benefit up to $6,500 per month! This amount plus you $7,000 Group benefit brings you up to 93% of income.
Your MBA personal disability policy is portable, and you can take this coverage to any job you may have in the future.
