Individual Disability Insurance – Let me help you draft a protection plan

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Principal Life Insurance Company offers a variety of individual disability insurance solutions designed to help protect you, your business and your ability to save for retirement.  Working together, a protection plan can be created to meet your specific needs. 

Client One – New Business Owner



New dentist purchasing an established practice

  • A personal Individual Disability Income (DI) insurance policy is in place, but is unsure if it’s enough protection.
  • He is also concerned about the business expenses, including loan payments in the event he becomes too sick or hurt to work.




  • Reviewed the current Individual DI insurance policy and confirmed that the policy was not up-to-date with his current income; was able to increase the monthly benefit.
  • Recommend the purchase of an Overhead Expense (OE) insurance policy, enhanced with the Business Loan Protection rider (an additional cost rider).


–    Made sure the OE insurance policy provides a monthly benefit great enough to reimburse him for covered business expenses, such as utilities, employee salaries, rent etc.


–    The Business Loan Protection rider covers the loan to purchase the practice, with benefits going directly to the bank holding the loan in the event of a disability.


Plus, the OE insurance policy premium is tax deductible to the practice, and although the benefit is taxable is income, the actual business expenses are deductible.

Client Two – Concerned About Retirement




  • Executive who has maximized the Individual DI insurance coverage available.
  • Client is worried if she became too sick or hurt to work, what would happen to her dreams for retirement?




  • Reviewed her Individual DI insurance policy and confirmed she had the maximum benefit amount available based on his income.
  • To help protect her retirement dreams, DI Retirement Security was recommended.  In the event she becomes disabled, DI Retirement Security pays a monthly benefit directly to an irrevocable trust in her name.  At the end of the benefit period (commonly To Age 65), assets can be distributed per the terms of the agreement.



Client Three – Two Surgeons Key to the Practice




  • Local surgical center has two surgeons that account for the majority of the center’s revenue.
  • If either one of these surgeons became too sick or hurt to work, the loss of revenue would be devastating. 




  • Discussed the concerns with the surgical center’s manager and recommend Key Person Replacement insurance for both surgeons.
  • The premiums are paid by the surgical center and if the insured doctor becomes totally disabled, the center would receive benefits income tax-free to help sustain the loss of revenue.


Client Four – Attracting Top Talent



  • Small law firm group is trying to attract bright new attorneys to join the firm. 
  • Determining what benefits would attract and retain top talent and know that Individual DI insurance is key to the offering.  However they are concerned about the taxability of the benefit if the policy is paid for by the firm.




  • Offering the Individual DI insurance policies through an Executive Bonus plan. 
  • An Executive Bonus plan allows the firm:


–    To bonus cash to each attorney for the purchase of a policy. The bonus is taxable as ordinary income to the employee, but deductible by the business. Benefits are then received income tax-free by the employee.


–    To offer a competitive benefit that does not require a formal program or annual administrative costs.


–    To determine which employees receive the benefit.


  • Since the employer wants to make sure any benefits are still received income-tax free, they offer the Individual DI insurance policy through an Executive Bonus plan. 


Disability insurance has limitations and exclusions.  For costs and complete details of coverage, give me a call.


Disability Income insurance is issued by Principal Life Insurance Company, a member of the Principal Financial Group®,
Des Moines IA  50392.




Policy and rider descriptions are not intended to cover all restrictions, conditions or limitations. Refer to policies and riders for full details. Policies and riders are subject to state availability. Some riders are subject to an additional premium.


While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.




DI Retirement Security is issued as non-cancelable, guaranteed renewable, individual disability income insurance policy. It is not a pension or retirement program or a substitute for such a program. DI Retirement Security is not available for government employees, individuals with Group LTD coverage that includes a “retirement supplement” or anyone who is over insured based on Principal Life’s current Issue and Participation guidelines. It may not be available or the benefit may be reduced for certain occupations if there is existing DI coverage with lifetime benefits. Additional underwriting guidelines may apply. DI Retirement Security is currently not available in California.


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