Insurance, Small Law Firms, Solo Practitioners

If You Become Disabled, Will Your Practice Become Disabled, Too?

Here are the reasons why solo and small-firm attorneys should purchase disability insurance.

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sad-upset-young-lawyer-summer-associate-law-student-stress-needs-helpLast year, I was conducting a CLE with my friend and Solo Practice University columnist, Mark Bassingthwaite, over at ALPS, and a funny, yet sadly predictable thing happened.  With all the great content on starting a 21st century law practice, the topic that generated the most questions was disability insurance.  Now you may think this is odd, but it really isn’t.

Insurance is a serious and often discussed topic when you talk about opening a solo practice. Everyone asks about errors and omissions insurance and the pros and cons.  People talk about premises liability insurance and even life insurance.  Yet, when I suggested in the early years, if money was tight, that a new solo was most wise to purchase disability insurance instead of life insurance, that’s when the questions started rolling.

Let’s discuss it because, unfortunately, it’s not discussed often enough. When I started practicing, my local bar association offered a unique product at the time — discounted disability insurance which was gender neutral.  This meant it was the same price for men and women, it was very inexpensive, and the annual cost was fixed (level) for all my working years.  I immediately signed up for it even though the ink was still drying on my new license and I didn’t have any income to “protect.”  That was 21 years ago.  I still have the policy to this day because I’d be foolish to give it up.  It’s an absurd $688 per year… fixed!

My thinking was this: If I die tomorrow, I really don’t have any expenses or responsibilities to others as I wasn’t married and I had no real assets to protect. Proceeds from a life insurance policy would be just a gift to whomever was the beneficiary.  However, if I got injured or incapacitated in some way, I would have no way to pay my debts, sustain myself during my incapacity, or keep my practice afloat without some monthly income.  It made more sense for me to buy an insurance policy that would replace a small portion of my income so my solo/small-firm practice would not go under.

I had a very good insurance agent who was just starting out and was very aggressive.  He explained to me that lawyers, for the most part, were good risks for disability insurance because it takes a lot for them to not be able to practice law for an extended period of time.  Think about what lawyers do in contrast to firemen, policemen, carpenters, or any other type of work which involves a lot of physical labor.   We could have a broken arm, and still perform our job if necessary.  We are/were considered A+ risk.  And the premium reflected the fact we were A+ risk, meaning we were low risk for payout. (Not sure if this is the language anymore, but it was then.)

The first question that came in during the CLE was, “If lawyers are such low risk for payout, why bother getting the insurance?  If we can continue to work under most conditions and be unable to collect, why spend the money on the premiums?”  Fair question and it makes sense.  Well, I don’t disagree.  But I also lived through a perfect example of how disability insurance can help keep your practice afloat should you become incapacitated. When I was pregnant, I developed hyperemesis gravidarum.  Fancy word for morning, noon, and night sickness.  Basically, I couldn’t function in any responsible manner during the majority of my pregnancy.  It took some arguing by my agent on my behalf because they were looking to apply the new rules on payout versus the terms of payout under the original policy.  (Watch out for this!)  However, when he was done, I collected my contracted monthly disability amount for nearly six months.  The insurance paid for itself many times over and kept my practice afloat.

Disability insurance has increased like all insurances.  The restrictions on claims are greater and there is usually a three-month waiting period before you can claim any income (this keeps the premium down to a manageable level) unless you want to pay a much higher premium.  There are also many more accident and illness products out there to investigate such as Combined Insurance and Aflac which are pennies to buy but will cover you easily and quickly. It’s a great product to have if you have a high-deductible insurance plan because it will pay out enough to cover your doctor visit for an accident so you break even.  The point of this post, however, is that you SHOULD investigate the benefits of a disability-type policy for accident or illness. The traditional policy I have had for 21 years is becoming harder to find and more difficult to qualify for, but if you are younger, just starting out, and appreciate the value of supplemental income should you become incapacitated, you do want explore what options might be right for you.

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Susan Cartier Liebel is the Founder and CEO of Solo Practice University®, an online educational and professional networking community for lawyers and law students who want to create and grow their solo/small firm practices. She is a coach and consultant for solos, an entrepreneur mentor for LawWithoutWalls.org, a member of the advisory board for the innovative Suffolk School of Law – Institute on Law Practice Technology and Innovation, an attorney who started her own practice right out of law school, an adjunct professor at Quinnipiac University School of Law for eight years teaching law students how to open their own practices, a frequent speaker, and a columnist for LawyersUSA Weekly, The Connecticut Law Tribune, The Complete Lawyer, and Law.com. She has contributed to numerous legal publications and books offering both practical knowledge and inspiration. You can follow her on Facebook, Twitter, LinkedIn, and Google+, and you can email her at Scl@solopracticeuniversity.com.

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