Why do we buy insurance?
Life. Auto. Home. Malpractice Liability. Business Liability. Disability. The list goes on.
Why? To protect against the unknown.
The uncertain, the possibility that there may be an issue with something we own or with ourselves, is the impetus for insurance.
We get health insurance to protect our human bodies. We get other insurances for business, materials, houses, cars, and liability issues.
We buy insurance in proportion to the amount of resources we don’t have for handling risks.
But what about disability insurance? Why do we buy it?
Disability protects us as the worker bee, the technician, the one in the business or the practice who is producing most of the work.
Most of us are the engine in our small businesses or our professional practices. We drive the production.
And if we’re not there in the practice or the business, then most of the revenue, if not all of it, stops.
It’s all on our back.
And it’s okay to be there for awhile, but you don’t want to be there for long term.
You don’t want your business depending upon you. In fact, you’d like to be in a position where, at some point, you don’t need the disability insurance anymore.
But how do you get there? You replace your active income.
You can do this in one of two ways, or a combination thereof.
- You create a business or practice that is not solely dependent upon you.
Maybe, it’s 50% dependent upon you. Maybe less than 50%. That’s running closer to a real business.
- You create wealth and cash flow outside the practice or business.
Typically, my advice is towards real estate because it worked perfectly for me and gave me a Plan B exit.
So today, I don’t need any disability insurance at all, because my current business and investments don’t require me to be there to make the money come in.
I have a real business and a lot of passive cash flow from real estate investments that I’ve built up over the years.
If you want to be at the same place at some point in your life, you need to drive that direction intentionally.
Get focused on what that looks like, both inside your practice and outside your practice with other assets.
Think about it. Think about your disability insurance and why you have it.
That should be your focus point until you don’t need it as much, or better yet, you don’t need it at all.
That’s when you have true freedom.
The day you can get rid of disability insurance, you’re free rather than dead.