Planning for the Unexpected – Insurance Options for Lawyers (Part III)
This is the third in a three part series of posts about insurance issues for lawyers in solo and small practices. I’m interviewing Michael Korn, a financial representative of National Financial Network, LLC in New York City.
Michael is a former small business owner who specializes in working with small business owners and law firms, helping owners and senior management build, protect, and manage wealth. He may be reached at michael_korn@natfin.net or 646/885-2843. I’ve asked Michael some questions about what lawyers, particularly those working as solos or in small firms, should be thinking about. In our first post, Michael discussed the different types of health plans available for attorneys, and in the second, he discussed the factors to consider when choosing a plan and disability insurance.
Life insurance
ACS: What about life insurance? Is it important for lawyers to have, and what do they need to know about it?
MK: Life insurance is a basic protection tool that can help you meet many of your business goals while still protecting the financial security of your loved ones. If you own your practice and have a family, your family is reliant on the income from your business. If you were to pass away unexpectedly, your family’s income would stop. The proper amount of life insurance will help the rest of your family to continue on and prosper.
When determining coverage amounts, you may want to consider your “human life value.” Human life value is defined as the present value of all future income that you could expect to earn for your family’s benefit, plus other value you expect to contribute, less taxes and personal consumption through your planned retirement date. As a simple rule of thumb, however, a professional with a family may need ten to 20 times gross annual income in coverage (depending on age and assets).
As a solo or small firm lawyer, you may have many other uses for life insurance. Issues to consider are the need to fund a buy/sell agreement if you have a partner, key man insurance, and the potential benefits of using permanent life insurance and its cash value for deferred compensation retirement programs.
Long-term care insurance
ACS: Should lawyers get long term care insurance?
MK: Long-term care insurance helps provide asset preservation and peace of mind and it
protects your family and your retirement income from the consequences of living a long life and needing care. Long-term care can occur at home, in an assisted living facility, in a nursing home, or in the community through special programs, but no matter how or where it is provided, it can be very expensive.
As a law firm owner, the firm can pay your long-term care insurance premiums (including those of your spouse or other dependents), and depending on the firm structure and state you are in, you may receive tax deductions or tax credits; speak with your accountant for details.
Long-term care insurance is something you will likely use later in life, but it might make sense to pay for this type of protection coverage in your peak earning years, since some insurance companies offer policies allowing you to pay a higher premium for a set number of years with no further premiums due after that.
ACS: What’s the best way for lawyers to find the plans that make the most sense for them?
MK: If you are an individual or sole proprietor looking for health care, try contacting the stronger carriers in your region directly to discuss their options. Local and regional bar associations and buying organizations sometimes offer health care plans for small businesses, including law firms. The United States Federation of Small Businesses (www.usfsb.com) is a national organization specializing in health insurance plans for sole proprietors and small businesses.
The best way to put together a comprehensive protection plan and explore all the options for health care and other forms of protection is to work with an insurance agent, specifically one who specializes in financial services and benefits for small businesses or even focuses on working with lawyers. Ideally, you want an agent who handles health care and other personal planning issues. Ask around for referrals to a professional agent who can work with you to put together a comprehensive plan to help you protect yourself, your family, your practice, and your future.
ACS: Thanks, Michael, for a helpful and informative discussion!