The Insurance Buying Guide: Net Worth

Your total net worth also may affect the amount and price of disability income coverage a company will sell you. A person with $1 million in the bank probably doesn't need disability income insurance.

The amount of total net worth and the liquidity of such assets will determine whether a reduced amount of disability coverage will be issued -- or no coverage at all. If your assets are easily marketable or if you have a large amount of unearned income, then the underwriter may decide that you are not eligible for any coverage.

For example, Joe is an orthopedic surgeon who earns $120,000 a year. His insurance company's issue and participation limit is 60 percent of earned income. It characterizes him as a Class 1 occupational risk. So, at this stage, Joe would be insurable for $6,000 a month of disability income coverage.

But Joe also has about $60,000 a year of unearned income from rental properties, interest and dividends. This complicates things.

The combination of $6,000 of monthly disability coverage plus $60,000 annually of unearned income may remove Joe's incentive to return to work. Joe's insurance company therefore may reduce the amount of disability income protection it will sell him to reflect the impact of his unearned income. It could decide to issue Joe only $3,000 per month of disability income coverage.