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Disability Insurance for Investment Bankers

January 19, 2025
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Disability Insurance for Investment Bankers

Why Investment Bankers Need Individual Disability Insurance

As an investment banker, you’ve built a career around hard work, long hours, and high stakes. Your income is often a mix of salary, performance-based bonuses, and commissions, elements that are not always fully covered by standard employer provided disability insurance. If an unexpected illness or injury prevents you from working, will your current coverage truly protect your financial future?

The Financial Risks of a Disability

Investment banking is a demanding profession that requires sharp analytical skills and unwavering dedication. A disability that impacts your ability to work could mean a significant loss of income, which can have lasting financial consequences.

Limitations of Employer-Provided Disability Insurance

Many investment banks offer group disability insurance, but these plans often come with significant drawbacks:

  1. Limited Coverage on Total Compensation: Group policies typically cover only 50-60% of your base salary and may not account for performance based bonuses, commissions, or stock options. If the majority of your income is tied up in your bonus or commissions, you may be grossly underinsured.
  2. Taxable Benefits: If your employer pays for your coverage, any benefits you receive in the event of a disability are subject to taxes, further reducing the amount you take home. Most group policies cover 60% of your base salary up to $10k or $15k/month. As an investment banker, you are likely in a high tax bracket. Since the benefit from your group policy will be taxable, this leaves a large gap between your benefits received and income you rely upon.
  3. Lack of Portability: Your group coverage is tied to your employer, meaning you may lose coverage if you change firms or move to a new opportunity. Investment bankers tend to change jobs often. If you leave your employer, your group policy is not portable and you may lose your coverage.

Why Individual Disability Insurance is Essential for Investment Bankers

An individual disability policy offers financial protection tailored to your unique compensation structure and career trajectory. Benefits of securing an individual policy include:

  • Comprehensive Income Replacement: Since the group policy will only cover a portion of your base salary, an individual policy will allow you to replace a larger proportion of your total income. Companies will look at your full income received. Typically you can cover up to 60-70% of your total gross income or about 70-80% of your take home pay.
  • Tax-Free Benefits: When you purchase your own policy with after tax dollars, any disability benefits you receive are tax-free, providing full financial protection.
  • Own-Occupation Coverage: Many individual policies offer ‘own occupation’ definitions, ensuring you receive benefits if you can’t work specifically in investment banking, even if you can work in another capacity. Most group policies require you to be totally disabled and not working.
  • Portability and Flexibility: Your coverage remains with you no matter where your career takes you, providing continuous protection even if you switch firms or start your own business.

Take Control of Your Financial Security

Relying solely on employer provided group coverage can leave significant gaps in your financial safety net, especially as an investment banker. Since group policies typically cover a proportion of your base salary, you are leaving a significant portion of your income uninsured. Investing in an individual disability insurance policy ensures that you are fully protected, giving you peace of mind and financial stability in the face of unforeseen circumstances.

At Set for Life Insurance, we specialize in helping investment bankers secure tailored disability insurance solutions that align with their career and financial goals. Contact us today to discuss your options and take the first step toward securing your future. You may also Request a Quote to start the process.

For more information about disability insurance for investment bankers, visit Set for Life Insurance today!