…is a very complex subject 100%. The perspective of passive income is not aligned with the pursuit of many entrepreneurs or those would like to create another stream of income. It is this way because income is earned based upon the industry occupation. So this disqualifies most Americans for the requested protection. It is vital to show how you make your money along with the mastery of your skill set.
There is documentation that needs to be handled by physicians to confirm your inability to perform the duties of your occupation. See, even entrepreneurship is designed to be an occupation in a certain field. Apart of our process of protecting income starts with asking the question: “Is there any passive income you might currently receive?” If your passive income is substantial, approximately 30% or more of your total earned income, the amount of benefit they will allow you to purchase will be reduced. They set it up in this manner as they know that if you become physically unable to perform, chances are that you will still be receiving some passive income from your investments. This takes you into a different ball altogether.
So, investments are very good but can limit you from protecting the precious income that is needed to help you stay sustained for a number of years. Many are unaware of the longevity risk of passive income and some of the damage it can do to a financial plan that is not protected properly. Let’s just dial in the health cases for an example. Most of your passive income will not even handle the financial demands of most medical bills. So you have to make a decision of paying the medical bills, medications depending on the health situation or paying for your household responsibilities without liquidating your personal assets. The important thing to know here is that your expenses can increase once you are unable to perform your occupation’s duties. Once confirm you are not able to perform your own occupation, your health insurance will drop. There is an increase of $2k-$4K immediately that you did not plan for.
Passive Income needs to be enough to sustain all of your personal expenses and more. If not, you will end up liquidating all of your assets and investments to sustain your lifestyle.