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How disability insurance helped one man get his life back

On a golden July day 20 years ago, John Nichols was a healthy 32-year-old insurance professional, enjoying a carefree weekend with friends at a buddy's lakeside cabin in Wisconsin.

Then in a matter of seconds his life changed forever.

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Nichols' story is a testament to the value of the disability insurance products he sells. He is the LIFE Foundation's Disability Insurance Awareness Month spokesperson this year.

Nichols and his pals had just finished a round of golf and were preparing for the first waterskiing run of the day. Skis on and ready to go, Nichols was at the dock when he grabbed the rope handle from the water and gave the boat driver a thumbs-up.

It was too late by the time he noticed the slack in the line.

The boat lurched forward before he had a chance to drop the handle, and the sudden tightening of the slack popped Nichols up in the air. His body sailed down head first through the four-foot water and crashed into the lake bottom.

"As I floated to the surface, I knew I was in trouble," he writes in his book for insurance agents, Income Protection: The Conversation. "My thoughts were to get my head above water and call out for help. Instead, my chin rested against my chest while my arms floated about involuntarily."

Thanks to his quick-acting friends, Nichols survived.

Devastating news

disability insurance true storyBut when he woke in the hospital the next morning, the neurosurgeon delivered devastating news. Nichols suffered a broken neck and was diagnosed a quadriplegic.

It took six grueling years of recovery before Nichols was back at work full-time -- and "maybe longer mentally," he says. "Many people may not realize there are at least two sides to a disability -- the physical and the psychological. I struggled mentally, reliving the drowning episode and trying to come to terms, come to acceptance of this new John Nichols."

Before the accident, Nichols was with an insurance agency affiliated with a national carrier. Afterward, he started Disability Resource Group in Chicago, which provides disability insurance to individuals and businesses.

Fortunately, at the time of his accident, Nichols had disability coverage, which pays out if someone becomes disabled and is unable to work. He had insurance through both a group policy through his job and an individual disability plan.

Many large employers offer disability insurance coverage as part of a standard employee benefits package. And many workers assume that coverage is enough. Here's more on choosing disability insurance at work.

But Nichols wouldn't be where he is today if he hadn't also had the individual disability policy.

Advantages of disability insurance

A group plan is certainly helpful, but it has limitations. Typically a group plan pays out 40 to 60 percent of a worker's salary, with the amount capped at $5,000 a month. If the employer pays the premium, the income replacement benefits are taxed. You also can't contribute any of that money to your 401k because the benefits aren't considered earned income. In addition, some group plans don't cover partial disability. They pay nothing if you're able to work at least part-time.

An individual disability policy is one you buy yourself, and it's tailored to your needs. It's designed to pick up where a group policy leaves off and fill in the gaps. A variety of riders are available, including one to continue contributions toward retirement savings.

Nichols says his group disability plan terminated benefits a couple of years after the accident. The insurer concluded that he could perform the "substantial and material duties" of his job and that he was "choosing to rehab instead of work."

"This happened even though my doctor supported my continuation of rehabilitation," he says.

Nichols was still sleeping up to 16 hours a day then. With two hours of daily rehab, plus the time it took to get ready in the morning, he had only a few hours left for anything else. "I was always tired," he says.

He wanted to continue rehab because he was showing improvement in muscle movement ability and strength.

"My physician said that the rehab was critical to the long-term recovery," he says.

The individual disability insurance continued to pay out benefits during those years he couldn't work full-time, and paid additional rehab benefits when his medical insurance rehab benefits were exhausted. Here's how to find an individual disability insurance policy.

"This gave me an opportunity to try and get back as much of my body and function as I could," he says.

The hard work paid off. Nichols still suffers paralysis and nerve damage, mostly on the right side of his body from hips to knees and in his right hand and foot. But he not only learned to walk again, he now also runs marathons, raising money for organizations that serve children with spinal cord injuries.

Under the radar

Disability insurance tends to lie under the radar for a lot of consumers, even though the ability to earn income is the largest asset most people have -- bigger than a house over the long run.

"After health insurance, it's the most important coverage," Nichols says. "Just imagine if I didn't have it."

While the small risks in life are easily self-insured, Nichols says, the big risks and unknowns need coverage. The average person faces a 3-in-10 chance of becoming disabled and unable to work for at least three months sometime during their careers.

"In one sense, if you don't have disability insurance you are saying you don't have an income, a lifestyle, worth protecting," he says.

Disability coverage also helps others who would be affected if you became disabled.

Says Nichols: "People tend to forget about the domino effect an accident and illness can have on other people in their lives -- a spouse, children. Think about all the other people who are attached to your life."

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