Why High Earners in Professional Firms Face a Hidden Financial Risk

Many high earning professionals assume their income alone guarantees long term financial security for their families. Yet there is a hidden risk that often goes unnoticed until it is too late: a protection gap that can leave families vulnerable and cause significant hardship in the event of premature death or disability.

Entrepreneurs who build businesses over many years often create assets that continue to generate wealth long after they are gone. In successful cases, a company built over 10 to 20 years may be worth $5 to $10 million or more. These businesses can be sold, passed on to heirs, or provide ongoing income for survivors, serving as a lasting financial engine independent of the owner’s labor.

Professionals at law, accounting, consulting, and similar firms may feel like business owners because they have ownership stakes, profit distributions, and client relationships. But unlike entrepreneurs, they do not own an asset that can survive without them. Their stake is tied directly to their continued work, and the moment they stop producing, the income stops as well.

When these professionals pass away, the firm returns their capital contribution and pays out any group life insurance benefits. While they may have retirement accounts, those assets are often still growing and subject to taxes on withdrawal. Few of these resources provide a sustainable income stream comparable to their prior compensation.

The difference is clear: entrepreneurs leave behind a tangible, income-producing asset that can support their families for years. Professionals in firms, despite their ownership status, usually leave behind a one-time payout that does not replace the ongoing income or lifestyle their families had become accustomed to. Entrepreneurs still need protection and planning, but they begin with a business that can outlive them. Professionals, on the other hand, have earnings that are entirely dependent on their continued work, and once that ends, so does the income. This gap requires thoughtful planning and solutions beyond basic group benefits to truly protect families and provide peace of mind.

Real Life Consequences of Inadequate Protection

Consider a 42-year-old partner at a consulting firm earning just over $1 million annually. Married with two children, his largest financial assets outside his home were a 401(k) worth about $450,000 and a cash balance plan with $300,000. These savings were far from enough to replace decades of future earnings.

When he died suddenly from a heart attack, his family received his capital contribution from the firm, a modest group life insurance payout, and access to his retirement accounts. While helpful, those funds were taxable and could not replicate the steady seven-figure income he had provided. Within a few years, the family faced difficult decisions such as downsizing their home, delaying college funding, and adjusting their lifestyle.

This example shows how the protection gap can cause severe financial consequences, especially for younger high earners whose retirement savings have not yet matured.

Beyond Death: The Overlooked Risk of Disability

Premature death is only part of the risk equation. For many partners and executives, losing the ability to work due to illness or injury is often more likely and more damaging. According to the Social Security Administration and LIMRA, about one in four of today’s 20-year-olds will become disabled before retirement, and 27% of adults already live with a disability. Yet, NFP data shows that only 26% of employers offer supplemental executive disability coverage, making it a benefit that many high earners simply do not have access to.

Many executives earning $400,000 a year are capped at $10,000 per month in benefits, leaving a $120,000 annual shortfall. This creates a second protection gap that can devastate families without a death occurring, underscoring the need for proactive, executive-level protection solutions.

Checklist: Are You Exposed to the Protection Gap?

• Your income stops the moment you stop working

• Most of your wealth is in retirement accounts not yet fully matured

• Your firm’s group life or disability benefits are capped and do not replace your full income

• You have no asset or ownership interest that can be sold or that produces income independent of your labor

• You have not recently reviewed your personal coverage beyond your firm’s benefits

  
  

Take Action to Protect Your Financial Future

The protection gap is a hidden liability that exists between your current earnings and the assets that can support your family if you are no longer able to provide. Closing this gap means assessing the risks of both premature death and disability and taking action before it is too late.

While firms can and should play a role in addressing this issue, the responsibility ultimately begins with you. Review your coverage, work with experienced advisors, and ensure your family and legacy are protected.

Sources:

• Social Security Administration Disability Facts

• LIMRA – Disability Insurance Awareness Month

• NFP – 2025 U.S. Executive Compensation and Benefits Trend Report