Pilot Protection

Pilot Disability Planning: When Flying Isn't an Option

Protect Your Income and Lifestyle

Pilot disability insurance is expensive and often inadequate. Learn comprehensive disability planning strategies including asset protection, income replacement, and maintaining your lifestyle.

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22%

Actual Income Protection ($400K with ALPA after tax/caps)

$292K

Annual Gap ($400K Income vs $108K ALPA Cap)

~7%

Medical Denial Rate Age 60+

Tax-Free

Section 7702 Living Benefits

Quick Answer

Standard disability requires being "disabled" - you can fail your FAA medical while perfectly able to work a desk job, leaving you with no benefits
ALPA LTD at $400K income provides only ~22% actual protection after caps and taxes - gap of nearly $300K/year
Loss of License covers FAA medical loss but has gaps: 6-month wait, 4-year limits, income caps, ends at 60-62
The age 60-65 danger zone: highest risk, highest income, weakest coverage - when LOL ends and ALPA shifts to "any occupation"
Section 7702 living benefits fill every gap: no waiting periods, no "disability" definition, no age limits, tax-free

The Opportunity

Why This Matters for Pilots

The Definition Problem

Standard disability requires being unable to perform your occupation. But you can be medically fit by normal standards - able to walk, talk, work a desk job - yet fail your FAA medical. This gap means no benefits when you need them most.

ALPA LTD Limitations

At $400K income, ALPA pays only ~$108K/year (capped, taxable). After 2 years, the definition shifts from "own occupation" to "any occupation" - if you can do ANY job, benefits may stop even though you cannot fly.

Loss of License Shortfalls

LOL insurance typically covers only 50-70% of income, has 6-month waiting periods, 4-year duration limits, and often ends at age 60-62 - precisely when risk is highest and income is greatest.

The Age 60-65 Danger Zone

Your risk is highest when your income is highest. Many LOL policies end at 60-62, ALPA LTD shifts to "any occupation" definition, and you have the fewest years to recover - a perfect storm of vulnerability.

Implementation

Proven Strategies

Emergency Reserves: The 6-Month Bridge

Build 6+ months of expenses in liquid savings to cover waiting periods before LOL/LTD kicks in. At pilot income levels, this means $100,000-$200,000 in high-yield savings or money market funds.

Best for: All pilots - this is the foundation of disability protection that allows other coverage to work.

Example:

$350K income = $175K needed for 6-month waiting period. Without reserves, you burn through retirement savings or face financial crisis before benefits start.

Section 7702 Living Benefits

Critical Illness Rider provides immediate lump sum for heart attack, stroke, cancer. Chronic Illness Rider pays ongoing income if you cannot perform ADLs. Both are tax-free with no waiting periods or "disability" definitions to meet.

Best for: Pilots who want protection that pays for the CONDITION, not your ability to work - filling gaps that standard disability misses.

Example:

$1.5M policy: Critical illness = immediate lump sum up to $1.5M. Chronic illness = 2%/month ($30K/month) tax-free, indefinitely.

Tax-Free Policy Loan Access

Build cash value in Section 7702 policy accessible via tax-free loans at any age, for any reason. No income verification, no age limits, continues regardless of medical status or employment.

Best for: Filling the age 60-65 danger zone and supplementing during partial disability when you can fly but earn less.

Example:

Grounded at 62, LOL ended at 60, ALPA requires "any occupation" proof: Access $50K+/year from policy loans with zero tax impact.

Avoid These Pitfalls

Common Mistakes

Assuming ALPA Coverage Is Enough

ALPA LTD is valuable but capped at ~$108K/year (taxable), with offsets and "any occupation" definition after 2 years. At $400K income, your actual protection is only 22% after taxes and caps.

Ignoring the Taxation Problem

ALPA LTD with employer-paid premiums is fully taxable. A $10K/month benefit becomes ~$7K after taxes. Section 7702 policy loans and living benefits are tax-free - you keep 30%+ more of every dollar.

Not Planning for Partial Disability

Demoted from Captain to FO, restricted to domestic only, or limited hours? Standard disability and LOL may not pay - you still have your license and can still fly. Income drops $150K/year with no coverage.

Waiting Until the Age 60-65 Window

Many LOL policies become unavailable after 55-60. Section 7702 premiums increase with age. Building protection at 50 costs significantly more than starting at 40 - and may be unavailable entirely.

Questions

Common Questions

Here are the most common questions we receive about this topic.

Ask Your Question

Your airline coverage is better than nothing, but it is designed for the average employee, not high-income pilots with unique FAA medical risks. Review the actual policy documents - caps, definitions, and exclusions matter. At pilot income levels, the gaps are substantial.

No. ALPA LTD is valuable baseline protection. The goal is to supplement it, not replace it. Layer coverage for comprehensive protection: ALPA LTD + Loss of License + Section 7702 living benefits + cash value access.

Depends on your age, health, and how much gap you want to close. A typical Section 7702 strategy for a pilot might involve $30,000-$60,000/year in premiums, but those premiums build cash value (not just expense like LOL premiums).

Some options become more expensive or unavailable. That is why the best time to build protection is while you are young and healthy. But even at 55, options exist - they are just different. Consider higher death benefit for immediate living benefit protection.

Possibly, but expect exclusions, higher premiums, or denial. Pre-existing conditions significantly affect availability. Another reason to get coverage while healthy - every clean FAA medical is a window of opportunity.

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