With the current economic and health challenges in America, many individuals are justifiably concerned about ensuring they protect themselves and their families against the unexpected. And individuals are more open than ever to exploring ways to protect their future.
Advisors are uniquely positioned to help clients through times of uncertainty by offering income protection solutions, such as individual disability insurance (IDI), that guard against an unforeseeable event. IDI can provide long-term financial protection and added stability should a client become unable to work due to a disabling event, such as an unexpected illness or injury. By sharing a few essential details about income protection, advisors can help clients understand the true value of IDI, how it works and who needs it.
COMMUNICATING IDI BENEFITS
One of the most important aspects to communicate is that IDI can be an effective, long-term income-replacement solution. Just as life insurance pays beneficiaries for a loss, IDI can pay a monthly benefit, tailored to a policyowner’s total income, in the event of a serious illness or injury.
People rely on their whole income to maintain their financial security, which includes their base pay, any incentive pay and bonuses. Although many companies offer group long-term disability (LTD) coverage, clients should be aware that it often doesn’t cover all sources of income, and it is often taxable and typically only provides 40-60% of income replacement. It also likely does not cover bonuses or incentive pay.
For higher-income earners, LTD can be capped at an amount that is much lower than what is needed to replace a client’s monthly income. Should these individuals experience a disabling event, they would still be expected to keep up with their higher recurring expenses. Also, most employer-based disability coverage is only maintained while the employees are working for that employer. IDI is portable income protection, which stays with the individual throughout their career no matter where they work.
Most people have not thought about how they would pay their bills should they experience a disabling event. However, everyone has monthly expenses, which often include mortgages, car and loan payments, and other recurring costs. Highlighting that expenses are recurring even in the absence of income can help clients realize how valuable IDI can be for their financial stability.
Highlighting the fact that expenses are recurring even in the absence of income can help clients realize the value of IDI to their financial stability.
Advisors can help paint the picture for clients that if they are unable to work, these expenses would remain, with possible new expenses arising due to their illness or injury. IDI helps protect the income that clients are using to pay for these monthly expenses, maintain their lifestyles and support their families. This is even more essential during unpredictable events like we’re experiencing now.
While higher-income earners are prime candidates for income protection, they are certainly not the only group of people who would find value in IDI. Young people are not immune from a potentially disabling event and should also consider how they will protect their income over the course of their careers
In fact, research shows that at least one-quarter of today’s 20-year-olds can expect to be without work due to a disabling event before they reach retirement[i]. Purchasing IDI coverage early can help younger professionals secure competitive IDI rates, and they can increase coverage as their careers progress. IDI can also provide income replacement until the age of 65 or 67, making it a long-term solution.
Giving clients a glimpse into what their financial lives would look like should they experience an unexpected long-term illness or injury opens the door for conversations about the importance of income protection. Once this stage has been set, advisors can then emphasize key considerations around the true value of IDI.
By providing meaningful solutions that address clients’ individual needs, advisors demonstrate how individual disability insurance can provide valuable protection and increased financial stability for clients, especially during times of uncertainty.