Making the Case for Disability Insurance to Clients

Consider the following numbers: 51 million Americans, one in four 20-year-olds and $1,280.

If you guessed those as the number of Americans without disability insurance, the percentage of 20-year-olds who will become disabled before retirement age and the average monthly Social Security disability payment…you'd be right.

Congratulations!

But, that's it for the good news.

As the numbers indicate, there is an urgent need for advisors to talk with their clients about the disability insurance gap and whether or not clients and their families are adequately protected.

Fortunately, starting that conversation is one of the few things that is as easily said than done, and there is no time like doing so than during Disability Insurance Awareness Month.

Here are a few ways to get the conversation started.

Contextualize the Risks

When most clients think about disability insurance, it is often in the context of a catastrophic accident that leads to a life-long injury.

While such accidents certainly happen, the chances of a client experiencing a catastrophic injury are, thankfully, quite minimal.

That, however, shouldn't negate their need for disability insurance.

Rather, disability insurance — especially short-term coverage — can be a financial lifeline in the event of less severe, but far more likely, injuries.

In fact, a recent Haven Life study found that close to 50% of American workers consider their job "risky" — whether in terms of physical or emotional injury, illness or distress.

Should that injury, illness or distress result in a client being unable to work, having a disability insurance policy in place can cover lost wages.

By helping clients understand their day-to-day disability risk exposures, advisors can ensure their clients have the necessary financial protections in place.

In the event a client does need to trigger a disability insurance claim, that also means peace of mind for them to focus on recovery, not finances.

Educate on How Coverages Work (or Don't) Together

As mentioned in my last article, certain clients might have some disability-related protection through their term life insurance policy — especially if they purchased a disability income insurance rider.

It is understandable then that clients who purchased this rider might not want to pay for a standalone disability policy.

However, advisors should help clients understand that a disability income insurance rider is not an all-encompassing solution and might not provide enough financial protection clients could need in the event of an accident or injury.

For example, such a rider typically replaces just a portion of income — which again, might not be enough financial protection for clients who are unable to work.

After all, the majority of American workers (61%) recently told Haven Life that their base salary covers more than half their cost-of-living expenses.

Without their full wages, 40% also said that they would only be able to maintain their standard of living for up to two months.

So, it's important to consider whether or not you would need a separate policy (in addition to a disability insurance rider) to replace more of their income.

For advisors, the takeaway is clear: having a standalone disability policy may be the only surefire way for clients to ensure they and their families have financial protections in place in the event of a disability.

Mine Facts vs. Fiction

After you've talked with clients about whether they need a standalone disability policy, clients might be inching towards making a purchase.

But, the thought of having to fill out another application or go for more lab testing can be an understandable deterrent.

Fortunately, that's not necessarily the case anymore.

Notably, some insurers now offer the ability for clients to purchase a disability policy directly online, without the need for a medical exam.

Additionally, in reviewing available options, encourage clients to see if their existing life insurer also offers a disability product.

If they do, clients could have the option to "bundle" their policies — which essentially means they get a discount or preferred rate for purchasing a subsequent policy.

Ultimately, it is less important where clients purchase a policy and more about having the right financial protections in place.

And, while an advisor can't prevent an accident from happening, they can use Disability Insurance Awareness Month as the impetus to make sure that in the event one does occur, clients are protected.

Wade Seward is head of distribution strategy at Haven Life.