Sell the plan that works when your client can’t.
Anyone gainfully employed has an asset worth protecting. That asset is his income. Disability insurance provides income in the event a worker is unable to perform the duties of his job. Workers take a big risk without disability insurance. It’s hard to fathom how much an impact it can have.
The one key question that should be asked is:
“What asset or assets would you use to cover monthly expenses if you were to become disabled?” If your client doesn’t have a valid asset to pull income from, then it cannot be emphasized enough how important it is to get them covered with disability insurance. A client’s entire financial plan can come crashing down in an instant without a steady income coming in.
A disability policy will charge a specific premium based on:
- The insured’s occupation,
- health (including tobacco status),
- and income benefit desired.
- The healthier & lower-risk occupation insureds will pay a lower premium.
A benefit of owning disability individually:
Owning DI individually vs. through through an employer means that the benefits will be tax-free. 60% of a client’s income, tax-free will be substantially more than 60%, if the benefit is taxable. Moreover, many employer plans have caps on the monthly benefit regardless of income. How much is $5,000 per month going to help an executive making $250,000 per year? This client should be looking at individual coverage to make up that shortfall.
Lastly, ask your clients’ this question:
“Would you rather make $100,000, and if disabled get $0, or would you rather make $98,000 and if disabled you get $60,000 tax free?” (note, you would use the premium amount to represent the amount of reduction in income). However, when put in these terms, it is hard to ignore the value that a disability policy can bring to a client… and advisor for that matter. It’s hard to continue with a client’s financial plan without that income!
Sell the plan that works when your client can’t.