Income protection (DI or disability income) insurance remains one of the most undersold insurance products on the market.
One would think that, given the fact that the odds of suffering a disabling event during our working years are far higher than the odds of us dying prematurely, consumers would be jumping at the opportunity to protect themselves and their loved ones through an insurance solution, even more readily than when purchasing life insurance.
In fact, according to the Council for Disability Awareness:
- You, disabled? What are your chances? Higher than you probably think. You can ignore the problem, but it’s hard to ignore the facts:
- Just over 1 in 4 of today’s 20-year-olds will become disabled before they retire.
- Accidents are NOT usually the culprit. Back injuries, cancer, heart disease and other illnesses cause the majority of long-term absences.
When you combine that with the fact that, also according to the Council:
- At least 51 million working adults in the United States are without disability insurance other than the basic coverage available through Social Security.
- Only 48 percent of American adults indicate they have enough savings to cover three months of living expenses in the event they’re not earning any income.
- Almost half of American adults indicate they can’t pay an unexpected $400 bill without having to take out a loan or sell something to do so…
…it doesn’t take long to realize the potential train wreck that may be out there threatening the financial well-being of too many households.
Knowing that the risk remains, while recognizing imparting the importance of planning for that risk may be challenging, it might be worth considering the following approach with clients and prospects:
“Jane, it’s hard to overstate the importance to protecting your income in the event of a disabling injury or accident. It may help to think of this planning in the following terms:
Which job would you rather have?
- Job #1 pays $5,000 per month, but in the event you are sick or hurt and unable to work, you would have ZERO income coming in to your household as long as you remained disabled (and how long could your household be maintained without any of your income?)
- Job #2, on the other hand, pays slightly less – $4,750 per month – but in the event of that same disabling injury or accident, a tax free amount of 60% of your [Job A] income – $3,000 per month – would be payable to you for as long as you remain disabled, all the way out to age 65.
- By the way, if we consider that your after-tax income while working (Job #1 at the $5,000 per month level) is about $3,500 (at a 30% tax bracket) – that $3,000 per month tax free benefit provided by “Job #2” if you become disabled – would actually be replacing 86% of the Job #1 income!”
- So – “which job would you rather have?”
Ultimately, we all make choices about how important protecting our loved ones is.
Which begs the question, “which job is best for your clients – Job #1 or Job #2?”
Many clients will conclude that Job #2 affords “sleep at night” protection they need, and you would be even better fulfilling your role as those clients’ “trusted advisor!”
If you’d like to learn more about Income Protection planning and options, reach out to the AIB Income Protection Sales Support Team at 800.695.8224 – Ext. 113 or via email today!