On a flight back home, I started chatting with the gentleman seated next to me. After the usual introductory comments and questions, I asked how he liked working for a Fortune 1,000 company. He mentioned that he enjoyed his job and had been working there for about eight years. Then I asked what he would do if he had an accident or illness that prevented him from working. He paused a bit and then looked at me and said, “I hope my employer will take care of me.” As is the case with many clients and prospective clients, it was clear that he hadn’t thought about the possibility of this happening to him anytime soon.
In the same way our clients don’t like to think about having a disabling accident or illness, they also like to assume that they are already covered—and that their coverage is the type and amount they need. However, we have seen a major shift in the past decade in how our society and employers think about health care. Instead of the employer-sponsored and paid-for comprehensive health care that was a fixture of previous generations, the onus is increasingly put upon the employee to take personal responsibility for his financial and health care future. These changes, paired with avoidance of the subject of disability altogether, can lead to poor planning or gaps in coverage that may ultimately leave individuals open to unnecessary hardship.
Imagine a scenario in which your client, or prospective client, obtains a great job and is enrolled in the company’s group medical insurance plan. The plan itself is a long, dense document full of high-level medical and economic terms. It’s easy for him to brush the plan aside, thinking all he needs to know is that he is receiving mostly free health care and his doctors are in network. Ideally, this is where a financial advisor would step in and help him understand and tailor his disability coverage.
Without guidance from an adept financial advisor, the story could easily play out in a very different way. He tosses the benefits paperwork into his desk drawer and doesn’t give it a second thought. But several years later, he experiences a drastic life change. Perhaps he gets into a serious accident or, more likely, he develops an illness that reduces his ability to do his job. Every day brings a new set of problems with which he never thought he would have to deal. His employer’s medical insurance helps him obtain the treatments he needs, but the recovery will be long and there may be a permanent condition he will have to learn to live with for the rest of his life. His employer continues to pay him using his sick time, personal days and vacation. But how long can that last?
He learns that he has disability coverage, which he will now depend on to provide cash while he is unable to work. At first, it seems like a huge relief. However, he quickly becomes acquainted with all the details of his plan, including a number of unpleasant surprises. First, he can’t get the maximum income replacement he needs by using only this plan as his group long-term disability plan only provides up to 60 percent of his prior income. On top of that, the benefit is treated like taxable income because his employer pays for this benefit. Therefore, the 60 percent will be further reduced by taxes. He will now have to live and survive on roughly 50 percent of his income—maybe even less. Like most people, he hasn’t saved nearly enough to cover this kind of eventuality. While it may be difficult for most people to save enough to cover this, we can help them realize how much disability insurance coverage they would need to make up for the lack of employee benefits coverage.
Another challenge comes when he discovers that his status as disabled is at the mercy of the physicians who are associated with the group disability insurance company, not with his own physician. Professionals who most likely do not treat people like him on a daily basis will now decide whether or not he is able to work. If they do assess that he is capable of working, his benefits may stop.
This may seem like an extreme example, but it actually happened to me. About one year after a tragic accident, I decided to start coming into the office a few times per week. I couldn’t do much and was only able to go in for about an hour at a time. However, as soon as the group long-term disability insurance carrier’s claims examiner learned that I was working, they sent an examiner out to do an assessment. One week later, I received a letter explaining that my benefits would be terminated. Their staff physicians ruled that I was capable of performing the “substantial and material duties” of my job. This was coming from doctors who didn’t treat me, who only knew about me and my recovery from a single interview. Regardless, that was enough to shut down my benefits through the group long-term disability insurance carrier.
I was incredibly fortunate to have a private individual disability insurance plan in place. My physician, who was far more familiar with my case, understood that I was not ready to return to part-time, let alone full-time, work. I can’t imagine how my rehabilitation or my life would have been set back had I needed to return to a nine-to-five job at that point.
Unfortunately this is the reality for many people in the United States. We are comforted by the idea of having medical and disability insurance plans through our employers, so many fail to plan for the possibility of an onerous scenario like mine coming to fruition. It is imperative that we help our clients realize they are not invincible. These examples are far more common than they might think, and sharing them can help clients understand why they need to start making smarter, more comprehensive plans for their future.
At the end of the day, individuals can no longer rely on the government or their employer to provide them with the best insurance for the rest of their lives. The Social Security Administration estimates that the average monthly disability payment from Social Security is a paltry $1,171 per month. The days of an external safety net are disappearing. If your clients want the best chance at the best possible recovery and financial stability, then you need to help them take matters into their own hands.
One of the best ways to ensure that a client is covered is for him to get an individual disability insurance plan in addition to his employer-provided group long term disability plan. These types of plans put the control in the client’s hands by providing him with the empowerment of choice, control and cash. If he becomes too sick or hurt to work, individual disability insurance is the ultimate gap filler to enhance his medical insurance into a more exhaustive health plan.
Disruption is all around us whether it be the mundane or more significant areas of our lives. That disruption may be positive but there’s also the negative. No matter your clients’ circumstances, chances are there are already a great many things they can’t control. Why not help them grab hold of the things they can?
John F. Nichols,
MSM, CLU, is a nationally recognized disability benefits consultant, the creator of disability products and administration systems and an expert witness in disability proceedings. Nichols serves as president of Disability Resource Group, Inc., a national insurance agency that he founded in 1999. As a life and qualifying MDRT member, John has two Court of the Table and 10 Top of the Table qualifications. He is an Excalibur knight level contributor to the MDRT Foundation as well as a major donor to the Legacy of Life program. Nichols can be reached at Disability Resource Group, Inc., 2625 W. Peterson Ave., Chicago, IL 60659. Phone: 800-945-9719 x301. Email: Jfn@drgdi.com.