Though disability is behind a significant number of home foreclosures and personal bankruptcies, insuring against it has not been a high priority for most workers because many assume they’re already covered through Social Security, workers’ compensation or employer-provided group plans.
Most Americans don’t realize a disability could interrupt their income—and fewer still are protected from that loss by adequate savings, private insurance or government programs.
Just consider the following statistics on disability recently compiled by the Council for Disability Awareness:
More than 10 percent of Americans between the ages of 18 and 64 have a disability (U.S. Census Bureau, Selected Social Characteristics in the United States: 2009).
8.1 million U.S. workers receive Social Security Disability benefits as of October 2010 (SSA Beneficiary Data, 10/10).
Nearly 90 percent of disabilities aren’t work-related and thus don’t qualify for workers’ compensation benefits (National Safety Council, Injury Facts, 2008 edition).
Applications for Social Security Disability Insurance (SSDI) benefits increased 21 percent from 2008 and are projected to increase in 2010 as well, yet only 35 percent
of initial SSDI applications were approved in 2009 (Social Security Administration).
100 Million Americans are not protected by private disability insurance (Council for Disability Awareness, Long-Term Disability Claims Review, 2005).
Once again the LIFE Foundation has declared May Disability Insurance Awareness Month. It’s a time when the insurance industry comes together to do something about the enormous gap that exists between Americans’ need for disability income protection and the actual coverage they have in place. This year’s theme is “Protect Your Paycheck.” LIFE will be launching the Producer Planning Toolkit later this month to help insurance professionals pull together a quick and effective campaign for May. Some of the many promotional endeavors include the following:
• Microsite. LIFE has created a microsite, www.protectyourpaycheck.org, to focus Americans on the fact that too many are leaving their most valuable asset—their paycheck—completely unprotected. At the end of this month, this will become a standalone microsite that will feature the best of LIFE’s web-based DI resources. It will also be one of two places where consumers can enter the “This Moment Made Possible by My Paycheck” photo contest.
• “This Moment Made Possible by My Paycheck” Photo Contest. Accessible through the www.protectyourpaycheck.org microsite and LIFE’s Facebook fanpage beginning later this month, this contest will ask consumers to submit a photo with a caption that captures a moment that their paycheck has made possible (e.g., family members enjoying time together in their home, a memorable vacation, etc.). There will be a photo carousel on the www.protectyourpaycheck.org microsite, and people who grant LIFE permission will have their photos featured there. It will only take a few minutes to enter, and the person who submits the best photo and caption will receive a $500 gift card.
• DIAM on the LIFE Website and Blog. During May, the homepage of LIFE’s main website will focus on disability insurance, including a link to LIFE’s popular “Disability Needs Calculator” and the “Lifetime Earnings Calculator.” LIFE will also feature disability insurance content on “The Insurance Word Blog” throughout the month.
• Disability e-Cards. LIFE has a suite of electronic greeting cards, designed to give insurance professionals a cost-free way to communicate with people in their communities during DIAM and throughout the year. There are disability insurance e-cards that were developed specifically for use during the May campaign. You can access LIFE’s e-cards at www.insureyourfuturenow.org.
• Turnkey Planning Kit. LIFE is creating a new planning kit for agents to use during May, which includes free downloadable flyers for use in mailings and client meetings, a DI sales ideas podcast, links to important DI resources, as well as a marketing guide so agents can create their own quick, effective DIAM campaign to reach out to their communities.
• Media Outreach. Throughout the year, LIFE reaches out to personal finance reporters at the nation’s leading print and online publications. During May, LIFE’s focus will be on story ideas relating to disability and disability insurance.
• Public Service Announcements. LIFE will develop and distribute radio PSAs to 1,000 radio stations across America.
The following information will provide you with some helpful statistics and information as well as some sales ideas from leading DI specialists from The Plus Group.
Social Security Disability Insurance: Participation Trends
and Their Fiscal Implications
A series of issue summaries from the Congressional Budget Office, 7/22/10
Benefits in the Program
“Average monthly benefits for disabled beneficiaries were $1,065 in May 2010. Benefits for spouses and children were lower, averaging around $300 per month. Disabled beneficiaries usually receive the same amount of benefits each month, boosted by annual cost-of-living adjustments, for the rest of their lives.
“DI benefits, like all Social Security benefits, are tied to a worker’s past earnings through a progressive formula. That is, workers who have higher earnings receive larger benefits, but the replacement rate—the portion of earnings that benefits replace—declines with earnings.
“For example, a 55-year-old worker who has had earnings equal to the nationwide average (in 2008, $41,000) during all of his or her working life and who becomes disabled this year will receive monthly benefits of $1,544, replacing 45 percent of those earnings. Yet if that person’s earnings had been half as much, the benefit would have been $993, replacing 58 percent of earnings.
“Because the benefit formula is linked to the growth of average earnings nationwide, average initial DI benefits grow at approximately the same rate as average earnings.”
For the entire eight-page report in pdf format, go to www.cbo.gov/ftpdocs/116xx/doc11673/07-22-SSDisabilityIns_Brief.pdf
About the Personal Disability Quotient
The Personal Disability Quotient and the PDQ Calculator were developed to aid in educating consumers by the Council for Disability Awareness. The statistical basis for the PDQ Calculator is the 1985 Commissioners’ Individual Disability Tables A and C, Society of Actuaries.
For questions about the PDQ or CDA, please call 207-774-2634.
For more information and other client questionnaires, go to www.DisabilityCanHappen.org.
Your Chance of Becoming Disabled
Check the box below that reflects your total points. Read across to see your estimated chance of becoming disabled and unable to work for three months or longer before the age of 65.
__ less than 25 points
5-25% chance (below average)
__ 25-35 points
25-35% chance (about average)
__ 36-49 points
35-50% chance (above average)
__ 50+ points
50% or more chance (significantly above average)
The Length of Time a Disability May Last
Probability
Average of disability*
length of lasting 5 years
Age disability* or more
__ 20-24 69 months 30%
__ 25-29 74 months 32%
__ 30-34 78 months 35%
__ 35-39 82 months 38%
__ 40-44 85 months 40%
__ 45-49 86 months 43%
__ 50-54 86 months 45%
__ 55+ 84 months 46%
*For disabilities lasting three months or longer.
Mind the Gap In Your Key Clients’
Group DI Plan
By Ray Phillips
A trip on the London Underground is a unique experience. The complexity of the subway system borders on anarchy. Yet through it all a proper British structure keeps the system moving in a timely, efficient and orderly way.
As one stands on the platform and a subway car approaches, an otherworldly voice bellows from a loudspeaker, Mind the gap. This is the London Transit Authority’s way of telling riders to be careful getting in the car lest they trip over the space between the car and the platform, or worse yet, get a foot caught in the small chasm.
A prudent DI planner might use this anecdote with clients when discussing their need to supplement a group long term disability (LTD). “If you don’t Mind the gap, you might get caught short at claim time.”
Consider this scenario: A well-compensated client has coverage at work. His perception is that it completely covers his income and there is no need for additional individual coverage. But remember, Mind the gap.
Let’s assume the client is making $225,000 and that he does indeed have a solid group LTD plan at work—60 percent of salary to a maximum of $10,000 per month. The client’s annual DI benefit would provide $120,000 of taxable benefits (this benefit is taxable if the employer is paying the premium). Obviously, there’s a shortfall relative to his income here, and realize that the gap would be wider if the client’s income was higher or if the group LTD program’s monthly cap was lower. Yet an appropriately structured individual DI plan can address that shortfall.
Likewise, bonuses and commissions are not countable toward the income a group LTD plan will protect. This might further widen the gap, especially for those who are in a commission-oriented occupation or who have a history of healthy bonuses.
When working with the clients who have DI coverage provided by their employers, it is important to make sure the income they’re making is suitably protected. Group LTD benefits may not protect as much income as the client assumes. Remember to think of the London Underground and Mind the gap in your client’s group LTD plan!
Tips for a Successful
Voluntary Multi-Life DI Case
By Reed Schnittker
The individual disability income (DI) insurance industry has seen growth in the voluntary multi-life marketplace. It’s an attractive market because it allows:
• Employers to maintain comprehensive and budget-friendly employee benefit packages to attract and retain employees.
• Employees to purchase valuable coverage at a discount through a carrier their employer has endorsed—often with streamlined underwriting.
• Producers to see increased referrals, increased cross-selling opportunities and more commissions.
To be successful, producers need to understand the customer, effectively communicate the offering, and work with the employer to establish a plan and enrollment strategy that best meets the employer’s needs.
Understand the Customer. Employers are the “gatekeepers” to employees, and a strong relationship with them can result in better support, access to employees, and a stronger plan design. When meeting with employers, position yourself as an expert for employee benefits and ask questions that help you deepen your understanding of their workplace and objectives. The knowledge you gain helps you and the insurance carrier develop a plan design that meets employer and employee needs.
Communication. Putting benefit decisions in the hands of employees means more education and communication is needed. Most employers welcome assistance in helping employees understand the benefit offering. The best way to educate them and ensure a successful enrollment is to use a variety of communication methods with messages that address their needs.
Establish a Plan. Creating a customized plan design and determining the best ways to communicate with employees takes time and coordination. Work with an insurance carrier that offers assistance, such as customizable communication templates, employee enrollment packets and enrollment help. Establish employer expectations by clearly defining your role and theirs regarding account set-up, enrollment communication, enrollment meetings and policy delivery.
Following these tips when selling and enrolling a voluntary multi-life DI program can provide benefits for everyone—you, the employer and their employees.
Disability Protection
For the Single Business Owner
By Ken Bloch
Single business owners invest countless hours and energy into creating wealth, stability and security for their families. These businesses are not only the single source of income, but also future retirement income and legacy for the owners. Will the value of such a business withstand a disability moment?
The sole business owner is the strength to his family, employees and clients. However, even the most stable businesses can become fragile in a disability moment. When this happens, a business suffers a loss of value due to the loss of leadership.
A single business owner protects his income with personal disability insurance and business expenses with a business overhead policy. His family is protected with life insurance. What about protection for the business? A single business owner can insure the value of his business up to $5,000,000 based on current market conditions and receive a permanent total disability lump sum payment after a 12-month elimination period. The value of the business is calculated using a multiplier of wages plus profits. Benefits would not be payable if the business owner was able to sell the business.
Every sole owner business should consider this coverage—physicians, attorneys, CPAs, dentists, manufacturer’s representatives, financial planners, and other executives and professional business owners. After a severe stroke, how long will any of the above occupations be able to maintain their client base and business value?
Discussing this issue with your business professional clients gives you the opportunity to review all facets of business insurance with them. It also provides the opportunity for new agents to utilize daytime activity to create new clients and build a successful career.
Important Resources for Disability Insurance
Information and Education
The Life and Health Insurance Foundation (LIFE)
www.lifehappens.org
888-543-3777
LIFE is a nonprofit organization, formed in 1994 by seven leading insurance producer organizations, to better educate the public about important insurance planning topics. LIFE coordinates three industry-wide awareness campaigns: Insure Your Love (observed in January/February), Life Insurance Awareness Month (observed in September) and Disability Insurance Awareness Month (observed in May). A wealth of information is on the site, plus the organization provides various promotional materials for clients.
Council for Disability Awareness
www.disabilitycanhappen.org
207-774-2634
Since it began in 2005, this nonprofit group has engaged in communications, research and education, helping the American workforce become aware of the growing likelihood of disability and its financial consequences. This website contains useful information that can be helpful in marketing DI to clients.
The International DI Society
www.internationalDIsociety.com
562-481-2381
The International DI Society is dedicated to the task of preserving and enhancing the disability insurance industry. Membership includes industry regulators, producers, educators and insurers. IDIS has a mentoring program for newcomers to the disability market. The Society hosts an annual meeting in the fall. The website provides helpful articles and a very useful glossary of terms used in disability insurance.
The American College
www.theamericancollege.edu
610-526-1442
The premier educational institute, specializing in financial services. Offers several respected industry designation programs, as well as other specialized educational classes. For courses specializing in disability insurance, go to www.theamericancollege.edu/insurance-education/lutcf-insurance-skills.
LIMRA
www.limra.com
860-688-3358
More than 850 financial services companies in more than 70 countries around the world turn to LIMRA first to help them build their businesses and improve their performance. This 90-year-old organization provides financial services companies with the latest industry information and makes recommendations that address their needs. While much of their information is proprietary to member companies, the website has useful information.
The Plus Group
www.plusgroupus.com
800-831-1018
The only national insurance brokerage organization focused on disability insurance. There are 20 partners who represent the recognized leaders in the income and asset protection industry. Helpful articles can be found on this group’s website.
Disability Insurance Forum
www.disabilityinsuranceforums.com
This is a website/blog where disability insurance agents can interact with each other. Use this to find joint work partners across the country, debate products and learn more about disability insurance.
Armed with this information and sources, you should be ready to take advantage of the promotional materials available from the LIFE Foundation to bring DI into your product mix.
