Making the Case for Individual DI Insurance

One way is to use real stories about recognizable scenarios to illustrate how a disability could affect your client personally.

By Stacy McCann

Earlier this year, The Guardian Life Insurance Company of America® (Guardian) released findings from a national survey that explored the link between financial confidence and life satisfaction. The Guardian Study of Financial and Emotional Confidence™1 revealed that while 78 percent of Americans are worried about their financial future, their behaviors often contradict the financial priorities they identify as most important in their lives. One of the top priorities cited was protecting your family financially if you die or are unable to work. While life insurance covers a death, disability income (DI) insurance is a crucial component to protect your income if you are unable to work due to an illness or injury. And yet only about 40 percent of respondents had some type of DI insurance coverage

Why do so many of our clients miss this integral part of their family’s financial safety net? Many clients appear to have a limited understanding of how DI insurance works, which contributes to low ownership levels, including half of all Millennials who have no disability coverage.

Disability statistics

Consider these compelling statistics from a 2014 study by The Council for Disability Awareness2:

• One-in-four of today’s 20-year-olds will become disabled before reaching age 67.2.

• Only 33 percent of private-sector workers have access to long-term disability (LTD) benefits through their employer, and 40 percent have access to short-term disability benefits (STD).

• At companies with fewer than 100 workers, only 29 percent have access to STD and 23 percent have access to LTD.

• The most common causes of long-term disability claims are not accidents but rather back problems, joint and soft tissue pain, cancer, heart disease, and mental health illnesses.

Guardian’s fourth annual Workplace Benefits Study3 found that 3 in 5 Americans could not live off their savings for more than six months if they were to become ill or injured and were unable to work. Employersponsored DI coverage is a decent foundation but generally offers only basic protection, with around 40 percent income replacement after taxes. Social Security Disability Insurance is also inadequate for most earners to maintain their current standard of living.

<insert pull quote>

Clients who have invested a great deal in their education and may have substantial student loan debt are particularly in need of protection to meet their financial obligations in case of a disability.

The IDI conversation with clients

For an agent or broker, this provides an opportunity to educate clients while customizing an individual DI policy to meet their unique needs. Take the time to explain what’s covered and what options are available. When people do not understand something, they often ignore its value and worry that they are paying for something they’ll never use. To combat this, use real stories about recognizable scenarios to illustrate how a disability could affect them personally.

Financial professionals can help consumers visualize the unknown and the possible. In order to decide what coverage is “worth it” to purchase, consumers conduct vague probability calculations in their heads to determine the likelihood of something happening to them. Recognizable scenarios, whether illness or injury, resonate best and increase the perceived probability that it could happen to them.

Explain the importance of DI insurance in career-interrupting scenarios. Clients who have invested a great deal in their education, such as doctors and attorneys, and may still have substantial student loan debt, are particularly in need of protection to meet their financial obligations in case they suffer from a disability. Unlike many other kinds of debt, student loans cannot be discharged in the event of bankruptcy.

Many graduates assume that federal student loans come with exceptions in the case of disability, but the government’s standard is quite restrictive. And private loans may not have any provisions for disability at all. For these clients, financial professionals can now offer policies with riders that repay their student loans and protect them from default.

No one plans on becoming disabled, but the sobering reality is that nearly 25 percent of Americans will become disabled before they retire. Most disabilities are not caused by accidents but by illnesses. And that’s precisely why individual disability insurance is an integral part of your clients’ comprehensive financial product portfolio, especially for people who are in their peak earning years and who might not be able to afford the financial impact of a serious disability.

1 https://www.livingconfidently.com/research/

2 http://disabilitycanhappen.org/research/consumer2014/

3 https://www.guardiananytime.com/g