The best time to get a disability insurance income protection policy (or any other form of coverage) is at the earliest possible time when it is both financially feasible and practical, even though there may not be an obvious need at the moment. The only result of procrastination is that health can change and circumstances can change, both of which can affect eligibility. Why, then, do clients wait until it is too late?
One reason might be that prospects and even agents or advisors don’t see the need or the urgency to purchase these policies. Another reason might be that no one told your clients or prospects they should have it or that this form of protection even existed. They could also have some false belief that they will never get disabled or that their employer or some one else if they become disabled will pay their expenses and wages. Incidentally, one does not have to be a paraplegic in order to collect. Definitions vary, but the best one will require that you be unable to do the duties of your own occupation even if you are working elsewhere, regardless of how much you earn.
What happens if someone wants the income protection coverage but has already been turned down for any number of non-medical reasons? Is the “best” time gone? No. Not if an agent knows where to go for assistance and a probable solution. There are brokers who specialize in hard-to-place policies, which can be caused by approximately 10 or so major categories (e.g. health, occupation, new business, working from within the home, working abroad, overweight, etc., just to name a few).
Your client, if interested, should apply for this valuable form of coverage at the earliest possible moment even if they can’t immediately afford the 2 to 4 percent of income (depending on age, sex, or occupation) that the full benefit amount/benefit period/options they are eligible for might cost. Given the fact that most disabilities last less than two to five years, what’s wrong with recommending that period of time as a possible initial benefit period? As a result, the cost will be substantially lower. There are also other solutions for lowering the cost without reducing the benefit period. One such solution is to reduce the benefit amount. Most carriers have an option that will allow more coverage to be purchased in the future in order to replace the reduced amount or to cover higher income, strictly based on financial underwriting (no evidence of medical insurability). This future increase option has some other benefits to the insured, as well.
The last reason to apply for coverage at the earliest possible moment has to do with and is based on premium and potential benefits.
So when should the coverage be discontinued? Only when that person is either self-insured or retired before the coverage terminates (which is usually at age 65, however, if the policy holder is still working, coverage can be kept to at least to 75 or longer with some carriers). If money becomes the issue, the policy really doesn’t have to be dropped, even then. Coverage can be reconfigured to create a lower benefit amount or a shorter benefit period. Either of these two solutions will lower the premium and possibly lower it enough to keep the policy in force.
Larry Schneider is a disability specialist with over 30 years of experience. He is the owner of the Disability Insurance Resource Center. He can be reached at info@di-resource-center.com or 800-551-6211. For more information, visit www.di-resource-center.com.
How to Select the Ideal Disability Policy
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What to look for in a quality, ideal policy
Guarantees
1. Renewable (at least to age 75)
2. Non-cancellable
Miscellaneous
1. Participation table(s) (especially important for the medical profession)
2. Exclusion/rating philosophy (especially for mental/nervous conditions)
3. Occupation classification tables
4. Unisex vs. sex-distinct rated and list bill discounts available
Options (riders)
1. Benefit period payable to 67 or for life
2. Residual/partial/proportionate
3. Cost of living adjustment
4. Auto increase
5. Future increase
6. Return of premium
7. Catastrophic benefit amount
8. Social Security benefit amount
Definitions/terms and conditions
1. Own-occupation (of which there are basically four types, depending on the insurer’s occupation) for the full benefit period.
2. Are cost-of-living adjustments purchasable when no longer on claim/caps, etc?
3. Elimination period — must days of disability be continuous, or can it be stop and go?
4. Future increases. When is the cutoff, how often can the option be exercised, and what is the look-back period for doing so?
5. Benefit amount. Can the full amount be issued without integrating the Social Security benefit?
6. Residual calculations (e.g. earned and received vs. other methods)?
7. Presumptive disability — irrevocable vs. complete loss?
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