Presented by Tim Dreher
Many agents and advisors that I talk to just like you are not what I would consider “generalists” but have specialized in one type of insurance product or service. Regardless of your focus, Income Replacement insurance is a product that you should also be talking to all of your clients about to help them protect their most valuable asset…their ability to earn an income.
Some of you focus your practice on the sale of life insurance. One of the reasons that you sell life insurance is to provide dollars to replace an income in the event of a death. Your client’s chance of a disability are so much greater than a premature death. Disability Income insurance would also benefit your client by providing income replacement in the event of a disabling accident or illness. Consider combining a death benefit with a living benefit to provide complete and comprehensive coverage for your client. Statistically, you are 16 times more likely to lose a home to foreclosure due to a disability than to a death.
If the focus of your insurance practice is on selling group benefits, then you probably already know the importance of protecting your client’s most valuable asset, their ability to earn a paycheck. But do you also realize that many times group long term disability plans, although a good start, might not provide, due to limited benefit amounts and benefit duration, adequate protection in replacing a large portion of your client’s income in the event of a disability? Additionally, group DI benefits are normally either paid by the employer or are paid by the employee on a pre-tax basis. In this case, any benefits paid out to an employee because of a disability would likely be taxable, thus reducing their benefits even more. Supplementing their group LTD with an individual policy is an excellent way to make sure that the client is adequately covered.
For those of you that focus on retirement planning, a disability that causes a loss of income can have a devastating effect on your client’s ability to continue to fund their retirement accounts. There are several carriers in the DI marketplace that have income replacement plans that not only help take care of your client’s monthly living expenses, but will also continue to contribute to your client’s retirement account while disabled. That becomes a double win.
Finally, many of you are investment advisors and money managers. For most of your clients, their most valuable asset is their ability to earn a living. As their advisor, it should be properly managed and protected just as you would any other asset. Many wealth management advisors charge a fee of roughly 2% of assets under management. Similarly, in most cases, a properly designed Income Replacement policy (DI) can also be as little as 2% of your client’s income.
There are many reasons to talk about DI with your clients. It helps you to diversify your portfolio of products and it’s also a great door opener to many sought- after markets, such as high income individuals and business owners. It’s also a great way to ensure that, in the event of an accident or illness that prevents your client from working, they would still have the ability to continue to pay their bills, including the premiums on those other products and services they already have with you.