Statistics show that people are more likely to become disabled than to die during their working years. When financial professionals and insurance brokers help their clients plan for their futures, it’s important that they discuss income protection, in addition to life, auto, health and homeowners insurance. Disability insurance insures clients will have an income source in the event they are unable to work for a period of time because of an accident or illness. Given the statistical odds of a disability happening, it’s prudent for clients to buy disability insurance coverage to protect their incomes.
People who have highly specialized jobs (physician or attorney) or can simply afford to pay the premiums, it’s worth paying extra to have an “own occupation” policy. This coverage pays benefits if you are unable to perform the major duties of your own occupation.
In addition to “own occupation” definition, a “modified own-occupation” definition is also a quality definition for clients who are professionals but not in highly specialized occupations. The modified own occupation definition of disability protects the insured in his own occupation as long as he or she is not working in any other gainful occupation by his or her choice.
It’s important for insurance brokers and financial professionals to introduce the need for income protection to every client—whether they are working for an employer or they are self-employed. Group Long Term disability plans provided by employers often provide very limited coverage. Most Group LTD plans are taxable benefits if the premiums are employer-paid, and monthly benefits are capped, replacing only a small percentage of high income earners’ salaries. Adding an individual policy on top of the Group LTD policy will insure the client has maximum income protection.
On the other hand, most self-employed individuals do not have Group LTD coverage, so they need an individual disability policy.. The own occupation definition of disability considers the insured disabled if he or she is unable to perform the duties of his or her particular occupation even if he or she is working in another occupation by his or her choice. The modified own occupation definition will consider the insured disabled if he or she is unable to perform the duties of his or her particular occupation as long as he or she is not working in another occupation. Both are considered quality definitions of disability.
There are three sources of Disability Insurance Coverage: (1) Social Security Disability Insurance provided by the government, (2) Employers providing coverage through a group plan for their employees and (3) Private Insurance Coverage, mostly sought-after by high-income-earning professionals, like doctors or lawyers, self-employed individuals and those looking for additional coverage.
Disability insurance advisors and brokers need to explain the values and the differences in the various long-term disability plans to their working clients. Working with Source Brokerage, Inc.’s disability insurance specialists, financial planners and insurance brokers don’t have to be disability income specialists. Source Brokerage can help you understand the contracts and tailor plans to meet the individual needs of your clients based on their professional and financial needs.
(Source: Overlooking disability insurance can be costly, Dave Carpenter, July 25, 2012)