Excess for Success
Often when insurance professionals think of Petersen International for excess disability insurance including group GSI coverage and individual DI, they think of only high-income earners. And yes, we do often illustrate the need for supplemental disability insurance for people making lofty incomes.
But the truth is that our bread and butter cases are the same as your bread and butter cases…which are clients that are simply doing well for themselves. They may not be in the highest stratosphere of income level that many brokers brag about, but they live comfortably.
If you remember back to DI 101, remember that industry and financial experts illustrate that a person should have about 65% of their income coming in during any period of disablement.
Two-thirds!
Remember that number!
Now here is the untold truth about your average disability insurance plans written in the traditional markets – rarely do they cover two-thirds of income.
For the record, traditional DI carriers (individual and group) do a fantastic job at insuring the majority of situations. However, they all have a cut-off as to maximum benefit that is often on a decreasing scale.
Group disability insurance was designed and is perfect for rank and file employees of a multiple employee company. They are provided with DI benefits based on a percentage of income, usually 60% to 65%. That is W2 income only. Group programs typically have monthly benefit caps as well, depending on the occupation, which frequently falls in the $5,000 to $15,000 per month range. Again, for rank and file, this usually fits the bill perfectly.
Regarding IDI and GSI programs, we frequently see issue and participation limits up to $25,000 to $35,000 per month or more in some cases. Wow! How awesome does that sound. If we have a client making $500,000 per year, we figure we should be providing about $27,000 per month in income replacement benefits. If our carrier says they will issue up to $30,000 per month, we should be able to get the full $27,000! Right?
Wrong!
The sliding scale of maximum benefits decreases the benefit percentage as the employee’s income increases. The illustration for the above situation may work like this…$500,000 per year of income will be eligible for a maximum benefit of only $20,000 per month.
Why?
There are various possible reasons. The carrier might not be able to secure enough reinsurance. The carrier might not be willing to extend their own retention of the risk. Or the carrier and their actuaries might feel that someone with a $500,000 income may have significant assets to liquidate in case of disablement.
No matter the reason why your clients can’t find insurance programs that provide own occupation benefits to 65% of their income, Petersen International can assist you in devising a program to fit their excess disability insurance needs.