Back to the Basics – Disability Insurance

Last week I was able to enjoy a socially-distanced dinner on the patio at the home of W. Harold Petersen, one of the pioneers and early champions of modern American income protection insurance, not to mention the retired founder of Petersen International Underwriters.  I have always heeded his sage business advice and commentary.  At the matured age of 92, Harold’s wit, opinions and historical references through most subjects of conversation remain sharp, belying his age.

I assume as with most dinner table conversations taking place over the last few months, our familial banter led to the topic of Coronavirus and how it is affecting business strategies in the life and health insurance markets.  Harold further inquired rather directly, “with all of the uncertainty in this world right now, where do you find your inspiration to write?”  I relayed to him that most of my recent articles for this publication and for others have focused on specific solutions and coping agents for the hardening insurance markets and slumping business trends.  But as I further pondered his query, he gently reminded me that importance in most matters of life is always in the fundamentals.  The basic nature of insurance in these difficult times is what’s truly important to Americans.

Personal disability insurance is one of the elementary financial needs of any professional, and in a perfect world should be as commonly prescribed as healthcare and life insurance.  That ideal is far from the reality. 

Disability coverage is far and away the most important piece of insurance that every working American should own.  So why then is there such an extreme emphasis in this country on other products while DI sales fail in comparison?  Don’t get me wrong, life and medical insurances are critical to everyone’s financial protection and should be held in esteem in a sound financial plan – but more so than income protection?  Not a chance.

If your employed clients are between the ages of 18 and 75, they need at least 65% of their incomes protected with comprehensive “own occupation” disability insurance.  That is the bottom line, and we need to think more about the financial wellbeing of our clients and their families during this COVID-19 era.

Most Americans suffer from the delusion that they will not become disabled during their lifetime.  Unfortunately, the reality is quite different.  Over a quarter of working Americans will be affected by a short or long term disablement during their career.  Yet, only 31% of those working in the private sector have any form of income protection insurance.  Why do we feel impervious to accidents and to the thousands of medical conditions and diseases that can harm the human body to the point of disablement?  Well, it seems that it’s simply human nature to feel relatively invincible, and it is up to you the advisor to educate and guide your client through the proper planning not only for retirement, but throughout their income accumulation years.

That is when most of the problems take shape, in the first two-thirds of our lives.  We don’t save enough of our earned income.  Expanding retirement vehicles have brought promise over the last quarter century, but Americans still don’t save enough for emergencies let alone retirement.  One-third of us have no retirement savings, and 48% of us don’t save additional income.  How can we expect to financially survive in this world while supporting our families without any savings or income protection?  We can’t.  We need personal disability insurance.

Personal DI is available to anyone and everyone who works for a living.  If not through traditional insurance channels, there are sources of income protection for those who may fall outside the realm of “usual” insurability, including impaired-risk clients with hazardous occupations or moderate to severe mental and physical health concerns.

The tools are there and the products are there to help protect your clients from whatever physical disasters life throws at them.  Disablement is real and it happens to millions of Americans every year.  Take the advice of Harold Petersen during these uncertain economic times, and don’t neglect the fundamentals.