Great Ideas for Unique Insurance Sales Opportunities: Basic Issues – Personal Disability Insurance
Basic Issues – Personal Disability Insurance
Two basic issues for Personal Disability Insurance that Petersen International Unederwriters deals with daily are Supplemental Coverage and Primary Coverage.
Supplemental disability insurance provides the solution to the under insured. The rule for personal coverage is that unless an income earner has 65% to 75% of his/her income protected against a disability, that person will eventually die a financial death when disability strikes. A proper level of income replacement disability insurance is necessary to protect him/her from this financial death. When we take into account a LTD plan with 65% income replacement to a maximum of $15,000 per month, this insures everyone properly up to an annual income level of $275,000. So what happens to the higher income earners? If we look at the Individual Disability Income Replacement tables provided by most individual carriers$15,000 per month of disability benefit takes an annual income of $450,000 to qualify. That represents only 40% of their income being insured.
Higher income earners now have the problem of obtaining proper levels of disability insurance. We refer to this as reverse discrimination. Practical solutions with participation limits of 65% – 75% of income, regardless of the amount of income earned are now available.
New Financial Disability Plans provide the ability to issue supplemental monthly benefits to a participation of 65% for employee paid (tax free benefits) policies and 75% for employer paid (taxable benefits) policies. Issue limits are as high as $250,000 per month, but this does not mean one should forget about the importance of the person who only needs an additional $1,000 or $2,000 per month in benefits.
Primary coverage becomes mandatory when a person is totally rejected by the traditional carriers and does not have any sort of LTD available. The reasons for the rejection can be numerous but the typical reasons include occupational issues, place of work issues, (working out of one’s home or perhaps overseas), medical issues, and income issues. Remember, “No” from a traditional source does not mean it cannot be accomplished.