Individual Disability Income Insurance Objections

Transcription

1 Individual Disability Income Insurance Objections Principal Continuing Education University Chris Herrmann, CLU, CEBS

2 While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is not a marketing opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

3 How to achieve financial security

4 Income is the financial foundation

5 OBJECTION It won t happen to me I expect to stay healthy.

6 Times Are Different Now Source: National Underwriter, May 2002; The JHA Disability Fact Book 2003/2004 Edition Need for Disability Insurance

7 Chances of Disability In the U.S., a disabling injury occurs every 1 second, whereas a fatal injury occurs every 4 minutes! 1 43% of all people age 40 will have a long-term disability event prior to age National Safety Council, Injury Facts 2008 Ed. 2 JHS Disability Fact Book, 2006

8 OBJECTION Why would I need disability income coverage?

9 Are You Protecting the Right Assets? Potential Earnings to Age 65 (with 5 percent annual salary increase) Annual Income Age $50,000 $100,000 $150, $4,516,000 $9,032,000 $13,548, $3,322,000 $6,644,000 $9,966, $2,386,000 $4,773,000 $7,159, $1,653,000 $3,307,000 $4,960,000

10 If your client became too sick or hurt to work, they have a lot to lose Current standard of living Insurability Future earnings Their home Credit rating Retirement savings and other assets Peace of mind

11 Disabilities happen 3 in 10 workers entering the workforce today will become disabled before retiring. 1 There is a death caused by a motor vehicle crash every 12 minutes, there is a disabling injury every 13 seconds. 2 1 Social Security Administration, Fact Sheet National Safety Council, Injury Facts, 2008 Ed.

12 OBJECTION I would have to be totally disabled to receive benefits.

13 Residual and Transitional Coverage Residual (or Partial)* Requires a loss of income and usually a loss of time or duties Pays benefit proportionate to loss of income. Transitional* Totally disabled from current occupation, but working in another occupation Pays up to 100% of earnings or the maximum benefit *May require an additional cost

14 Catastrophic Benefits Coverage Pays a benefit in addition to current benefit if your client is catastrophically disabled: Can t perform two or more Activities of Daily Living Cognitively impaired Presumptively disabled $5,000/month Individual Disability Income coverage with and $8,000/month benefit for catastrophic = $13,000/month potential benefit

15 OBJECTION My financial needs change so fast. What policy could keep up?

16 Keeping Up Future Purchase Options Future Increase Options Cost of Living Rider Adjustable Policies These riders may require an additional cost

17 OBJECTION Would I even have a disability that would be covered?

18 Breakdown (by percentage of claims) of some typical reasons an individual may become disabled

19 Sample Disability Claims Occupation Age Diagnosis Total Paid Attorney 46 HIV $471,559 Business Owner 36 Back $23,210 Computer Consultant 44 Back $696,583 Corporate Executive 54 Cancer $101,605 Nurse - RN 38 Depression $205,150 Pharmacist 39 Lupus $96,162 Physician 34 Vision $1,013,380 Psychologist 50 Muscle Pain $224,701 Real Estate Agent 50 Cancer $15,950 Veterinarian 46 Asthma $58,115 Principal Life Adjustable Disability Insurance claims as of March Above is for illustration purposes only and is not intended as an inclusive representation of all claims.

20 OBJECTION I have enough disability coverage through my employer.

21 Can your client survive on a 60% pay cut? Group Long-Term Disability insurance is a good start, but it may not be enough. Chart based on $5,000 gross monthly income ($60,000 annually), with 60% Group Long Term Disability program, assuming a 30% tax bracket for Federal, State and FICA.

22 Considerations: Group LTD insurance Benefit provisions within the policy are typically conservative Reverse discrimination for key employees (cap on benefits may be too low for higher-paid employees) Policy is usually not portable for the employee Bonuses and incentive pay typically not covered

23 Individual DI insurance benefits Premiums and benefits are guaranteed through age 65. Tax-free benefits (when paid with after-tax dollars) Quality benefit provisions Bonuses and incentive pay can be covered Policy and discounts are portable Payment options available (employer-paid or employee-paid)

24 Offer Integrated DI Solutions Integrated Disability Program Income Replacement Percentage 100% 75% 66% 60% 0 8 Days Sick Pay/Vacation Group Short-Term Disability Insurance* * 180 Days Supplement Individual Disability Income Insurance Group Long-Term Disability Insurance** To age 65 Benefit Duration Note: Hypothetical example. Elimination and benefit periods can vary depending on how the policies are structured.

25 OBJECTION I can buy it later or It costs too much.

26 Waiting to purchase DI can cost your client. Age Male $1, $2, $2, $3, Female $2, $3, $3, $4, Colorado resident, Non-smoker, 5A, $100,000/annual income, $4,800/mo benefit, 90 day elimination period, To Age 65 benefit period and your occupation period, residual disability benefit rider.

27 Another Viewpoint Premium paid until age 65 for: 35 year old male: $50, year old male: $56, A 45 year old male would pay an additional $5,410 of premium for 10 years less coverage.

28 $7,950/mo benefit replaces 48% of $200,000 annual income For 1.51% of annual income

29 OBJECTION Social Security or Workers Compensation will take care of me.

30 Social Security Less than half - 35% - of the 2.8 million workers who applied for Social Security Disability Insurance (SSDI) benefits in 2009 were approved. - Social Security Online, disabled worker beneficiary statistics, ssa.gov Pays Benefits for Total disability only: severely impaired, physically or mentally, can t perform any substantial gainful work and must last 12 months or result in death.

31 Social Security Maximum benefit for $100,000/year income is: $16,800/year ($1,400/month x 12 months)

32 Workers Compensation Must be due to an occupational disease or injury arising out of or in the course of employment. Nearly three-fourths of disabling injuries in 2008 are not work related, and therefore not covered by workers' compensation. - National Safety Council, Injury Facts 2010 Ed.

33 OBJECTION I could still work if I became disabled.

34 But would they want to? Today we face many concerns and diseases that weren t as common several years ago: Terrorist attacks Natural disasters Workplace violence AIDS Bird Flu West Nile Virus

35 OBJECTION I don t like needles or I hear the Underwriting process is difficult.

36 Simplified Program Discuss a simplified concept with your client

37 OBJECTION My family and friends will help me out.

38 What if the disability lasted? Would they want to put that burden on their family? How long would their family be able to support them?

39 Chances of a Disability In the last 10 minutes, 490 Americans became disabled* In 2008, there were 2.1 million disabling injuries caused by a motor vehicle accident; there were 39,000 fatal motor vehicle accidents.* *National Safety Council, Injury Facts 2010 Ed.

40 OBJECTION I can rely on my savings.

41 What Are Your Clients Saving For? Is your client saving to pay for a disability? Or are they saving for: A New Home Travel Education Retirement

42 Savings Needed If your client makes $60,000/year salary and wanted to save three months of salary, they would need: $15,000 in savings ($5,000/month income x 3 months)

43 OBJECTION I ve already maxed out my Individual Disability Income coverage.

44 Protect their Retirement Savings What would happen if they suffered a disabling illness or injury and could not work?

45 Impact of a permanent disability on retirement savings at age 40 This image cannot currently be displayed. Retirement Assets Age

46 How does it work? Insured Before disability insured pays DI insurance premiums Insurance Company Upon reaching the benefit period insured may begin receiving Trust assets per the terms of their Trust Agreement Irrevocable Trust Upon disability company pays DI insurance benefits which the Trust invests

47 Traditional Individual Disability Income (DI) Traditional DI with Lifetime Rider/Feature Retirement Protection When would disability benefits stop for a permanent disability? End of benefit period (i.e. To Age 65) Benefits continue to pay for your lifetime Benefits are paid into the trust until the end of the benefit period. Withdrawals then made from the trust until death or until funds are gone What Death Benefit is available? 3x s ultimate monthly benefit if death occurs before end of benefit period 3x s ultimate monthly benefit Insured s estate receives any remaining trust assets. What is the amount of Death Benefit paid? $10,200 ($3,400/mo x 3) $10,200 ($3,400/mo x 3) $4.1 Million* *The 4.1 Million of death benefit assumes disability begins at age 40 and $3,400 monthly benefit paid to trust from age 40 to 65. $3,400 distributed monthly from trust until death at age 70 and trust assets earn 8% interest both before and after benefit period.

48 Thank You! Home Office: Principal Life Insurance Company, a member of the Principal Financial Group, Des Moines, IA Approval #t i DI2731