Individual short-term disability insurance represents a strong selling opportunity for agents and brokers.
According to LIMRA, 14% of Americans own any type of disability insurance coverage, long-term or short-term.
It’s remarkably undersold, which only enhances the opportunity that insurance professionals have in front of them. It’s time to tap into the untapped.
Start with the policy basics
Explain to your clients the usefulness of owning individual short-term disability insurance. There’s a 25% chance of suffering a career-altering disability at some point before retirement.
This is considerably more likely than dying before retirement, yet 52% of Americans own life insurance.
Short-term disability insurance coverage is also usually comprehensive, not pigeon-holed to physical injuries as is commonly misperceived. It can cover qualifying medical illnesses and mental health struggles as well.
In fact, “depression and anxiety” is the fifth most-commonly cited reason for short-term disability insurance claims.
Finally, the benefits can provide a safety net that is much needed when you consider the personal finance situation of many Americans.
The Federal Reserve found 30% of Americans are unable to cover a $300 expense with cash savings.
If suddenly faced with a disability that left them unable to work, how long could your clients continue affording the expenses of life, whether those be mortgage payments or groceries?
Short-term disability insurance could keep up to 60% of their weekly income flowing in, which should help keep the bills paid.
Explain federal income protection options
Or lack thereof.
When it comes to income protection programs at the federal level, there’s really only Social Security Disability Insurance.
The disability threshold to qualify for SSDI is infamously difficult. Usually to start receiving benefits under this program, a person’s disability must be expected to last a minimum of 12 months and/or result in death.
As a result, two-thirds of all SSDI claims are denied.
Considering most short-term disability claims will probably last for only months – not years – it’s highly unlikely your client can get covered under SSDI for something like a broken hand or minor procedure that requires time off work to recover.
In instances like this, having short-term disability insurance may very well be the only possible saving grace.
Then explain state-level options
Not as lacking as federal options, but still lacking.
As it stands today, only five states and Puerto Rico require employers to offer short-term disability insurance (the five states are California, Hawaii, New Jersey, New York and Rhode Island).
There are 11 states that have their own paid family leave policies. Sixteen states have their own paid sick leave policies.
And when it comes to workers’ comp on the state or federal level, the disability must be the result of something that happened while on the job. Comparatively, short-term disability insurance can cover injuries and illnesses that happen on or off the job.
Government-administered income protection options at any level are limited at best and simply too shaky to trust. Short-term disability insurance coverage is almost always more comprehensive and more reliable.
This same line of thinking applies at the employer level.
And then employer-level options
The theme from the previous two sections rings true when discussing income protection options at the employer level.
Only 19% of US employees have access to paid leave through their employers.
Forty percent of employees are offered a short-term disability insurance benefit through their employer according to the Bureau of Labor Statistics.
But when looking at the bottom percentile of earners, only 19% are offered a short-term disability benefit.
The employer-level options are certainly more robust than anything offered by the government, but they are still not dependable. Moreover, the data means 60% of employees aren’t offered any type of short-term disability insurance benefit.
When you boil it down to the bare bones, the most surefire way your clients will be able to protect their income from disability likely will be through the private market.
Lean into cross-selling
In terms of financial products, you would be hard pressed to find a stronger cross-selling opportunity than that which exists with disability insurance.
For any of your clients who already own long-term disability insurance, short-term disability could be an easy sell.
Long-term disability insurance usually carries a 90-day waiting period, and this can be too long for your clients. If they suffer a disability and their income stops, they might not be financially capable of waiting for 90 days until benefits kick in.
Short-term disability insurance can carry a 7-day waiting period, sometimes even less.
By owning both products, your client can start receiving short-term disability insurance benefits almost right away and this should carry them right through to the waiting period for long-term disability insurance benefits.
The two products can compliment each other nicely by closing up any income protection coverage gaps your client may have.