When DI Prospects Say, ‘I Have It Through Work’

Many protection specialists will agree that the most valuable asset for working-age clients is their income. Without an income stream, an individual’s mortgage, financial plans, retirement plans and quality of life might be at risk. That is why discussing income protection with your clients is so important.

One of the most common client objections is “I have group coverage through my employer.” Instead of this objection being a deterrent, protection specialists should see this as a great opportunity to educate clients about individual disability insurance. Group disability coverage can be helpful, but it rarely covers as much as clients think, since there it often has limitations.

Limitations Can Have Consequences

When you ask clients exactly what their group coverage actually covers, you find that most clients have no idea. One of the key limitations is that employees typically don't receive their full income when they are out on a disability claim. Some of the other most common limitations include:

Taxed benefits – If the employer is paying and deducting the premiums, the benefits to the client upon a claim are taxed.

Base salary – Most group coverages only take into consideration the client’s base salary and don’t include bonus income, commissions, overtime and other factors into what is covered.

Monthly caps – Most group coverages will have a monthly benefit cap that might limit what higher-earning individuals ultimately may qualify for.

Portability – Typical group coverages are not portable, meaning that the client will not have group coverage once they are no longer employed with that company. In addition, group coverages have to be renewed every year; the company can decide not to offer group coverage any longer.

Stats Can Speak Volumes

An example of a monthly DI benefit could be 60% of base salary to a $5,000/month cap. This may sound like a healthy monthly income while on a disability claim, but keep in mind that is before taxes (assuming the company was paying and deducting the premiums). It is important to note that any client with a total income over $100,000 will have less than 60% of their monthly income covered – again, noting the taxation issue as well. Can the client live on that income, especially if they were accustomed to living on a much higher income?

Education Can Make The Sale

Knowing about these common limitations can help enhance a discussion about the importance of reviewing the group plan to make sure the client understands the potential monthly benefit upon a claim. The worst time to find out that the benefit could be drastically less than expected is when the client needs those benefits (i.e., while on a disability claim).

Helping to educate clients about the actual benefit payouts, plus offering solutions to supplement with individual DI can make a protection specialist look like a hero! Note that supplementing should be affordable as the client will only be filling the gap, rather than applying for the full 60% benefit.

Most carriers offer a discount when three or more individuals from a common employer place with that carrier. This can allow for great referral opportunities coupled with knowing that all individuals within that employee class will have the same group limitations!

Kenny Russell is director, disability sales, for the Disability Solution Center at Crump Life Insurance Services. Kenny may be contacted at [email protected].

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