When was the last time you talked with your clients about their financial plan if they were to suddenly become disabled? Disability insurance is reported to be one of the most overlooked types of insurance. If you haven’t discussed it recently with your clients, now is a good time.
Each May marks Disability Insurance Awareness Month, which is coordinated by Life Happens, a nonprofit organization. It is designed to raise awareness about disability insurance and how it can be key to your clients’ future financial stability. Disability insurance helps clients safeguard their paycheck during working years. It also protects their retirement savings and should be a building block of any comprehensive insurance portfolio.
Disability can be dire
In a recent survey, Life Happens reported that an individual “has a 3 in 10 chance of suffering from a disabling illness or injury” and this would make them unable to work for a period of three or more months. Most clients know that the material things in life should be insured – like cars and homes – but they typically don’t realize that there’s a way to ensure their paycheck. If something should happen to their physical, mental or emotional well-being, this is very important.
People don’t like to think about the possibility that illness or an accident could make it impossible for them to work, but financial professionals should emphasize the ways in which these events can impact retirement. The lost income from the time spent not working can impact your long-term retirement plans.
Disability Insurance and retirement
Individuals who want to use disability insurance benefits to help shore up retirement can arrange a disability insurance policy that pays benefits into an irrevocable trust rather than directly to the affected individual. When the benefits period ends from other disability insurance coverage, the money that has accumulated in the irrevocable trust will be released to the client to supplement retirement income. This type of additional disability coverage planning is an excellent way to continue building retirement savings in the event of a disability, which is an occurrence that would otherwise prevent a person from continuing to contribute to their 401(k).
Disability Insurance for business owners
If your clients own a business and they or one of their co-owners becomes ill, making them unable to work, how would this impact the business? Would it continue successfully without the contributions of a key player or seamlessly transition to new owners if needed? Disability insurance can be so much more than income protection for your business owner clients. Key person, disability, and other types of insurance for business owners could provide the necessary resources to keep the business running.
In this month of disability awareness, now is the time to ask yourself – Are your business owner clients prepared for the unexpected?
Editor’s Note: This post was originally published in May 2014 and has been reviewed and updated.