The Great Reshuffle offers opportunities to protect clients’ income

According to Willis Towers Watson’s 2022 Global Benefits Attitudes Survey, almost half of U.S. employees are looking for a new job or plan to soon. Better pay, health benefits, job security, flexible work arrangements and retirement benefits were the top five reasons driving workers to seek new employment opportunities, according to the survey. As the labor market remains strong, it’s a good time to help your clients consider income protection through individual disability insurance as part of their benefits package.

What is individual disability insurance?

Disability insurance helps protect what is often consumers’ greatest asset: their ability to earn an income. It’s a personal, portable financial protection tool that provides a monthly disability benefit if the insured becomes disabled that is beyond what is available through employer-sponsored benefits. Policies can be customized through riders, for an additional cost, to fit clients’ unique coverage needs and some policies even offer dividends or discounts for being an existing customer.

How much does individual disability insurance cost?

Individual disability insurance typically costs 2% to 4% of clients’ income and replaces at least 50% to 60% of clients’ income, should they need it. Although disability insurance premiums are often less when the policy owner is younger and healthier, clients often overlook this important financial tool because they believe becoming disabled is unlikely or would be covered by a workplace policy. However, 1 in 4 20-year-olds is likely to become disabled at some point before retirement, according to the Social Security Administration. In fact, most accidents are unavoidable and can occur anywhere: at work, on a trip, or even at home. According to the National Safety Council, 90% of disabilities are caused by sicknesses and over 85% of disabling accidents and sickness are not work-related, according to the National Safety Council. Given the risk that a disabling condition can happen outside of a workplace context, clients may not be fully covered by their workplace policy.

When is the right time to buy a policy?

Almost everyone at any age or household income level can benefit from individual disability insurance. That said, individuals with certain careers, including those in the medical field and small business owners, may benefit most from ensuring their income is protected because they may be more likely to have higher levels of debt compared to workers in other fields. Additionally, professionals with incentive compensation like bonuses or commissions can also benefit from individual disability insurance, as employee benefits, if provided, may not cover their total compensation – leaving an income protection gap that could erode the lifestyle of the family in the event of income loss.

What should clients consider?

Once clients understand the benefits of securing income protection, it’s important to help them navigate how to choose a policy that fits their unique coverage needs. Some questions that can help guide the discussion include:

• What other sources of income would they tap into in the event of a disability?
• What is largest benefit they qualify for?
• How long until they receive benefits following a sickness or injury?
• Will they be required to look for work in a different occupation?
• Have their employer benefits changed, and how can they supplement them?
• How often should they evaluate their coverage needs?

Individual disability insurance as part of a broader financial strategy

Income protection is a critical piece of a protection-first financial strategy, and it can also be a tool to help you develop long-term relationships with your clients. While they may not be ready to buy life insurance or asset accumulation solutions, New York Life’s Wealth Watch survey found that Millennials and Gen Zers are expressing interest in working with a financial professional to develop a financial strategy and bolster savings. Helping to guide clients on how to navigate unexpected loss of income and the solutions available to them may open the door to a lifelong partnership as their financial needs change.

Whether your clients are among the thousands of workers looking for a new job or simply ensuring their current employer benefits meet their financial needs, now is the time to talk to them about how to protect their income should they be faced with a disabling event.

Paul Fromm is VP and Head of Disability Income Solutions at New York Life.