You Don’t Want to Buy Any of This Stuff, Do You?

Having spent most of four decades marketing and selling disability income insurance, including individual, group, and payroll products, I am still amazed at the general resistance by many working Americans to doing fundamental research and analysis of their own personal and family financial situation. The amount of life insurance sales each year dwarfs the combined disability sales, yet in any given year the odds of a disability are many times as likely as death. Why is this?

Like anything else, there is seldom one reason, but here are some thoughts on the reasons, and my hope is that you, the reader, might decide to make a conscious decision to either seek coverage, or consciously decide not to make that choice.

Reasons for the lack of attention to Disability Insurance:

Those of us in the business lament the name of our product. Life insurance is not marketed as “Death Insurance,” yet that is typically the trigger for benefits to be payable. However, for whatever reason, a century ago our product genre was named “Disability Income Insurance.”
Disability Income can come in many different flavors. Most employers provide some variation of Paid-Time Off, Sick Days, group short-term disability and/or group long-term disability coverage as part of their benefit’s package. However, seldom do these plans go from one employer to another, and smaller firms are much less likely to have comprehensive plans in place.
Both the State and Federal governments have also added various permutations of coverage. Five states currently have what is termed Short-Term or Temporary Disability Insurance. California has the longest and largest potential payout at up to 60-70% of wages, payable for up to 52 weeks. The other states are less rich, and typically will pay for approximately 26 weeks. Additionally, various state Worker’ Compensation plans are available, but limit benefits to results of injury or sickness that can be tied to employment. Finally, the Family and Medical Leave (FLMA), a federal program mandates up to 12 weeks of job protection, however, does not replace lost wages. Some states do mandate payment of benefits to help replace lost wages, but this is not universal.
When surveyed, most working Americans envision a disability from some type of accident. However, each year the research indicates that disability due to an accident, accounts for only approximately 10% of claims. Additionally, the odds of recovery and return to work following an accident are known to be much greater than for disability due to disease or illness.
Another survey result that plays into this discussion is the tremendous misunderstanding of the average American’s family to withstand even a relatively short period of disability. Survey after survey demonstrates this wishful thinking. Additionally, when asked where they would go for monetary support, the leading responses are family, friends, or their bank. I think you can see how this thinking can lead to inaction.
Another source of revenue that the surveyed identified is to borrow from their retirement accounts, whether a 401K, 403b, or IRAs. What is forgotten is that these accounts are designed to help fund one’s retirement and tapping into them for even a relatively short period of time, let alone a long-term disability can wreak havoc on well-laid plans.
Much of the group disability marketplace is made of voluntary disability benefits . . . voluntary short/long term disability plans and/or what I term “payroll products.” If the employer does not provide for employer-paid group plans, and the responsibility for the monthly premium falls on the employee, it is easy to envision the dilemma of ‘ do I really need this coverage? However, your ability to sustain even a relatively short disability may quickly exhaust your own financial resources.

My goal for this blog is to help you look at each of your situations honestly and measure the risks to your personal financial goals. Historically, the industry has used a rule of thumb that one should be prepared to spend 1-2% of one’s income to provide monies if disabled. However, many options exist that can and do cost significantly less. There is no “right answer,” other than taking the time to assess the risk and look at options that can help mitigate the risk. Remember, your odds of being disabled don’t change whether you buy or do not buy coverage . . . you simply provide yourself with another potential source of income when many things you thought were in your future shift under your feet.

About Bob Herum

Bob Herum has written 14 posts in this blog.

Bob Herum, MSFS, CLU, ChFC, RHU, REBC, DIA, DIF, LTCP CDA President. Bob has over 30 years of experience in the insurance industry and has demonstrated success as a producer, a wholesaler and as a manager. Bob has been published in such magazines as The American College’s Wealth Magazine, National Underwriter, Life Insurance Selling, Broker’s World, NAIFA’s Advisor Today and Health Insurance Underwriters (HIU). Additionally, he has spoken at national, regional and state forums on a variety of disability and worksite sales topics and is a recipient of the W. Harold Peterson Lifetime Achievement Award by the International Disability Income Society (IDIS). Bob retired as a Colonel from the Army Reserves. He is a past President of the Columbus, Ohio NAIFA chapter, a two-time past President with the International Disability Society, past-chair of the NAHU’s Disability Insurance Advisory Group, and past-President for the Cincinnati Society of Financial Service Professionals (FSP). Bob is married to Teri and has one son, Nick.