Catastrophic Disability Coverage: What And Who Is It For?
Today, individual disability policies offer a host of specialty features that add value for the customer, including a rider, sometimes as a separate contract, that pays an extra benefit if the insureds disability is considered catastrophic.
What is a catastrophic disability? It refers to a disability that causes the insured an irrecoverable and irreparable loss of certain functions. An example would be leaving an individual with an irrecoverable and irreparable loss of sight, speech, hearing or the use of both hands or both feet.
A catastrophic disability could also refer to a disability that leaves an individual totally disabled due to an irreversible form of senility or dementia, paraplegia or quadriplegia. This level of disability may be the result of an accident or an illness. While not all spinal cord or head injuries and serious diseases, such as a stroke, will lead to catastrophic disability, they are common causes of it. (See chart.)
Although the chances of suffering a catastrophic disability may be relatively low when compared to more common disabilities, such as a back injury or carpal tunnel surgery, the related costs can be great.
People who suffer catastrophic disabilities incur many additional expenses that substantially impact their quality of life and increase their cost of living. This may make a disability policy that only provides income replacement insufficient. Among many examples of added expenses are special medical equipment and on-going in-home health care.
Producers can help their customers protect themselves from the financial obligations that can result from a catastrophic disability by discussing the need for, and availability of, the coverage.
Following are some tips for approaching clients about disability insurance, as well as for introducing the concept of catastrophic coverage:
Make disability insurance a part of the overall financial planning process. Need for this coverage should be addressed along with life insurance and retirement savings.
When assessing a clients current monthly income and expenses, ask the person to consider how income and expenses would be affected by a long-term disability.