Disability Insurance For Hard-To-Insure Boomers
Every high-income baby boomer who wants to maintain a comfortable standard of living probably needs some private disability insurance, advisors say. And boomers who are helping to support children or loved ones need even more income protection.
One problem is that many boomers who do not get adequate disability coverage through their employers might have a hard time qualifying to buy individual coverage.
Figures from the federal government show that about 5% of boomers with college degrees already suffer from some kind of disability serious enough to affect their jobs, and about half of those boomers have severe work disabilities.
Larry Schneider, owner of the Disability Insurance Resource Center, Albuquerque, N.M., a disability brokerage, says about 12% of the boomers whose applications cross his desk face serious underwriting challenges.
Some boomers understand they will have trouble getting disability insurance because they have health problems, such as diabetes or obesity, or they have not owned their companies or held their jobs long enough to build up solid income histories. Other applicants run into problems because they earn less than $20,000 per year, work out of their homes, are federal employees or travel overseas more than 2 weeks per year, Schneider says.
If you go to Iraq even 15 minutes, forget it, Schneider says.
Carriers are uncomfortable with the risks insureds face when they travel extensively, and few carriers look forward to investigating claims involving incidents that occur overseas, he adds.
Although carriers could exclude coverage for disabling conditions resulting from overseas travel, most simply deny policies to applicants who spend much time outside the United States, he says.
Meanwhile, many carriers are not sure whether low-income applicants, applicants with access to rich, disability-triggered federal retirement benefits or applicants who work out of their homes have much incentive to go back to work after they suffer from disabling illnesses or injuries, Schneider says.
Some small business owners have effective incomes that are much higher than the incomes they report to the Internal Revenue Service because of the wonders of modern accounting. In those cases, insurers go by the tax returns, he says.