Any time you can talk to clients about disability protection, you ought to discuss the importance of catastrophic coverage and make sure any policies purchased provide adequate protection in the event that the unthinkable occurs.
A catastrophic disability benefit rider, or CAT rider, can prepare clients to face severe or life-changing disabilities that might quickly exhaust basic disability benefits. At my company, approximately 20% of our policyholders have elected catastrophic coverage.
The definition of “catastrophic disability” can vary by state and policy, but one common guideline holds that a catastrophic disability is one that causes a person to be unable to perform two of six activities of daily living without assistance or causes irrecoverable and irreparable loss of hearing, sight or speech or the use of either both hands or both feet.
When discussing any financial strategy, agents always should present and discuss disability plans with and without catastrophic coverage and illustrate how each option could mean the difference between sufficient coverage and comprehensive protection.
A strong place for agents to start is by demonstrating how individual disability income insurance coverage can supplement group coverage. Begin by reviewing the basics of existing disability insurance and how effective it can be in protecting what may be clients’ most valuable asset: their ability to earn an income.
Many don’t realize group plans fall short by typically covering 50% to 70% of income, depending on tax status. In addition, many clients who earn commissions or bonuses forget to include these sources of income in benefit calculations. Ignoring commissions and bonus earnings can leave clients with monthly benefits that are too low to cover basic living expenses.
Following up the conversation with simple personal needs analysis and visual presentations that help prospects see how a disability could impact their income helps them understand the need for this coverage. Discussing expenses and any coverage gaps or shortfalls reinforces the sale.
Online tools can illustrate the potential shortfall and be tailored for the specific prospect while keeping the conversation friendly and informative. Review how an event causing a long-term disability could leave clients challenged to pay ongoing expenses such as a mortgage, car loans, child care, education and credit card balances. Then, show them how additional coverage can make up some of the difference, depending on their level of disability.