Insuring Against The Unthinkable

By purchasing a supplemental disability income insurance policy with CAT coverage, policyholders can increase their maximum potential benefit and potentially protect up to 100% of their income at the time of original policy issue, depending on the insurer’s maximum issue amount. More importantly, depending on a number of variables ranging from age and occupation to coverage needed, this rider generally can be added to a policy very affordably.

Who should consider CAT?

Those with existing coverage already understand the need for disability insurance protection and are, therefore, prime candidates for CAT. But many business owners and employees who have coverage through their workplace may be focusing only on the short term, and many may not have looked beyond to the potentially devastating effects, if a disability leaves them sick or injured and unable to work, even if they have a group policy.

A potential for growth also exists in the executive market, since group LTD policies can cap off and result in a larger gap between covered salary and total salary earned. In short, highly paid executives may have more to lose.

Here’s an example. John Doe, a client with an average earned income of $125,000 ($10,417 per month) who has group LTD coverage, will receive a replacement ratio of 60% or $75,000 per year (if $6,250 is the monthly benefit cap). If he were to suffer a catastrophic disability without having a CAT rider in place, a yearly income shortfall of approximately $50,000 ($4,176 per month) would exist.

Simply said, agents or brokers who are doing analysis and aren’t discussing the possibility of disability coverage and options may be leaving their clients exposed and overlooking an opportunity to help them protect what may be their most valuable asset: their income.

Fortunately, many carriers are approaching the marketplace with a mission to increase awareness, and the inroads made in the worksite sales arena are apparent. According to Eastbridge Consulting Group Inc., 23% of insurance products sold in the worksite in 2004 were DI products.

To continue this positive momentum, 12 of the country’s leading disability insurance providers have come together and formed a group called the Council of Disability Insurers. The primary focus of the group will be to create a cohesive and compelling presentation of the importance and value of disability insurance protection. The major emphasis in the organization’s activities will be a strong focus on education of consumers, providers (employers) and intermediaries.