Disability insurance is one of the most important segments of the working person’s financial/insurance plan, and adequate amounts of disability insurance are essential for the well-being of people. But it is often overlooked because most people do not perceive they will ever lose their income due to disability. However, loss of income due to disability is a fact of life and is a greater peril than death occurring during a working career.
Our federal and state governments have long recognized the necessity for people to have a continuing flow of income. Many programs such as Social Security, unemployment compensation and individual retirement accounts are in place to help our citizens with their income cash flow, and there are a few states with disability plans. However, government disability plans alone do not provide the necessary income to support a reasonable lifestyle for most people.
Most people are required to buy insurance to cover their automobiles in the event of accident or loss, and many people choose to buy homeowners insurance and medical plans. Most arrange insurance for their boats, artwork, jewelry and other prized possessions, or to insure other peoples’ misfortune with liability insurance.
But the main thing that has created these assets and is likely to be inadequately insured is our income. The need for a continuing income cash flow has long been recognized by economists and scholars of finance. As long ago as 1913, Solomon S. Huebner, Ph.D., professor of economics at the Wharton School of Finance, University of Pennsylvania, stated that disability insurance should be part of the life group of coverages to replace income when the earner is unable to produce it. A vanishing business
A vanishing business
The disability insurance industry, due to neglect and lackluster leadership, has been on a slide toward total disappearance. From a high of 545 individual disability insurers in 1975, the count slipped to 320 in 1980 and to a mere 26 in 2002. Disability insurance was virtually forgotten from 1993 forward when the last disability insurance training course was held. The number of life insurance companies underwriting disability insurance has dwindled to a hardy few.
It is timely for all advisors and planners to support the efforts being made to reinvigorate this segment of the insurance industry. America must have a facility to guarantee replacement of an adequate income cash flow, and to cover business obligations in the event of a disabling injury or sickness.
According to the U.S. Department of Labor, statistics that study the income and spending patterns of American income earners show that a cash flow of 65 to 70 percent of normal income is essential to stay on an even financial keel. In the event of a disabling injury or illness, even in a two-income family, the demands of supporting the household may fall to one person. Expecting that one person to be able to provide for the needs of the household is unrealistic. Single wage earners are also at severe risk of losing most of the accumulations which they have worked long and hard to produce.
How do we convince producers to help prepare clients for a disabling event? One method is to provide the information necessary to make a qualified presentation to the customer. Providing interested producers with easily accessible, correct and pertinent information on disability insurance will go a long way toward rebuilding a viable and badly needed industry. Publicizing the facts of disability insurance to the entire insurance community is also critical to getting a producer to include disability insurance in his customer’s financial plan. Overcoming a negative culture
Overcoming a negative culture
First and foremost in importance is education and training for the insurance industry. In 2005, the International Disability Insurance Society was created as a 501(c)3 corporation. Its mission is to bring together insurance regulators, educators, insurers and producers in a common forum.
The purpose is to change the negative culture of the industry, where segmentation has been the pattern of communication, to a culture of inclusion. The society is also providing leadership in education for producers, insurers, consumers, educators, and regulators. It has partnered with The American College, a leader in financial services education, to promote and provide classes for its new disability course, “Essentials of Disability Income Insurance.” The society has two more advanced courses in development. Go to the IDIS website (www.internationaldisociety.com) for more information.
And plan to attend the International DI Society conference for producers, educators, regulators and insurers in Las Vegas (scheduled for Oct. 27-30, 2007) to be better informed and to become enthusiastic about a great future in disability insurance.