Reports of the death of availability of individual disability insurance for baby boomers may be somewhat exaggerated.
“The majority of boomers who are in decent health can still get disability policies,” says Gregory Olsen, a partner at Lenox Advisors Inc., New York.
The oldest boomers are about to turn 62, and even the youngest will be 44 by the end of 2008.
Many insurance agents and brokers believe the only applicants of interest to individual disability insurers are doctor-marathon runners ages 25 to 35.
In the real world, the average age of individual disability insurance clients is just 34, notes Gregory Large, a colleague of Olsen’s at Lenox.
“We do not sell a lot of coverage to clients over age 45,” says Large, who is a managing partner at Lenox.
Clients who apply for disability insurance for the first time after age 45 are much more likely than other clients to end up with a coverage exclusion or an impairment rating, Large says.
But Olsen says healthy boomers still have access to disability insurance.
In many cases, “they could still be getting regular disability insurance,” Olsen says. “At 43, it’s still very practical. Even at 53, it’s doable.”
Many carriers are selling coverage to applicants as old as 63, and the coverage can last up till age 67, Olsen says.
But experts interviewed agreed that insuring boomers’ ability to earn an income takes hard work and a thorough knowledge of the disability market.
Demand for disability insurance among older, high-income executives and professionals is growing because high-income boomers are redefining middle age. They are marrying later, having children later and buying homes later.
Insurers, meanwhile, have been preoccupied with past disability insurance underwriting and contract-writing problems, along with the need to protect boomers against the cost of long term care.
“I really don’t see a lot of innovation [in disability insurance] products for people in their 50s and 60s,” Olsen says.
Disability insurance producers report, for example, that products that can protect the income of people in their 70s or 80s who are still working are rare, even though some famous insurance company executives are in their 70s and 80s.
Getting disability insurance coverage for a boomer may require several years of tax returns, a full medical exam, a rigorous telephone interview and months of shepherding the application through underwriting, Large says.
“I’ve lost too many clients to the process,” Large says. “The industry has to do a better job of simplifying the process of selling this product.”
On the other hand, high blood pressure and high cholesterol–two health problems that mar many boomers’ medical records–tend to be easily controlled with medication, Olsen says.
Another consideration is that the high-income boomers who can afford large amounts of individual disability insurance are often in excellent health.
Insurance advisors working with boomers who cannot qualify for disability insurance probably should start by making sure the boomers have adequate long term care insurance, Olsen says.
Olsen also recommends that boomer income protection advisors have a thorough knowledge of annuities.
A rated annuity–an annuity designed to pay a relatively high amount of benefits to annuitants with relatively short expectancies–might be a good option for a boomer with obvious health problems, and annuities with guaranteed minimum income benefits might be good alternatives for other boomers, Olsen says.
Boomers who need an alternative to disability insurance “should be making sure that, if they become disabled, they can turn their portfolio into an income stream,” Olsen says.