Recent economic events have made employees more aware than ever of their financial vulnerability. Even highly compensated Americans — those earning $100,000 or more per year – have learned that they are not immune to financial instability, and that they may be lacking the appropriate coverage to protect themselves and their families: disability income insurance (DI).
An individual’s ability to earn an income has been, and will continue to be, their most important asset. Yet many Americans are not familiar with individual DI protection, nor are they seeking advice on how to protect their income.
According to MetLife’s Seventh Annual Employee Benefit Trends study, almost half of all employees earning $100,000 or more annually are worried about the financial repercussions of a disability that affects their family’s principal wage earner, and are concerned about their ability to pay bills if a period of sudden income loss were to occur. However, about one-third of these employees have no DI coverage.
If highly compensated employees are concerned about sudden income loss, why are so few taking steps to protect themselves with DI? This is a valuable opportunity for you to offer guidance and education about how DI can help provide security.
What Your Peers Are Reading
Education is critical
According to MetLife’s study, one in five employees who earn $100,000 or more a year does not know how much of their income is protected by DI. Of those, 40 percent either believed the amount was inadequate or were unsure if their coverage was substantial enough. In fact, one-third of those who do know how much DI coverage they have are covered for less than 60 percent of their salary.
Despite the high rate of DI underinsurance for highly compensated employees, only 33 percent of individuals earning $100,000 or more have spoken to an insurance agent about their DI coverage.
You should discuss your clients’ income protection needs with them as part of any sound financial plan. This should include a review of any employer-provided group disability plan, as well as the potential need for supplemental individual disability coverage.
Coverage foundation, the workplace
Traditionally, employees look to employers for disability protection. However, while more than half of highly compensated individuals with DI obtain it through the workplace, these employees may not have enough coverage for their income level.