DI Insurance: How to fix the money management conversation

Financial gurus often tell consumers to follow the money-management trifecta to start building financial security:

1. Pay down debt.
2. Build a rainy day fund.
3. Save for retirement.

I would assert that they’re missing a critical first step: Protect income.  Sure, financial pundits might discuss how important income protection is down the road, but that could be too late.  The best time to talk to clients about income protection is now. After all, without an income:

• How far could clients get with their rainy day savings?

• What kind of dent could they make in their debt?

• How could they save for retirement?

Most people can’t visualize what could prevent them from earning an income. They might think, “If I lose my job, certainly I’d get another one.” But, what if they’re not healthy enough? What if they can’t get another job because they’re physically or emotionally unable?

Most of us take our health for granted. We think we’re invincible, that we’ll always be healthy and able to work. In reality, unexpected illnesses and injuries happen all the time. According to the Social Security Administration, one in four of today’s 20-year-olds will develop a serious illness or injury that prevents them from working before retirement.

We need to change the money management conversation now.  Lead with income protection, instead of making it an after-thought.  This is especially true for the more than 80 million millennials in the workforce. They are just starting their careers and are only beginning to build financial security.  Chances are, most of them don’t realize they’re missing a huge component to that security: income protection.

One of the best ways to put income protection in place is with individual disability income insurance:

• It’s affordable.  The typical daily cost is about the same as what we pay for a latte or gallon of gas. And the younger clients are, the less expensive it is. As we age, the risk increases that our health will take a turn for the worse. When clients buy coverage early, they not only protect their income, they protect their insurability.  Most policies have features that help increase future benefits without requiring medical underwriting. So, no matter how their health changes, those clients can make sure their benefit amount keeps pace with income growth.

• It’s portable. The policy is individually owned, so it’s not contingent on an employer’s benefits package. Employees today change jobs and careers often.  By some estimates, millennials change jobs every three and a half years.  There’s no guarantee that an employer will provide group disability benefits. Indeed, according to the Bureau of Labor Statistics, only 31 percent of employers do. 

•  It’s tax-free.  The benefit amount promised by the policy is what the client receives (as long as premiums are paid with after-tax dollars). There are no surprises when the check arrives each month.

For most clients, the concept of income protection is new.  So, how do you bring it into the conversation?  Here are two ways: