While it is not a cure, disability insurance (DI) can be a bandage to help clients stop the financial bleeding if they have a disabling event. At the very least, the COVID-19 pandemic has highlighted the importance of income to everyday lives.
Discussing ways to protect income, whether the client is working currently or not, is extremely important. This can be especially true since a disability is likely an unexpected, life changing event.
On the heels of recognizing Disability Insurance Awareness Month in May, financial professionals are continuing conversations with clients impacted by COVID-19 — whether they are an essential worker, had a job loss or income reduction, or are getting back to work after a temporary layoff or business closure.
Many clients understand the ability to earn a living is their most valuable asset; however, they don’t make plans to maintain their lifestyles should that asset be taken away unexpectedly. Ideally, the DI discussion would come before that happens, but just because the client isn’t currently working doesn’t mean there aren’t any solutions available.
Unemployed with a DI Need
With companies closing or laying off employees due to the pandemic, some clients are finding out they are unable to apply for traditional DI offered through an employer, or even individual DI coverage through their insurance agent or financial professional.
Here are some questions to ask before creating an individual DI plan:
- Does the client currently being unemployed change the fact that a disability can happen at any time?
- Will the disability affect the client’s ability to get back to work once the employer opens the position again?
- Would the client’s income changing from a short-term situation due to the pandemic to a long-term situation due to a disability impact his or her lifestyle, and financial and retirement plans?
Naturally, some clients might ask the question, “Do I have to wait until I get back to work before I can protect my income?” Financial professionals can offer answers to help heal the wound left by income loss.
True individual DI requires the insured to be employed full time (at least 30 hours per week) prior to being eligible to apply for coverage. In addition, some carriers now require proposed insureds to work at least 30 days and acquire two paystubs before being eligible to apply.
Critical but Covered
A critical illness policy can be a great solution for clients who cannot qualify for individual DI because they are unemployed. Additionally, it can be a great supplement for clients who have DI coverage, whether through their employer or individually.
Depending on the carrier, critical illness coverage can provide benefits for myriad illnesses, including, but not limited to:
- Advanced Alzheimer’s disease
- Heart attack and coronary artery bypass surgery
- Kidney failure
Critical illness policies pay benefits for qualified claims in a lump-sum, and the policy can be kept in force for life. This can be advantageous as some of the previously mentioned conditions can be more prevalent in older individuals. There are other benefits (such as critical accident rider, child critical illness rider, loss of independent living rider, return of premium and others) that can be part of the contract via a rider subject to the carrier.
In Need but in Force
An opportunity for clients that are currently unemployed is to apply for a critical illness policy that offers a lump-sum benefit totaling a combination of one-to-two years’ worth of mortgage payments to assist them until they are able to put in force individual DI coverage once they return to work.
However, some of those clients end up keeping the critical illness coverage even when they put in force traditional individual DI. This allows benefits to be paid out (depending on the type of disability claim) while clients satisfy the elimination period of their traditional individual DI policy.
At Risk but at Peace
Lastly, there are other products available by at least one carrier that covers just cancer or heart attack and stroke. Financial professionals should always consider recommending that clients look to individual DI to cover as much risk as possible rather than just limited conditions. However, the cancer or heart attack and stroke policies could be all the client wants to protect against, or could be the only option based on existing medical conditions or age.
One way for an agent to learn more about how these solutions can help clients during times of uncertainty is to contact a carrier directly, and to read the information carriers and nonprofit groups have posted on the web. Another way is to contact a brokerage general agency to see how these products could be solutions for temporarily laid-off clients until they are back to work full time (certain carrier guidelines apply to when clients can apply after returning to work).