Ever presented disability income insurance to a client, and found that with one look at the price-tag they are reluctant to purchase? While it is true that a DI plan could be costly for some – it certainly doesn’t have to be.
Avoid the “sticker shock” with your clients
The general rule for the amount a client should spend on their Income Protection plan is 3% or less of their annual income.
If the premium is higher than the 3% amount, the client is more likely to experience “sticker shock” – and, even if you are able to place the policy, the likelihood of it lapsing is much higher. The client will then have no protection and you will not have a renewal commission.
How to keep premiums under 3% of a client’s income
1) By adjusting both the Benefit Amount and Elimination Period (EP), you are able to make the policy more cost-effective.
- Adjust the benefit amount to cover just the basic monthly expenses such as rent/mortgage, utilities, groceries, etc.
- Approximately 75% of fully underwritten policies have a 90-day EP – if your client has enough savings, offer a 180-day EP.
2) Creating a mixture of Base Benefit and Social Insurance Supplement (SIS) coverage is another solution to keep a client’s premiums low.
- The idea here is to get the most coverage for the lowest premium. Since the SIS coverage can be offset by Social Security, State DI or Workers Compensation, the premium is less expensive than that of the Base Benefit.
- A good mixture of SIS and Base coverage can generally keep the premium within a client’s budget, yet provide them with the coverage to ensure their financial stability in the event they are unable to work.
A Fun Fact to share with your “sticker shocked” clients
Over 80% of disability income claims are settled within 5 years because the client recovered and returned to work, or they passed away. In lieu of a less than 20% chance, your claim will go past 5 years, a 5-year benefit can be very affordable.*
Not every client needs all the available costly riders the carrier offers – choose only the riders that will actually benefit a client.
And if in doubt of which rider(s) would be the most suitable – contact your DI Specialist to discuss the best options. We are here to help!
*Council for Disability Awareness