Disability Insurance

Key Person Replacement Insurance is necessary to business owners who want to maintain the strength of their company if a key employee were to become totally disabled.

If an employer takes out a Key Person Replacement policy and the insured key employee meets the definition of Total Disability, the owner of the policy (the employer) receives either a lump sum payment or a combination of monthly and lump sum payments to cover the costs for the loss of the employee and to train a replacement.

To meet the definition of Total Disability, the insured must not be able to perform the duties of their Key Person occupation and are unable to work in any other occupation which is comparable by duties and/or earnings for the business.

Some benefits of Key Person Replacement Insurance offered by our carriers include:

• Guaranteed Premium – The premium cannot increase due to changes in the insured key employee’s health.
• Flexible Payment Methods – The policy can be set up to provide benefits in a lump sum payment or a combination of monthly and lump sum.
• Waiver of Premium – After the insured key person is disabled and meets the elimination period, premiums are waived.
• Interrupted Elimination Period – It is possible to combine different periods of disability to help reach the policy’s elimination period. These periods of disability must occur within a period that is twice as long as the elimination period, but less than one year.

To learn more about Key Person Replacement Insurance contact your Disability Income Specialist today.

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 

The need for an income protection plan is not just for the Executive, Doctor or Attorney earning in excess of $150,000. According to the United States Census Bureau, in September 2017 the average annual income in the United States was $51,017 from all occupations.

Average everyday working people (Middle America) are just as dependent on their income to provide for themselves and their families as anyone in those higher tax brackets.

Your opportunities are endless – reach out to your Clients, Friends, or Family

Ask if they have an income protection plan in place should they get sick or hurt. You can offer them an affordable plan to protect them and their family. Of the advisors I speak with every day, Life Insurance Agents, Health Insurance Agents, and P&C Brokers, 92% are not talking to their clients about income protection and how affordable it can be. 

You can differentiate yourself as an advisor just by offering valuable coverage to your clients that no one has ever spoken to them about.

Here’s an example:

Did you know that the premium for a 40-year-old Office Clerk for $2,500 monthly benefit is only $52.00 per month? There are affordable plans for even part-time Dental Hygienist and Registered Nurses working as little as 24 hours per week.

Talk about opportunities, there are over 192,800 Dental Hygienist in the US earning an average annual income of $70,000 and 2.7 million Registered Nurses earning approx the same income.

Never let premium be the reason your client’s income is left unprotected from an injury or sickness

The new affordable DI plans can fit almost any budget. The premium for a 35-year-old Dental Hygienist for $2,500 monthly benefit is only $52.05 per month. A 40-year-old Insurance Agent can purchase $4,000 monthly benefit for $60.28 per month.

Your clients want to buy Income Protection, but they need someone they know and can trust to ask them about it. You are at the front-line to educate your Middle America clientele about the vital need for income protection in the event of an injury or sickness and how affordable it can be.

Discuss income protection insurance with all your prospects and clients, because they may not understand the risk of losing their income should an injury or an illness strike.

Contact your CPS Disability Experts for Marketing Tools and Sales Ideas to help your clients.

The unasked question to small business owners is, What would happen to your business if you were to get sick or hurt and couldn’t work for a lengthy period of time?

Most small business owners could not get away for a long weekend, let alone several months. Many would likely have to close the business until they recover and then asses if the business could be revived or if there is any business left to sell.

Business Overhead Expense (BOE) can help business owners protect their business and employees if the owner needs time to recover from a serious illness or injury.

If a small business owner suffers a disability and is unable to work, it not only affects the business, it impacts all of the employees as well. Many small businesses are tight-knit families who rely on each other for support. If the business is unable to produce because of the missing owner, the employees may have to start looking for new opportunities.

The BOE Answer

The need is simple to set up: Many small businesses cannot survive without consistent production, and the owner is the primary producer. (Dentist, CPA, Attorney, Physician) What happens to the business when something happens to the owner?

The answer: Business Overhead Expense (BOE) Insurance.

A BOE plan helps to keep the business in operation in the event the owner becomes disabled and couldn’t work for a period of time. BOE reimburses the business for all their fixed operating expenses in order to keep the doors open while the owner recovers from an injury or illness.

This assures there will be a business to come back to once recovered. If a major illness or accident prevents the owner from coming back to work, there will still be a business to sell that has not depreciated because of the owner’s absence.

Also, BOE allows for tax-deductible premiums when insuring for the potential disability of the self-employed person. Often, small business owners are candidates for short-term and/or long-term DI as well.

Speak with your business owner clients today to see how you can help them protect the most important asset they have, their business. Please contact your CPS Disability Income Marketing Manager to start planning your client’s BOE plan today!