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Four Common Questions About Professional Income Protection

Four Common Questions About Professional Income Protection

| January 16, 2019

My work with insurance producers and financial advisors has its perks and one of them is seeing first-hand how successful producers do their job. My favorite brokers to observe are those who perform excellently and continue to grow a business year, after year, after year. Never the less, whether I'm working with an industry veteran or novice, some of the same questions about disability income insurance come up time and time again. See if any of these sound familiar... 

  1. What is own-occupation? An Own-Occupation policy allows a policyholder to continue full total disability benefits even if they earn income from another occupation. Some consumers and advisors assume they have Own-Occ, but as a rule, you should always read the actual policy provisions to confirm. If benefits are not paid fully when the policyholder earns income from another occupation, a "modified" own-occupation contract is probably what you are reading. 
  2. Why is a partial disability rider so important? If you study the disability income market, you realize that many more claims are paid because of illness than injury. Actually about 90% claims are paid for illness compared to 10% injury. Therefore, if you think about it injuries can have immediate impact on someone's ability to work, whereas the more common illness claim may have a more gradual effect on someone's abilities. Further in recovery both illness and injury experience is often a gradual path of healing instead of immediate. It's important that you know that periods of diagnosis onset and recovery can take place over long spans of time and pay significant claims under a partial disability provision. 
  3. Young professionals like doctors, dentists, and attorneys are often ideal clients but right now they don't have any money to invest. What can you do? Use special underwriting programs to streamline financial documentation and lab requirements that may be available to young professionals. Also, graded premium is way to afford coverage with a lower payment that increases over time. 
  4. What do I do when DI insurance seems too expensive? Yes, DI seems expensive at first, but I say compared to what. When the insurance seems too expensive you can go one of two directions. First, you can revise policy benefits to reach a lower premium. Or second, you can change how you value your income stream and seek out optimum coverage. One question you can ask is "how much would you trade today as a lump sum in exchange for your future earnings?" To answer this question, you must face the enormous amount of financial power behind income and the impact it has and will have on your cash flow.