The people who need disability income insurance come in two forms: the ones whose lifestyle would be almost immediately affected if their source of monthly income suddenly stopped, and those who could endure the financial hardships caused by a sudden stop of salaried income.
It is easy to help those in the first group see the need for protection against the sudden loss of their salary due to an illness or accident. Often people in this first group are on such a tight budget, which in part causes them to be in this first group, that they have trouble adding disability income insurance premiums to already stretched budgets. For this group, selling the need is easy, while selling the cost is difficult. Often, this group contains workers whose occupations make it difficult to obtain coverage at desired rates or for desired coverage periods.
The second group, often professionals, executives, or business owners, have sufficient assets and other sources of income, that a loss of salaried income is seen more as an “inconvenience.” By inconvenience it means plenty of adjustments, giving up some luxuries and some desired discretionary expenditures, but it would not be the financial disaster similar to those of the first group. It is very difficult to convince this group of the need for disability income insurance with an urgency to take action. However, if this group were convinced of the need, allocating additional dollars for premiums would not be seen as a big obstacle. For this second group, selling the cost is easy, while selling the need is difficult.
Ironically, disability income insurance is often easier to obtain for the second group since their occupations are usually less hazardous with preferred occupational classes. It is much easier for this group to get the disability income coverage they desire. Since the second group generally has larger salaries, the amount of disability income needed is larger resulting in larger sales. Many times, the same sales presentations used to sell the needs for the first group are used, often unsuccessfully, with the second group.
PlanLab’s Financial Needs Analysis has the needs presentation pages to sell the need to the first group. But, it also has a unique sales presentation page designed to show the need of disability Income insurance to the second group. Since Financial Needs Analysis has true monthly cash flow calculations, the effects of various periods of disability can be calculated. By showing the effects of being disabled for just two years, five years, or from now until retirement, it is easy to see the “overall” effects of a loss of salaried income. The full impact of the lost salary is calculated including the missed 401(k) contributions. The cash flow calculations use the appropriate assets to pay ongoing expenses and illustrate the long-term effects of using those assets. To make it easy for the client to understand, the effects of various periods of disability are illustrated by the estimated net worth at retirement.
A sample of this unique presentation page shows that the client should have a net worth at retirement, age 65, of $5,321,674 if no periods of disability are assumed and everything goes as planned. However, just missing the next two years due to a disability, would reduce his net worth at retirement by 9.39% or almost half a million dollars. Missing the next five years would reduce the retirement net worth by 23.57% or approximately $1.25 million. If he were disabled from now until retirement, his retirement net worth would be reduced by two-thirds—about $3.5 million!
The emphasis of this page is to point out that the disability income insurance is not just providing funds to replace missed paychecks; it is maintaining his standard of living for the rest of his life and retirement. This page also shows the likelihood of a long-term disability for a person his age as compared to dying before retirement. In this example for a man age 50, he is almost three times (2.93) more likely to suffer a long-term disability than die before age 65.
The second group needs disability income insurance, just as much as the first group. By showing the long-term effects on retirement and long-term standard of living, with the likelihood of a disability occurring, you have the tool that makes selling the need of disability income easy. Now, you can sell disability income to the group that needs it and can get it.