Do Your Due Diligence- Do DI - internal.nfp.com€¦ · Do Your Due Diligence- Do DI Sarah Ritchie, Principal Financial Group Kat Freeman, NFP Presented By: For producer information

Do Your Due

Diligence- Do DI

Sarah Ritchie, Principal Financial Group

Kat Freeman, NFP

Presented By:

For producer information only. Not for use with the public.

Individual Disability Income Insurance Objections

Principal Continuing Education University

Sarah Ritchie, Senior Relationship Manager- IDI Sales


While this communication may be used to promote or

market a transaction or an idea that is discussed in the

publication, it is not a marketing opinion and may not be

used to avoid penalties under the Internal Revenue Code.

You should consult with appropriate counsel or other

advisors on all matters pertaining to legal, tax, or

accounting obligations and requirements.


How to achieve financial security


Income is the financial foundation


“It won’t happen to me –

I expect to stay healthy.”

OBJECTION


Times Are Different Now…

Source: National Underwriter, May 2002; The JHA Disability Fact Book – 2003/2004 Edition

– Need for Disability Insurance


Chances of Disability

In the U.S., a disabling injury occurs every

1 second, whereas a fatal injury occurs

every 4 minutes!1

43% of all people age 40 will have a long-term

disability event prior to age 65.2

1 National Safety Council®, Injury Facts® 2008 Ed.

2 JHS Disability Fact Book, 2006


“Why would I need disability

income coverage?”

OBJECTION


Are You Protecting the Right Assets?

Annual Income

Age $50,000 $100,000 $150,000

30 $4,516,000 $9,032,000 $13,548,000

35 $3,322,000 $6,644,000 $9,966,000

40 $2,386,000 $4,773,000 $7,159,000

45 $1,653,000 $3,307,000 $4,960,000

Potential Earnings to Age 65 (with 5 percent annual salary increase)


If your client became too sick or hurt to

work, they have a lot to lose…

Current standard of living

Insurability

Future earnings

Their home

Credit rating

Retirement savings and other assets

Peace of mind


Disabilities happen…

1 Social Security Administration, Fact Sheet 2007 2 National Safety Council ®, Injury Facts ®, 2008 Ed.

3 in 10 workers

entering the

workforce today

will become

disabled before

retiring.1

There is a death

caused by a motor

vehicle crash every

12 minutes, there is a

disabling injury every

13 seconds.2


OBJECTION

“I would have to be

totally disabled to

receive benefits.”


Residual and Transitional Coverage

• Residual (or Partial)*

– Requires a loss of income and usually a loss of time

or duties

– Pays benefit proportionate to loss of income.

• Transitional*

– Totally disabled from current occupation, but

working in another occupation

– Pays up to 100% of earnings or the maximum

benefit

*May require an additional cost


Catastrophic Benefits Coverage

Pays a benefit in addition to current benefit if your

client is catastrophically disabled:

• Can’t perform two or more Activities of Daily Living

• Cognitively impaired

• Presumptively disabled

$5,000/month Individual Disability Income coverage

with and $8,000/month benefit for catastrophic =

$13,000/month potential benefit


“My financial needs change

so fast. What policy could

keep up?”

OBJECTION


Keeping Up

• Future Purchase Options

• Future Increase Options

• Cost of Living Rider

• Adjustable Policies

These riders may require an additional cost


“Would I even have a

disability that would be

covered?

OBJECTION


Breakdown (by percentage of claims) of some typical

reasons an individual may become disabled


Sample Disability Claims

Occupation Age Diagnosis Total Paid

Attorney 46 HIV $471,559

Business Owner 36 Back $23,210

Computer Consultant 44 Back $696,583

Corporate Executive 54 Cancer $101,605

Nurse - RN 38 Depression $205,150

Pharmacist 39 Lupus $96,162

Physician 34 Vision $1,013,380

Psychologist 50 Muscle Pain $224,701

Real Estate Agent 50 Cancer $15,950

Veterinarian 46 Asthma $58,115

Principal Life Adjustable Disability Insurance claims as of March 2009. Above is for

illustration purposes only and is not intended as an inclusive representation of all claims.


“I have enough disability

coverage through my

employer.”

OBJECTION


Can your client survive on a 60% pay cut?

Chart based on $5,000 gross monthly income ($60,000 annually), with 60% Group Long Term Disability

program, assuming a 30% tax bracket for Federal, State and FICA.

Group Long-Term

Disability insurance

is a good start, but

it may not be

enough.


Group LTD insurance

Considerations:

• Benefit provisions within the policy are typically

conservative

• Reverse discrimination for key employees (cap on

benefits may be too low for higher-paid employees)

• Policy is usually not portable for the employee

• Bonuses and incentive pay typically not covered


Individual DI insurance benefits

• Premiums and benefits are guaranteed through age

65.

• Tax-free benefits (when paid with after-tax dollars)

• Quality benefit provisions

• Bonuses and incentive pay can be covered

• Policy and discounts are portable

• Payment options available (employer-paid or

employee-paid)


Offer Integrated DI Solutions

Note: Hypothetical example. Elimination and benefit periods can

vary depending on how the policies are structured.

*

Group Long-Term Disability Insurance**

0 8

Days

Benefit Duration

To age

65

Inco

me R

ep

lacem

en

t P

erc

en

tag

e

Group Short-Term Disability Insurance*

Sick Pay/Vacation

Integrated Disability Program

Supplement Individual Disability

Income Insurance

100%

75%

66%

60%

180

Days


OBJECTION

“I can buy it later

or

It costs too much.”


Waiting to purchase DI can cost your client.

Colorado resident, Non-smoker, 5A, $100,000/annual income, $4,800/mo benefit, 90

day elimination period, To Age 65 benefit period and your occupation period, residual

disability benefit rider.

Age 35 40 45 50

Male $1,691.04 $2,257.44 $2,807.04 $3,593.76

Female $2,533.92 $3,167.04 $3,724.80 $4,524.96


Another Viewpoint

Premium paid until age 65 for:

• 35 year old male: $33,820.80

• 45 year old male: $56,140.80

A 45 year old male would pay an additional

$22,320 of premium for 10 years less

coverage.


$7,950/mo

benefit replaces

48% of $200,000

annual income

For 1.51%

of annual

income


“Social Security or Workers Compensation

will take care of me.”

OBJECTION


Social Security

– Less than half - 35% - of the 2.8 million workers who applied for

Social Security Disability Insurance (SSDI) benefits in 2009

were approved. - Social Security Online, disabled worker beneficiary statistics, ssa.gov

– Pays Benefits for Total disability only: severely impaired,

physically or mentally, can’t perform any substantial gainful

work and must last 12 months or result in death.


Social Security

Maximum benefit for $100,000/year

income is:

$16,800/year

($1,400/month x 12 months)


Workers Compensation

Must be due to an occupational

disease or injury arising out of or

in the course of employment.

Nearly three-fourths of disabling injuries in 2008

are not work related, and therefore not

covered by workers' compensation. - National Safety Council®, Injury Facts® 2010 Ed.


“I could still work if I

became disabled.”

OBJECTION


But would they want to?

Today we face many concerns and diseases

that weren’t as common several years ago:

Terrorist attacks

Natural disasters

Workplace violence

AIDS

Bird Flu

West Nile Virus


“I don’t like needles”

or

“I hear the Underwriting process is difficult.”

OBJECTION


Simplified Program

Discuss a simplified

concept with your

client


“My family and friends

will help me out.”

OBJECTION


• Would they want to put that burden

on their family?

• How long would their family be able

to support them?

What if the disability lasted?


Chances of a Disability

In the last 10 minutes, 490 Americans became disabled*

In 2008, there were 2.1 million disabling injuries caused

by a motor vehicle accident; there were 39,000 fatal

motor vehicle accidents.*

*National Safety Council®, Injury Facts® 2010 Ed.


“I can rely on my

savings.”

OBJECTION


Is your client saving to pay for a

disability? Or are they saving for:

What Are Your Clients Saving For?

• A New Home

• Travel

• Education

• Retirement


If your client makes $60,000/year salary

and wanted to save three months of

salary, they would need:

$15,000 in savings

($5,000/month income x 3 months)

Savings Needed


“I’ve already maxed out

my Individual Disability

Income coverage.”

OBJECTION


Protect their Retirement Savings

What would happen if they

suffered a disabling illness or

injury and could not work?


Impact of a permanent disability on

retirement savings at age 40 R

etire

ment A

ssets

Age


How does it work?

Insured

Upon reaching

the benefit period –

insured may begin

receiving Trust

assets per the

terms of their Trust

Agreement

Irrevocable

Trust

Insurance

Company

Before disability –

insured pays DI

insurance premiums

Upon disability –

company pays

DI insurance

benefits which

the Trust invests


Traditional Individual

Disability Income (DI)

Traditional DI with

Lifetime

Rider/Feature

Retirement Protection

When would

disability

benefits stop

for a

permanent

disability?

End of benefit period

(i.e. To Age 65)

Benefits continue

to pay for your

lifetime

Benefits are paid into the

trust until the end of the

benefit period.

Withdrawals then made

from the trust until death or

until funds are gone

What Death

Benefit is

available?

3x’s ultimate monthly

benefit if death occurs

before end of benefit

period

3x’s ultimate

monthly benefit

Insured’s estate receives

any remaining trust assets.

What is the

amount of

Death Benefit

paid?

$10,200

($3,400/mo x 3)

$10,200

($3,400/mo x 3) $4.1 Million*

*The 4.1 Million of death benefit assumes disability begins at age 40 and $3,400 monthly

benefit paid to trust from age 40 to 65. $3,400 distributed monthly from trust until death at

age 70 and trust assets earn 8% interest both before and after benefit period.


Thank You!

Home Office: Principal Life Insurance Company, a member of the

Principal Financial Group®, Des Moines, IA 50392

Approval #t100726016i | DI2731

INTERNAL USE ONLY. Not for public distribution. 2012 NFP SCHOOL OF EXCELLENCE


Keith Hoffman Disability Insurance, Vice President

Keith joined NFP in October 2006 with over 19 years of industry experience, including 3 years as an independent insurance producer and 16 years in

disability brokerage sales and management.

(512) 697-6155 [email protected]

Kat Freeman Disability Insurance Sales, Director

Kat joined NFP in June 2010 after four years with Unum in their Worcester, MA home office. At Unum, Kat was responsible for administering individual disability

claims on a Complex Claims Team.

(512) 697- 6151 [email protected]

mailto:[email protected]

mailto:[email protected]

INTERNAL USE ONLY. Not for public distribution.

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Do Your Due Diligence- Do DI - internal.nfp.com€¦ · Do Your Due Diligence- Do DI Sarah Ritchie, Principal Financial Group Kat Freeman, NFP Presented By: For producer information