There’s nothing better than knowing you have had an impact on someone’s life. For us to have a significant impact on our clients’ lives, we must help them overcome the obstacles that keep them from achieving their full financial potential. This often includes developing a culture of risk reduction with disability income insurance.
At our firm, everything we do for our clients is ultimately intended to build their net worth while reducing their overall risk. When asked how they define risk, they usually name one or two things. In reality, the amount of risk is daunting. We have come to define risk as anything that limits, erodes, eliminates or hijacks our clients from achieving their full wealth potential, including:
- market risk
- inflation risk
- tax risk
- lifestyle risk
- lawsuit risk
- employment/underemployment risk
- marital risk
- cell phone risk ( due to distracted walking and driving)
- living too long
- dying too soon
- disability risk
Despite all of the risks, the probability of death before age 65 is 2.8 percent for men age 45 and 2.3 percent for women at the same age. Those same men and women have an 11 and 15 percent chance, respectively, of being disabled for more than 90 days.1
As these statistics reveal, men and women at age 45 are four times more likely to be disabled for at least 90 days than die before the age of 65. But the issue is that many are only investing a little money in something that’s most likely to happen between the ages of 45 and 65 – a disability – and placing more money in something with a minimum amount of risk – a premature death that is unlikely to happen in the next 20 years.
Our biggest job is to keep our clients from doing the wrong things first. And one of the most common wrong things people do is they don’t insure their paycheck. Adequate coverage for their salary is one of the greatest risks our clients face.
The importance of disability income insurance is something that goes beyond our clients and I personally experienced a disabling illness several years ago. When I was first starting out with my firm, I started to feel run down. It got to the point where I could only work two to three hours a day. I was eventually diagnosed with Hepatitis A, and admitted to the hospital.
I was the leading producer in our firm, but I couldn’t meet with my clients. My income was decreasing. One day, I was discussing my financial situation with one of my colleagues and he asked me, “Don’t you have disability income insurance?”
That’s all it took to remind me that I had purchased both a group and an individual policy as well as a residual rider and a business overhead expense policy. I submitted a claim and thereafter, received a check that saved my company.
I learned firsthand the risks that a disability posed for my business and myself. What are your risks as it relates to your personal business model?
- Cash flow
- Assets under management erosion
- Assets under management volatility
- Client retention
- Your own disability
Ask yourself if you want failure as an option. When it comes to a disease or a long-term sickness, you need to protect yourself and your business.
Disability income insurance on all of your clients helps maintain their ability to continue to invest their assets as well as also protects your assets under management. Bringing disability income protection to your standard operating procedures greatly reduces a serious risk exposure that your clients face – and it will also bring protection to your business. When clients have maximum disability income protection, the need to deplete portfolio assets is reduced.
Market volatility is always going to be there. Disability income insurance is a buffer when a client is affected by disease or injury. With disability income insurance in place for protection, clients won’t seek to liquidate their financial portfolio for living expenses, especially during times of negative returns.
The majority of clients takes the death claim from an insurance company or advisor and goes elsewhere to invest and manage those funds.2 Accidents cause five percent of deaths.3 Take a client that became disabled for five or six years prior to death, and you were responsible for protecting the family with maximum disability income protection during those five or six years. Following the eventual death, what are the chances of that family taking their death proceeds elsewhere when that loved one passes?
Developing a culture of risk reduction with disability income insurance for yourself and your clients not only protects your clients but ultimately, your business model. We have to take care of ourselves and be our own best client.
1Council for Disability Awareness, 2013
2cnbc.com, 2014
3Centers for Disease Control and Prevention/National Center for Health Statistics, September 30, 2015
Disability income insurance policies have exclusions, limitations, reductions of benefits and terms under which the policy may be continued in force or discontinued.
