Most people never stop to think about how they will survive a loss of income — either temporary or permanent — should they become disabled. That’s why you should help your clients understand the need for disability insurance (DI), which can provide protection against a sudden interruption in their income.

People tend to ignore the fact that they can become disabled during their income-earning years when they are still young or healthy. And some clients believe their employer’s group insurance will provide them with adequate benefits if they were to become disabled.

But the probability of any client experiencing some form of disability is, on average, higher than 40%, according to Lawrence Geller, president of L.I. Geller Insurance Agencies Ltd. in Campbellville, Ont.

So, unless your clients are independently wealthy or have enough savings stashed away to offset an interruption in their regular income stream, you should make them aware of the need for DI.

Here are some of considerations for discussing DI:

> Make them aware of the probability
Most clients play down the risk of becoming disabled. You should make them aware of the probability — without instilling fear — by providing them with some real evidence. Statistics from the Canadian Life and Health Insurance Association can be helpful.

For example, a 20-year-old man is three times more likely to be disabled for at least 90 days than he is to die before age 65. A 35-year-old woman is seven times more likely to face disability than death before age 65. And if disability lasts for at least 90 days, it is likely to last, on average, three years or more for a 35-year-old man or woman, and four years or more for a 45-year-old man or woman.

> Discuss the implications
Temporary disability might not be a major cause of concern among your clients, Geller says. But longer-term disability could have a significant impact.

To get them thinking, Geller suggests asking clients a series of questions such as:

What if you become ill or injured and can’t go back to work? How will disability affect your lifestyle and your family?

Discuss the amount of clients’ savings or retirement funds they would have to draw down in order to cover their income shortfall, and how this would affect their eventual retirement plans.

Clients should also be aware that disability can result in additional costs, such as higher deductibles on medication coverage. More important, a family member, usually the client’s spouse, may have to take time off from work to care for the client, resulting in additional loss of family income.

“Expenses during a disability usually go up, not down,” Geller says.

> Explain the options
DI replaces about 70% of income earned from employment, up to specified maximums. So, clients cannot buy sufficient DI to replace their income fully.

However, he says, you can explain the various types of policies and their features. For example, some policies have a 90-day waiting period before benefits kick in, while others have a 180-day waiting period.

Clients should also be aware that DI policies have other restrictions, including: exclusions on coverage based on pre-existing health conditions; limitations on length of coverage; limits to benefits payable; and specified conditions under which benefits will be paid. The key is to help clients find an income-replacement DI policy that fits their needs.

> Remind clients that group coverage might not be sufficient
While many of your clients might be covered by group insurance, you should assess whether they need supplemental DI coverage.

Many group policies provide only limited benefits and may be subject to limitations such as benefit ceilings that are not based on an individual’s total income. Or they may be subject to qualifying periods — leaving the client at risk of an income shortfall in the event of disability.

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