Disability insurance (DI), often perceived as complex and difficult to sell, is a product that many financial advisors have shied away from in recent years. But with many Canadian workers lacking sufficient coverage, insurance experts say, DI represents a huge market that advisors would be wise to tap into.

“It’s a vastly underserviced, undersold market,” says Dawn-Marie Stevens, eastern regional vice president of sales with Newmarket, Ont.-based The Edge Benefits Inc. “Other people are avoiding it, so there’s opportunity.”

DI is designed to protect your clients from the possible loss of income due to a disability, such as an injury resulting from an accident or a serious illness. Clients may consider this type of scenario unlikely, but the chances of experiencing a disability are higher than your clients probably suspect.

On average, one in three people will be disabled for 90 days or more at least once before they reach the age of 65, according to the Canadian Life and Health Industry Association Inc. Given those odds, you have an obligation to ensure your clients are financially prepared to handle such a scenario, says Mark Halpern, president of illnessPROTECTION.com Inc. in Markham, Ont.

“People have to be aware of the risks of not having long-term disability insurance,” Halpern says. “Not only do we have a big responsibility for our clients, but I think we have a huge opportunity in this area.”

There is a gap in DI coverage in the Canadian workforce, especially among the self-employed. Approximately 58% of the 2.67 million self-employed Canadians have no DI coverage, according to Stevens. She considers the self-employed “a huge, growing market.”

Employees of small businesses also lack DI coverage. Most large companies offer some level of group DI coverage. However, Halpern says, a growing number of employers are eliminating this benefit.

“Employers are looking for ways to save money on that expensive group benefit,” he says. “People are now more responsible for taking care of providing those benefits themselves.”

Even clients who are covered by a group disability plan may not have as much coverage as they should. Most plans replace 60%-70% of a member’s income, but there’s usually a cap – $5,000, for example – on the amount of monthly benefits that plan members can receive. As a result, higher-income earners may end up with considerably less than 60% of their income being replaced under a group plan.

In addition, most group plans pay disability benefits for a limited period – usually, two years.

The vast majority of employees don’t realize that such restrictions on their workplace coverage exist. And, in many cases, people don’t learn about the restrictions until a crisis occurs.

“Unfortunately, people don’t know what they have,” Halpern says. “They find out at the wrong time what they didn’t have.”

Simply asking your clients about their existing DI coverage can be a good way to initiate this conversation. Urge your clients to bring in a copy of their group plan, Halpern suggests, so you can determine whether there are any gaps or limitations to their coverage. It may be worthwhile for some clients to top up their existing plan with a supplementary DI policy.

“If you can provide that individual with options that are going to improve his or her situation,” Halpern says, “[your client is] going to be so grateful. And that is going to make you much more referable.”

@page_break@ Not all clients will embrace DI enthusiastically. Premiums can be expensive, and DI typically is not an easy sell. Be prepared to spend time educating your clients on the importance of having DI coverage. Says Stevens: “Advisors need to learn how to sell the need.”

With household debt at unprecedented levels, Stevens adds, that need has become great: “Sixty percent of working Canadians are living paycheque to paycheque. People are in trouble if they lose their income due to a disability.”

Help your clients recognize the importance of having DI coverage by asking hypothetical questions about how they would cope in the event that they lost their income. For instance, would your client be able to pay his or her bills, and for how long?

Halpern says these kinds of questions often come up as a natural part of the financial planning process. He makes a habit of conducting “crash tests” to ensure his clients are prepared to weather any number of unexpected scenarios, including a disability.

“People have to look at this product in the context of overall financial planning,” Halpern says. “These products can only really be sold from an emotional place.

Getting clients approved for DI coverage is not always easy, Stevens says. Because both medical and financial considerations are involved in the underwriting, the application process can be tedious and time-consuming. And, at the end of that process, some applications will be denied.

Despite these hurdles, investing the time and effort into selling DI can pay off. For instance, DI adds a product to your shelf that few of your competitors are marketing, so it gives you a new source of revenue. Offering DI also can strengthen your relationships with existing clients.

“The more lines of coverage and protection you have on a client,” Stevens says, “the more likely they are to be a client for life. And the more profitable your book of business.”

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