disability-protectionDo your clients have the protection they need? An injury or illness can put people out of work, depriving them of the paychecks they depend on while also derailing their retirement plans and drowning them in medical debt. Disability insurance can replace some of the lost income – and that’s important – but it may still leave gaps. For the ultimate disability protection, offer three layers of protection: disability insurance, retirement protection and critical illness coverage.

Layer One: Paycheck Protection

Many Americans are walking a financial tightrope. They earn enough money to cover their regular expenses, but they don’t have much in savings. If their income stops, they’ll be unable to pay their mortgages, car loans and other bills.

According to CareerBuilder, 78 percent of U.S. workers live paycheck-to-paycheck. Even high income-earners may find themselves in this position: 10 percent of workers making $100,000 or more live paycheck-to-paycheck.

These workers can keep walking their financial tightrope as long as they can keep earning an income – but if anything goes wrong, they could be plunged into bankruptcy.

An injury or illness could be what pushes them over the edge. According to the Social Security Administration, more than one in four of today’s 20-year-olds will become disabled before reaching retirement age.

Disability insurance can replace lost income and provide a crucial safety net. To ensure that their long-term finances are secure, however, additional coverage types may be needed.

Layer Two: Critical Illness Coverage

Illnesses account for a significant percentage of disability claims. According to the Council for Disability Awareness, injuries such as fractures, sprains and strains of muscles and ligaments only account for 9 percent of long-term disability claims, while cancer alone accounts for 15 percent of claims.

A critical illness can hit someone’s finances twice: first with the loss of income and then with the medical bills. Disability insurance helps with the lost income, but the elimination period may be a problem for people facing immediate healthcare expenses. This is why critical illness insurance should be considered.

Health insurance doesn’t eliminate the need for critical illness coverage, either. Even with health insurance, people may face expensive deductibles, copays and out-of-network costs. According to a report from the Federal Reserve, 24 million people have medical debt from out-of-pocket expenses they incurred in the previous year.

Critical illness insurance provides a lumpsum payment that can be used to cover out-of-pocket medical bills or other expenses after a critical illness is diagnosed.

Layer Three: Retirement Protection

America may be headed for a retirement crisis. According to the Federal Reserve, only 35 percent of people between the ages of 30 and 44 and 42 percent of people between the ages of 45 and 59 say that their retirement savings are on track.

This means that most people are behind on their retirement savings, and they can’t afford any setbacks. Unfortunately, a disability could cause a major setback. While missing work because of a disability, people may not be able to continue making contributions to their retirement plans. Regular disability insurance can help, but it doesn’t replace the full income, so retirement savings may still suffer.

Retirement plan disability insurance provides another safety net. Up to 15 percent of income can be insured. After a total disability, the payout goes into a trust, and the proceeds are paid to the insured at age 65 or 67.

Give Your Clients Three Layers of Protection

Want to learn more about how critical illness coverage and retirement protection can provide your clients with the protection upgrade they need? Get the Sales Strategy #2 Quick Tip handout.

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