This week, love is in the air. Across the country, insurance agents are selecting heartfelt gifts and planning romantic dates for their sweethearts. How will they pay for these extravagances?
A few are generating extra income with the hottest combo sale around … DI + CI.
Critical illness insurance has been on the market for a few years, but recently the product has gained steam as the “elimination period eliminator.”
Also known as the “waiting period,” the elimination period is the period of disability that must elapse before benefits commence. For example, if Sam has a policy with a 90-day EP and is disabled on January 1, he will be eligible for benefits 90 days later — roughly April 1. Typical EPs are 60, 90 or 180 days.
Obviously, disability insurance policies with shorter elimination periods cost more because the likelihood of insurer payout is higher. Despite this fact, many clients choose a short elimination period because they question their ability to sustain their standard of living without income for more than 60 or 90 days.
Now, I know you’re probably wondering – How does critical illness insurance eliminate the disability insurance elimination period?
I’m glad you asked. If the insured is disabled due to illness (think stroke, heart attack, cancer and more), the critical illness policy is activated. Critical illness policies pay a lump sum amount upon the first diagnosis of a covered illness or medical procedure. So, a person with a DI policy with a 180 waiting period could also get a $50,000 critical illness policy that pays the lump sum benefit upon diagnosis. This $50,000 fills the gap left by the DI elimination period.
According to a 2011 statistic published by the Council for Disability Awareness, Long-Term Disability Claims Review, approximately 90 percent of disabilities are caused by illnesses rather than accidents. So, chances are high that if and when your client has a disability insurance claim, the critical illness policy would also be triggered.
Also interesting is the fact that if the insured collects the critical illness policy benefit for an illness or procedure in one category and then is diagnosed with a condition in another category, the policy will pay the full benefit again.
With this information in mind, get creative with your next disability insurance quote.
Instead of assuming that a 60-day elimination period is best, compare the cost of a 180-day elimination period combined with a critical illness policy. You might be surprised at what you discover.
And to make your disability insurance quote even more interesting, consider adding a retirement protection policy – also known as the retirement safety net. During periods of disability, clients are often unable to save for retirement. Retirement protection keeps retirement dreams intact, and we can insure up to 15% of earned income!
The policy can insure an amount equal to 100% of the client’s current retirement plan contributions, up to the maximum monthly benefit amount. In the event of total disability, the policy pays benefits directly into an irrevocable trust that is established in the client’s name. The trustee reinvests the plan proceeds into an investment vehicle consistent with the client’s investment strategies. At retirement, the trust proceeds are distributed to the client to replace lost retirement benefits.