The average age of a new individual disability insurance client is 58 years old, according to the Milliman 2016 Annual Survey of the U.S. Individual Disability Income Insurance Market.
Is that older than you expected it to be? Here are four reasons people in their 50s and 60s may be interested in income protection.
1. Changing priorities.
For this group, the dream of retirement is coming into focus. Children may be grown or finishing school. And, contributions to retirement savings accelerate with increased contributions to 401(k)s and the benefits of catch-up provisions. These are often the highest earnings years, accompanied by higher spending and more generous lifestyles. Clients are more likely to acknowledge the potential financial impact of a disability.
- More discretionary income = better affordability. By age 50, premiums begin to increase more significantly. Where disability insurance may be 2 to 3 percent of income for younger applicants, a 50-year-old client may pay 4 percent of annual income. So as an example, the client earning $100,000 may pay $4,000 annually in premium. Let’s frame that in terms of affordability: That same client who becomes disabled at age 60 and is not able to return to work, would receive $420,000 in tax-free benefits through age 65. With this scenario in mind, it’s often a worthwhile investment.
- Insufficient coverage at-work. Many employer-sponsored policies have a monthly benefit that is capped at a maximum limit of $5,000. This is an insufficient benefit for high wage earners, especially when you consider that the benefit is further reduced by federal withholding.
- Increased risk of disability. 90 percent of claims are due to illness not injury and 48 percent of first time claim filers are 50 to 59 years old, the largest age group by far. The average disability claim lasts for more than 30 months. For someone nearing retirement, the threat of reduced income and increased medical expenses is serious. It can be difficult to recover from that financial impact when you are so close to retirement age.
Educating clients about the risk of disability is the first step in highlighting the need for individual disability insurance. When you discuss a disability’s potential impact on retirement readiness, the case for disability insurance gets even stronger for those in their 50s and 60s.
Retirement plan DI is another attractive product for this age group – even for those with sufficient disability insurance coverage. Retirement Plan DI replaces employee contributions and employer matching that would have been contributed to the insured’s retirement account during the time of disability.
DIS has access to carriers and products that mitigate the financial risks of a disability especially in the mid-to-late career stage. Call your DIS representative for quotes and sales ideas aimed at this market.