Those who are beginning careers today face more financial challenges than their parents did a few decades ago. Net worth, home ownership and wages are down, while debt is up – way up! Consider these statistics:
- The current median wage for a 25 to 35-year-old is 20 percent less than it was in 1989.
- This year, U.S. student debt hit $1.5 trillion, exceeding the national credit card debt.
- The average student debt hovers around $37,500. For medical school and dental school grads that jumps to an average of $189,000.
The ability to repay student debt is an important consideration for a client considering disability insurance. Even with 70 percent of income replaced by an individual disability insurance product, the average medical school monthly student loan payment of $2,100 can be a strain on a household budget.
Understanding the growing concern of 30-something consumers, many IDI carriers offer a rider specifically designed to address student loan debt. Some carriers have enhanced those programs for physician and dentists to address the higher debt levels.
For a small additional premium, a student loan repayment rider can be added to an individual disability policy. The rider provides a monthly benefit in addition to the policy base plan. The benefit is based on the amount of the current loan payment usually ranging from $250 – $2,000. The benefit period is 10 or 15 years, depending on the length of the loan, and begins on the effective date of the rider. Most plans will pay the student loan payment directly to the lender on behalf of the insured.
For example, on the seventh anniversary of the policy with a 10-year student loan rider, a claim is filed. The rider would provide the student loan payment benefit for the remainder of the rider period, in this case, three years or until the loan was repaid, which comes first.
Depending on the carrier and the disability product, the rider may be available to specific occupations, require a benefit period to age 65 or 67, be restricted to certain plans, or have other availability conditions. Your DIS representative will help you find the carrier and rider that works for your client.
When talking to clients of this age group, you might find a new downloadable tool helpful, “What is the Right Age to Buy Individual Disability Insurance?” It presents the risk levels and length of disability by age, bringing home the message that the likelihood of becoming disabled is a very real risk.
Contact DIS to learn more about this and other riders to customize a disability product for your client.
