Why There Is No Real Retirement Planning Without Disability Insurance

What You Need to Know

Many consumers know just how to get the cash to cope with a disability: They say they will raid their retirement savings.
About 53% of workers say they need individual disability insurance.
For most clients, income protection will cost less than 3% of their income.

The fuel to a good retirement plan is income.

A client who is unable to work for an extended period of time due to a disabling illness or injury — and without proper disability insurance to replace their income — will not have a retirement, or at least not the kind that you spend your career helping people plan for.

Here’s why: One in four people said they’d turn to their retirement savings if they were disabled and unable to work, according to the new data from the 2022 Insurance Barometer Study, by Life Happens and LIMRA.

This is a serious financial misstep when you consider that one in four workers will be disabled at some time in their career, according to the Social Security Administration.

Here’s how disability insurance solves that.

Peter Zatir, a courtroom litigator with a thriving practice he owned with another lawyer, was stopped in his tracks by thyroid cancer.

It ended his career at 45, but not his ability to provide for his family of seven or to stay on track to retire.

He had individual “own occupation” disability insurance, as well as a buy-sell agreement with his partner, funded by disability insurance that ensured he got an equitable share of the business when he couldn’t work.

Where would he and his family be without disability insurance — and the right kind? Peter sums it up succinctly, “Without the protection of disability insurance, I can’t fathom where my family would be right now.”

Granted, it’s tough to have the disability insurance conversation — we know that as an industry.

But that doesn’t mean you shouldn’t be having the tough conversations.

Just 14% of those working say they have an individual disability insurance policy (down from 31% a decade ago), and more than half (53%) say they need it, according to the Insurance Barometer Study.

Clearly, there is a huge need and an untapped market for this.

You can play a part in closing this gap.

Here are some ways for all of us to start having this important conversation.

1. Keep it simple.

Ask a very straightforward question to each client in the course of their review: “If you weren’t able to work and earn your income for an extended period of time, due to an illness or injury, where would you get the money to maintain your family’s lifestyle, fund your retirement and grow your investment portfolio?” Then, it can be very instructive for a client to “do their own math.” Life Happens has a free Disability Insurance Needs Calculator.

Have your client use it and go through some easy steps to come up with their “number,” so that the next step in the conversation — getting coverage — is that much easier.

2. Tell clients a story — and it doesn’t have to be your own.

There is a reason storytelling is as old as time: It works.

People relate to other people.