The frequency with which I see disability claimants not properly protected, not having life insurance waivers of premium (LWOP) on personally-owned coverage, is astonishing. The risk of life insurance coverage lapsing when a disability claim is made and LWOP is missing is too high to ignore. The additional cost to cover the premiums ranges from about 3% for someone in his 20’s to about 30% for someone in his 50’s. Premiums for an “own occupation” definition or some other hybrid language, when available, are slightly more costly.
Disability claims involve more than a disability policy or LTD certificate; disability waivers can be found in many places, but only if you look. When a claim is made, claimants frequently provide copies of all coverages to be reviewed. Included may be multiple life insurance policies or certificates of coverage, short term disability (STD) plans, medical and dental insurance, pension, HSAs, MSAs, or FSAs, stock options, etc. Clients may have multiple claims, concurrent Workers’ Comp or Social Security claims; sometimes they are so incapacitated that they cannot evaluate their benefits on their own.
The review of all possible benefits often shows employee benefits have contingencies for a disabled employee, including a fairly standard waiver of premium on the group life insurance as well as conversion privileges. Coverage purchased to continue auto or mortgage payments may be available. Fraternal or association plans may have some benefits for short term disability or large medical bills. Simply reviewing only the LTD or IDI may limit benefits to which the client may avail him or herself.
What is alarming is the frequency with which personally-owned life insurance is missing the LWOP. Whether the claimant qualifies for $1,500.00 per month in LTD or has IDI policies adding up to tens of thousands of dollars of benefits per month, the outcome is the same. The claimant is forced to decide on how to spend the significantly reduced monthly income.
Review your portfolio of personally-owned and employer-provided insurance at least once a year to ensure you know what benefits you can access in the event of disability. Encourage your children to understand the value of their insurance portfolio beginning in college; purchase life insurance with LWOP to cover their college loans.
If you sold the life insurance to a client whose income you also helped to secure, you may wish to use this opportunity to revisit the client’s complete needs. If the choice at time of sale was purchasing additional face amount with the allotted premium, revisit both the need and the allocation. Either way, ensure your client is fully protected against loss in the event of disability.
Copyright © 2017 Caryn E. Montague All Rights Reserved