Q&A with Kelli Hueler: - Napfa

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Insurance Continued from page 26 • The average SSDI monthly benefit payment was Fewer than five percent of disabling accidents and illnesses are work related. Workers’ compensation doesn’t cover nonwork accidents and illnesses. • Compensation from group LTD plans are offset by any SSDI or worker’s compensation benefits. So, an advisor who is adding SSDI/worker’s compensation and group disability benefits might be overestimating a client’s disability retirement income. The importance of “preunderwriting.” Each disability insurance company employs slightly different underwriting guidelines, based on each company’s specific claims experience. This means that one company might view a client’s health history or occupation differently than another company and make a more attractive offer. Also, the guidelines are in constant flux. Knowing what questions to ask a client before obtaining quotes is imperative to getting the client the best offer. Underestimating the value of the “any occupation” definition of disability found in employer-sponsored group plans. When we hear the term “any occupation” tied to a disability insurance policy, it is understandable to think the worst—i.e., “any occupation” means that if a person can do any job under the sun, benefits will stop and the person will have to go back to work. This is not the case, however. Most employer-sponsored disability plans define “any occupation” as any occupation that the claimant can reasonably perform based on education, vocation, or experience and in which he or she is expected to earn more than 60 percent of pre-disability earnings within one year. This definition means the insurance company will not terminate a claim because a client is able to work in an unsuitable or unreasonable occupation. However, some group disability plans operate with tighter restrictions, so care must be taken when analyzing every policy. Insuring retirement plan contributions with the wrong policy. Retirement plan contributions can be insured against a disability in two ways. The first is to include the contributions with an income calculation, and insure them with a standard disability income policy. Using this strategy, the contributions will be insured at about 20 percent of replacement. The second way is to split the contributions from regular income and insure them with a retirementprotection disability policy. This strategy allows for up to 100 percent of the contributions to be insured. There are pros and cons to each strategy, but using a retirement-protection policy will ensure that the client receives the highest percentage of income replacement possible. Knowing when Lloyd’s of London coverage makes the most sense. Lloyd’s is a great option for insuring occupations that the “domestic” carriers will not insure or for people with health conditions that would make them otherwise uninsurable. Another Lloyd’s specialty is providing high limits. If a high earner has the maximum amount of coverage that he or she can purchase from a domestic carrier, Lloyd’s will offer additional coverage until all coverage equals 65 percent of total income replacement. Lloyd’s contracts and pricing are also better than most advisors think. Overlooking the importance of business disability products for selfemployed clients. Some of the revenue that a business-owner client is generating goes to pay his or her business expenses, or the client might have to use some business revenue to repay a business loan. In both instances, disability policies can meet those needs. Business overhead expense disability plans will pay a monthly benefit to the business to help keep it running while the owner is disabled. We usually recommend that business owners insure at least 50 percent of their monthly expenses. The cost of business overhead expense disability is about one-third the cost of personal disability plans. For covering repayment of business loans, reducingterm disability plans can do the trick; the plans are flexible and can be tailored to match the loan parameters. Not understanding the unique advantages of using a disability insurance specialist as a resource. An independent disability specialist will know the questions to ask clients to determine what type(s) of plan(s) and which company will be the best fit. The specialist will know the insurance companies, their contracts, strengths, weaknesses, underwriting guidelines, etc. Conclusion There is no need for an advisor or an advisor’s clients to be intimidated by disability insurance products. By working with a true LTD specialist—a person with the broad and deep knowledge of insurance options—the process can be easy, efficient, and cost-effective in meeting the clients’ needs. John Ryan, CFP ® , has been an independent insurance broker since 1978, and he focuses primarily on life, disability, and long-term care insurance planning for highly compensated professionals and executives. To contact him at Ryan Insurance Strategy Consultants, call 800.796.0909, ext. 102. Mark Desiderio joined Ryan Insurance in 2011 and evaluates the disability and life insurance needs for individuals and companies. He can be contacted at 800.796.0909, ext. 103. NAPFA ADVIS R MAGAZINE FOR SINGLE ARTICLE REPRINTS Contact Ric Haines Publisher & Director of Magazine Oper ations ric.haines@erhassoc.com Phone: 732.920.4236 28 Napfa Advisor October 2012
NAPFA Consumer Education Foundation Promoting Consumer Financial Education NAPFA Consumer Education Foundation’s mission is to educate consumers about basic financial NCEF FULLPAGE matters and help them identify financial services that are in their best interest. The Foundation is developing a new website including a Consumer Help Tool consumers can use to find just-in-time answers to real life financial questions. This tool will focus on “Managing Life’s Financial Journey’s” and content selected for inclusion in the Journey Project is best-in-class information, continuously being reviewed, and refreshed and enhanced to remain current and relevant to consumers. Speak with a NCEF Board of Trustee to find out how you can help the mission. NAPFA East Conference November 6 - 9, 2012 NCEF Hospitality Suite November 7th, 9:00 - 11:00 PM Lisa Lenczewski NCEF Coordinator lisal@napfa.org 847.483.5400 Ext. 106 Napfa Advisor SEPTEMBER 2012 29
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Q&A with Kelli Hueler: - Napfa

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