Broker Check

Disability Insurance

Disability insurance, which protects the ability to earn income, is the second component of risk management. It is a critical need of many consumers, as nearly one in three Americans between ages 35 and 65 will suffer a disability that lasts more than 90 days. A three month leave from work can be financially fatal to anybody; this is where disability insurance comes in. However, most consumers interviewed by Tiburon do not have disability coverage.

Disability insurance has faced five obstacles in penetrating the consumer market:

  • Unrecognized Risk & Denial
  • Willingness to Take the Risk
  • Lack of Marketing
  • Costs & Commissions
  • Indemnity Standards

Though consumers can purchase disability insurance individually or in groups, three-quarters of disability products are purchased in group policies. Specifically, 73% of disability sales are in group products, and the remaining 27% is actually split up between individual policies, and a combination of group and individual policies. If you were to look at individual policy sales alone, they only make up 14% of total disability policies.

There are three types of disability insurance, including can’t work at all, any-occupation, and own-occupation. Can’t work at all coverage uses the same standards used in social security disability benefits. The title describes the coverage, in that you may only receive benefits if you can not work at all. The criteria for this type of disability are very diffi

cult to meet, and subsequently few claims are paid. However this is the least expensive disability coverage. Any-occupation coverage only pays benefits if the policyholder can not perform work that they are reasonably qualified for. This type of insurance is often referred to as income replacement insurance. The last type of disability insurance is own-occupation disability coverage. The owner of a own-occupation policy receives benefits if he/she can not perform their own specific occupation. This is the easiest type of disability to receive, however insurers have backed away from offering it after there was an upsurge in claims by doctors in the mid-1990s.

Some of the big players in the disability insurance market are Guardian, Unum Provident, and Northwestern Mutual.