By Mark W. Anthoine, RHU, CLU, ChFC
Anyone who has considered offering individual disability income (IDI) protection insurance should take note – a number of trends are converging today that create a very propitious climate in which to market multilife IDI, either as stand-alone coverage or to supplement a group long-term disability (LTD) income protection plan.
Why Sell IDI?
The changing character of the U.S. population is providing opportunities for the IDI market. A viable market needs volume, and this year the number of people between 35 and 50 – primary years for purchasing income protection insurance – will swell to more than 65 million. By the year 2025, there will be a 16 percent increase, to more than 78 million, in the population aged 45 to 64 – the prime years for both earning income and protecting their financial obligations. These potential clients have both the need and the means to purchase IDI.
In addition, the personal savings rate in the U.S. has dipped precipitously, barely holding on at 1.8 percent earlier this year. At the same time, household debt remains at a hefty 13 percent to 14 percent of disposable income, inflating the impact for many higher-earning clients who often live close to the financial edge. With less of a “reserve” available if they are unable to work, these higher wage earners have a real need for protection from the devastating financial effects of a long-term disability.
The American family is also evolving, with more than 50% of U.S. households now dependent on dual incomes. What happens when one income is lost or reduced due to disability? Statistics also show that the number of single-parent households in the U.S. has more than tripled since 1970 and currently numbers 12 million. How does a family survive financially when the sole breadwinner can no longer earn an income, or has a significant decline in earnings?
In addition to demographic factors, the income protection market is being influenced by emerging medical conditions, such as mental and nervous-related (M&N) disorders, that can cause temporary or even permanent disability. In fact, a leading disability carrier reports that depression is now the fifth leading cause of all long-term disability claims.
While most group LTD plans cap M&N benefits at 24 months, IDI contracts can be written without such a limitation, making IDI a viable alternative or supplement to any group LTD plan.
Multilife IDI Opportunities in the Middle Market
Focusing on multi-life opportunities in the small to mid-size corporate marketplace is an area that is often overlooked. Many brokers/consultants focus, instead, on the larger employers. Successful marketing in this segment requires convincing an employer through education that a need exists, and then developing creative disability income protection solutions in response.
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