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DISABILITY
NEEDS
ANALYSIS
The objective of Disability Needs Analysis is to help you answer three basic questions…
1. Will your income stop or be reduced?
2. How much money will your family need to maintain your current lifestyle?
3. Where will you get that money and is that source guaranteed?
If you get sick or hurt and can’t work:
Today we will review…
1. The probability of occurrence
2. What is your most valuable asset?
3. The magnitude of risk
4. Where would the money come from?
5. What are your options?
6. Risk Tolerance Assessment
1. The Probability of Occurrence
Disabled people are one of the largest single minority groups in the United States...
Approximately 19% of the American population ages 21 – 64 have a disability. About 43% of this group are not employed.
Source: U.S. Census Bureau, Census 2000
Not
Disabled
Disabled
Roughly half (48%) of all home foreclosures are due to serious medical problems, whereas only 2-3% are death related
Source: Source: National Underwriter, May 2002.
Disability does not discriminate!
Disability 48%
Premature Death 2%
Other 50%
The risk of disability is great...
Consider the chance of disability. Out of 1,000 people, the number of people who may be disabled for at least 90 days before age 65 is:
At age Number Disabled Probability of Disability
25 403 2 out of 5
30 385 3 out of 8
35 365 3 out of 8
40 340 1 out of 3
45 305 3 out of 10
50 262 1 out of 4
55 205 1 out of 5
When a disability does strike, it can take a long time to recover...Average duration of a long term disability (disabilities lasting 90 days or more)…
Age at beginning of disability
Duration
25 2 years, 2 months
30 2 years, 8 months
35 3 years, 1 month
40 3 years, 6 months
45 3 years, 11 months
50 4 years, 2 months
55 4 years, 5 months
The good news is people are living longer…
-100
-75
-50
-25
0
25
50
75
100
MenWomen
Hypertension
Heart Disease
Cerebrovascular
Diabetes All Four Diseases
Percent Change in Death Rates
The bad news is the diseases that caused death are now leaving people disabled...
The result…The potential for loss of earnings due to a disability can be staggering.
-100
-75
-50
-25
0
25
50
75
100
MenWomen
Hypertension
Heart Disease
Cerebrovascular
Diabetes All Four Diseases
Percent Change in Disability Rates
Percent Change in Death Rates
2. What is your most valuable asset?
The fact is your health is your wealth...
Your most valuable asset is lost when you can least afford it.
Based on current income, these are your potential earnings to age 65.
$____________
Annual IncomeAge $25,000 $50,000 $75,000 $100,000 $150,000 $200,000
30 875,000 1,750,000 2,625,000 3,500,000 5,250,000 7,000,00035 750,000 1,500,000 2,250,000 3,000,000 4,500,000 6,000,00040 625,000 1,250,000 1,875,000 2,500,000 3,750,000 5,000,00045 500,000 1,000,000 1,500,000 2,000,000 3,000,000 4,000,00050 375,000 750,000 1,125,000 1,500,000 2,250,000 3,000,00055 250,000 500,000 750,000 1,000,000 1,500,000 2,000,00060 125,000 250,000 375,000 500,000 750,000 1,000,000
Your car is probably insured. Odds are your home is also insured. In all likelihood, your belongings are insured too. Doesn’t it make sense to have your ability to earn an income insured as well?
Your cars are worth Your automobile insurance premium
$______________ $____________________________
Your home is worth Your homeowner’s insurance premium
$______________ $____________________________
Your other assets (Business, Your multi-peril insurance premium, etc,
vacation home, boat, etc.)
are worth
$________________ $_____________________________
Think for a moment…
You spend a lot of money protecting these assets - the fruits of your labor. But, what about protecting what makes this all possible - your ability to generate income?
Your annual earning power Amount you are now spending to protect your income
$__________________ $_____________________________
Why keep your earning power at risk when so much depends on it?
3. The Magnitude of Risk
Let’s take a closer look at your monthly expenses...Monthly Expenses
Current Rent or mortgage
(Include taxes and insurance) $_______________
Food $_______________ Utilities (Water, heat,
electricity, telephone) $______________ Transportation (car, payments,
maintenance, repairs, insurance,gasoline) $_______________
Education $_______________ Insurance Premiums $_______________ Clothing $_______________ Household items
(appliances, furnishings, tools) $_______________
Recreation (dues, hobbies,entertainment) $_______________
Medical and dental expenses $_______________ Installment payments $_______________ Discretionary expenses $_______________ Savings $_______________
TOTAL$_____________
When you are disabled, where will you get the money to meet these obligations?
When disability strikes, your expenses are very likely to increase…
The problem is how to meet the cost of disability.
DEBT
Falling income plus ongoing expenses equals trouble
NORMAL INCOME
NORMAL EXPENSES
SAVINGS
Healthy - Working Disabled - not working
Have You Insured Your Golden Eggs. . .
CarHome
Property . . . But not the Goose?
4. Where will the money come from?
Where will you get the money to take care of your needs?
Sources of Income The Problem
Your Savings If you save 10% of your income eachyear, a disability can wipe out 10 yearsof savings in just one year. How longwill your savings last?
Borrow Who is going to lend money to adisabled person?
Your spouse’s earnings Besides the strain a disability wouldcause your family, would your spouse’sincome be enough to support yourfamily’s lifestyle indefinitely?
Liquid assets Is there any guarantee you’d get fullmarket value for your assets?
A disability income policy If you qualify!
5. What are your options?
Potential planning problems…
Death Disability Retirement
The difference between a problem and a tragedy
is planning!
Options: Comments:
Do nothing Not to decide is to decide
Save/invest You may not have time
Insure Self-completing in the event of death or disability
A disabled person has a lot to lose... Loss of health. Loss of future earnings -- As your health is impaired, so is your future
financial growth potential. Loss of insurability -- Serious disabilities can make insurance tough to
get. Loss of assets -- First your savings account is likely to be depleted,
then your other equity is eroded. Loss of prestige with associates -- Instead of being an asset, you may
become a liability. Loss of peace of mind -- You may fear that you may be unable to pay
present and future obligations. Loss of credit ratings -- Creditors like to see a steady source of
income.These potential losses add up to loss of dignity -- and all of these losses can be minimized.
Don’t you feel that it makes sense to take the necessary action now?
The only logical answer...
Your coverage can be coordinated with other sources of your eligible income.
Using this comprehensive approach to protecting your income, a small dollar amount will provide you with additional benefits when you need the money most.
An adequate amount of disability income insurance protection.
Can you qualify for this outstanding coverage?
If you are currently healthy, chances are good you’ll qualify for our non-cancellable coverage.
Waiting until a health problem develops may result in limited coverage, lower benefits or higher premiums. Or you may not qualify for coverage at all.
This outstanding coverage can’t be bought with money alone.
Why not see if you can qualify for coverage now?
Putting the premium in perspective...
Example: Male Executive, Age 45, Non-Tobacco
Annual income $100,000
Initial annual disability benefits $60,000
Potential benefits to age 65 $1,200,000
Annual premium payment $2,529
Daily payment $ 6.93
Premium as percent (%) of income 2.5%
Premium as percent (%) of total potential benefits to age 65 .002%
When you put the premium in perspective, the premium is the solution, not the problem.
Your financial foundation...
97%
Why not let 3% protect 97%?
The cost of waiting to buy disability insurance...
Monthly benefit $5,000 $5,000 Annualized benefit $60,000 $60,000 *Initial annual premium outlay
$1,540 $2,529
Total premium outlay to age 65
$46,200 $50,580
Cost of waiting $4,380 Potential benefits to 65 $1,800,000 $1,200,000 Potential benefits lost $600,000
Age 35 Age 45
Initial outlay for $5,000 base monthly disability benefit, to age 65 benefit duration, 90-day elimination period, Extended Partial Disability Benefits Rider (for Residual and Recovery benefits).
Why buy now?
•Your health may change.
•You may become disabled.
•Cost goes up.
•Potential benefits decrease.
•Peace of mind.
Which job would you prefer?
Job A Job B
Current Salary
$100,000 $97,471
Sick or hurt $0 $60,000*
$5,000 monthly benefit
Based on male, 45, 5A, non-tobacco
90-day waiting period
Benefits payable to age 65 (includes residual and recovery)
*Tax-free under current federal tax law if premiums paid with after-tax dollars.
What questions may I assist you with at this point?
Risk Tolerence Assessment:
Disability Income Exposure
Questions for Single People with No Dependents…
1. If all of a sudden you were unable to support yourself, would you want to ask your family or friends to take care of you?”
2. What do you think would happen to your independence if an accident left you disabled or unable to work?
Questions for Single Parents…
1. If you didn’t bring home a paycheck next week, would you and your family notice? What about the week after that? What about every week for the next year?
2. How would this situation impact your children’s lives?
3. Who would take care of you and your children if you suddenly became disabled and needed care?”
1. If one of you could not work for the next year, could you still pay all of your bills?”
2. Would either of you be able to provide the care needed for the disabled spouse, keep up with all the household and family responsibilities, and still keep up with work responsibilities?
3. What would be the financial effect of a long-term sickness on your retirement plans?
Questions for Two-Income Families…
1. If the sole source of income for your household suddenly stopped for the next year, could you still pay all of your bills?”
2. If the non-working spouse has been out of the workforce for a long time and suddenly had to go back to work, would gainful employment be easy or difficult to find?
• Is it likely this income would be enough to replace the lost income of the disabled spouse?
• Would it be enough to cover your household expenses and additional medical expenses ?
• Would the non-disabled spouse be able to return to the workforce and provide the care needed for the disabled spouse, keep up with all the household and family responsibilities, and still keep up with new work responsibilities?
Questions for One-Income Families…
