Ahhh, fall. That time of year when the temps start dropping, the leaves start changing, and your clients start thinking about the year ahead. And health insurance. But their personal health isn’t the only thing they ought to be considering:

• What does their future look like?
• What if they died unexpectedly?
• What if they couldn’t work anymore?
• How safe are their savings?
• Do they have people and things they want to protect?
• Have they thought about the cost of dying? The average funeral costs $6,000-11,000. Tampa (home to LLIS) is at the lower end; New York City is at the higher end. Cremation services average $3,000-4,000. And that doesn’t take into account the end of life expenses, which are typically highest in the last six months of life: about $18,500.

Their financial health is in the balance during open enrollment too. Life insurance and disability insurance are two benefit elections that often get overlooked because “it won’t happen to me” or “I’m healthy, I don’t have to start worrying about this yet.” And open enrollment season is a good opportunity for FOFAs¹ to have an open dialogue about life and disability insurance, guide clients, and help them reassess their plans.

Life insurance during open enrollment

Let’s first define the two types of life insurance your clients may have available to them through work:

• Employer-paid group life insurance
• Employee-paid supplemental group life insurance (supplemental group)

Group life insurance can be one of the most valuable benefits for your clients whose employers offer it. It’s not uncommon to find offers of $500,000 in coverage for the monthly cost of one barista-prepared coffee confection. And sometimes (as noted above) it’s provided free by the employer.

And while they’re considering their group options, this is also a good time for your clients to consider individual life insurance as either a supplement to the employer-paid insurance or in its place. In fact, only 44% of all life insurance policies in 2015 were through groups (which included employers, places of worship, and other associations).²

Here are some questions you should ask your clients about group and individual life insurance this month:

• Are they considering coverage for retirement years? Upon retirement, they’ll lose the employer-provided life insurance.*
• Does the group coverage provide them with enough to meet their needs? (You’ll find LLIS’s condensed death benefit calculator here)
• Are they healthy? If yes, then paying for supplemental group coverage may not be the best option. (They’re in a “group” plan and some members of that group, statistically speaking, will not be healthy. Insurance companies must account for the expenses of those individuals when pricing group plans.)
• Conversely, if they have a serious medical condition, then adding/keeping supplemental insurance through their employer is a good idea. (We can help them determine insurability based on the condition, either from our own up-to-date knowledge or from hypothetical inquiries to our underwriter contacts.)
• Are they considering a career change or switching employers? Group coverage is tied to their job.*
• Are they searching for a basic policy? Group offerings are usually quite limited. But if they want more choice and a policy tailored to their individual needs, a group policy won't fit the bill.
• Do they have a large family? Then an individual policy supplemented with the employer-paid coverage may be their best bet.
• How old are they? The cost of life insurance rises as we age, and group rates can be substantially higher than individual rates at certain points.

In addition to the employer-paid group life insurance, people often have the opportunity to self-pay for supplemental group coverage during open enrollment. Here is an at-a-glance look at the differences between the types of life insurance available to your clients (not employer-paid):

*They may be able to convert their group policy to an individual one, but it may cost significantly more.

Disability Insurance (DI) during open enrollment

What is your clients’ biggest asset? If they’re not retired, it’s probably their ability to earn an income. That income pays for the little things like their child’s ballet lessons and their weekly designer coffee; and the big things like the mortgage, college, and retirement. Disability insurance is insurance for their income.

During open enrollment, most employees think about health insurance and contributions to their employer-sponsored retirement plan. But what if they were unable to continue those contributions? 62.1% of all bankruptcies involved a medical event. Common diagnoses and the mean out-of-pocket expenses tied to them include³:

Non-stroke neurologic illnesses like multiple sclerosis: $34,167

Diabetes: $26,971

Injury: $25,096

Stroke: $23,380

Mental illness: $23,178

Heart disease: $21,955

A recent Harvard University study revealed that 72% of individuals who filed for bankruptcy due to medical expenses had some type of health insurance, which debunks the myth that only the uninsured face financial catastrophes when hit with large medical bills.

Without DI to keep income coming in, dreams of a beach condo may become a nightmarish shared hospital room in the event of a disability. Most people haven’t planned for replacement income if they couldn’t work due to illness or injury. And most don’t consider it until they have a family member, friend, or co-worker experience a medical challenge that brought about financial challenge. But most don’t have you.

Open enrollment is a good time for you to talk to your clients about individual disability insurance as either a supplement to the employer-provided insurance or in its place. Here are some questions you should ask your clients about group and individual DI this month:

• Do they depend on their paycheck to meet financial needs and obligations and to accomplish their financial goals? Then they should be protecting their income with a DI policy.
• Are they considering a career change, switching employers, or becoming self-employed? Group coverage is tied to their job and typically not portable. So if your client has only a group DI policy and discovers a health concern that may one day force them to go out on claim, they may need to stay at that employer to retain those benefits.
• What about taxes? If their employer pays the premiums for the group policy, your clients will get a 1099 at the end of the claim year. Individual policies are non-taxable if the premiums are paid with after-tax dollars from their personal account.
• Are they in a high salary, highly specialized occupation? A group policy will have restrictive definitions of disability (typically they must be 100% disabled and unable to work doing any type of job); individual DI policies have many levels of disability definitions, including own occupation (which means you can receive benefits if you cannot perform your occupation’s specific duties, regardless of working in another occupation). This is especially important for physicians, dentists, professional athletes, and other specialized clients to consider.
• Are they minding the gap? Employer-sponsored protection is usually capped and benefits paid are only 60% of salary, with no accounting for bonuses or commissions. Individual policies can insure beyond the group max up to 100% of pre-disability earnings (with the catastrophic rider), and they consider bonuses and commissions in benefit calculations, including K-1 income.
• What if their employer changes or cancels their group coverage? (Employers can change or cancel group coverage at any time, and so can the insurance providers.)

What happens if your clients have both an individual DI policy and a group policy? Their individual policy will always be the primary one and will pay full benefits regardless of any other benefits and cannot be reduced. But the opposite is not always true. Group disability policies often offset against Social Security benefits, workers’ compensation benefits, or other group insurance benefits, but they almost never offset against benefits from individual disability policies.

And what about their internet research? If your clients have done any looking on their own, they probably think they can't afford disability insurance. That's where a trusted resource like LLIS comes in. Our DI experts, up-to-date knowledge about the market, and individual attention make budgets and policies align. We can customize a plan that provides the needed protection and keeps it affordable by substituting or removing benefits that put costs beyond their reach or aren't among their biggest concerns. Everyone on teamLLIS is salaried, so commission is never a consideration when working with your clients. And since service is the only thing we sell, we work just as hard on a policy with a $5,000 monthly benefit as we do on a $15,000 one.

The good news is that more employers are offering group long term DI insurance.

However, fewer employees were insured by long term DI insurance benefit plans. We suspect that one reason for this decline is that people are choosing to purchase their own income replacement plans, separate from their employers.

Short-term Disability (STD)/Long-term Disability (LTD)/Workers’ Comp

Most advisors we work with counsel clients to build an emergency fund to self-insure a short-term disability, and purchase a long-term disability policy for long periods out of work. But LLIS helps clients with both types (STD and LTD) to offer options for every client’s circumstance.

STD: the most common causes are pregnancy, injury, and digestive disorders

LTD: the most common causes are back problems (and other joint and soft tissue pain), cancer, mental health, and heart disease.

Those are pretty common issues and probably ones your clients face themselves or know people who do. It's important for individuals to have this type of coverage, and also for employers to offer it (DI is a great employee retention and benefit tool).

Your business owner clients simply provide LLIS with a census that indicates names, dates of birth, occupations, and salaries of employees. We provide them with a quote that covers their group (typical STD is 60% to $5,000/month max and LTD is 60% to $6,000/ month; more is available if the group is a high wage earner type group) and work with them to ensure premiums meet their budget and coverage meets their needs.

“I’m covered by worker’s comp” is a response advisors tell us they hear often from clients when the topic of disability insurance comes up. But:

So don’t let the conversation end there.

Learn more about disability insurance here.

Click here for an at-a-glance look at group vs. individual DI.

During open enrollment season, don’t forget that not all clients have access to group DI. They need your help (and ours) even more!

Time is of the essence

• It takes time to get things in place so don’t let your clients wait to start considering their open enrollment options. The ideal timeframe for LLIS to help your clients determine if an individual policy is in their best interest is 90 days. We’re ready when you are!
• If they don’t name a beneficiary(ies) in time with group coverage, the law will determine who receives insurance proceeds in case of their death.
• Outside of open enrollment, group plans may limit the ability to change coverage only at life events like a marriage or a child. With individual policies, they can change coverage and/or beneficiaries at any time.
  
  

It’s always a good idea to look at options. With LLIS helping your clients, we do the shopping for them to find the right insurance company and the right insurance policy. Even if the cost of an individual policy is slightly higher than their group coverage, it’s still probably a better bet because of its portability. Help your clients choose wisely.

Contact these teamLLIS members about open enrollment and individual policies for your clients:

Jerry Skapyak (life insurance)

Kathy Bilodeau or Brian Ciccarelli (disability insurance)