Some clients may understand the need for Disability Income Insurance, but still resist purchasing because they don’t want to “lose” those premium dollars if they never use the coverage.
For many, the purpose of buying Disability Insurance (DI) is so they can sleep at night knowing if they get sick or hurt one day everything will be okay financially.
But what if nothing serious happens to your client during their working lifetime that prevents them from working? They have paid premiums to a policy for years that never was used. Having some peace of mind may have a cost, but there is a way to mitigate that cost.
There are income protection plans available with return of premium options that pay back the premium to your clients (income tax free).
This is how it works:
- A 39-year-old male Real Estate Agent earning $110,000 qualified for an Income Protection Plan that would pay him $5,000 each month (tax free) if he got sick or hurt and could not work.
- The premium for the coverage is $119.73 per month.
- If he reaches age 67, his total premium paid would be $38,094.
- If he adds the Return of Premium Advantage the additional cost would be $79.02 per month for a total premium of $198.75 per month.
- At age 67 with no claims being paid, the Real Estate Agent will receive a check for a tax-free amount of $63,236 – which is the investment return equivalent of 5.82% guaranteed* on the additional $79.02 monthly premium.
This “money back DI” solution can be offered on a long-term or even short-term policies. One option of the return of premium rider provides a lump sum return of a specified percentage of premium paid every 10 years (80 percent or 50 percent) less any benefit you receive.
Reach out to your clients to find out if they have been reluctant to purchase individual DI coverage because they feel they would be throwing money at a policy they will never use. Although policy premiums will be higher with the return of premium option, emphasize the “value” of being able to use the returned amount any way your client wishes – perhaps a lump sum payment on the mortgage or add to their retirement fund.
Contact your Disability Income Specialist with any questions or if you would like to see a proposal for yourself.
*The IRR will vary subject to clients age, occupation, and benefit amount.