Disability marketplace opportunities

By Allan Checkoway


The total disability of a key person, unexpected and unplanned for, can have a damaging effect on any business. In today's highly competitive corporate environment, there's a continuing demand for improving profitability. Businesses are constantly faced with the need for greater productivity from their management personnel. The disability of one senior level corporate executive will not only be disastrous for the executive and his family, it can create a negative psychological impact on the business, possibly leading to the failure of the business itself.

Are executives already adequately insured against the risk of long term disability? Definitely not. A U.S. News and World Report survey of 3.5 million small businesses revealed that 75 percent had no long term disability income coverage whatsoever. Industry studies show that executives who own individual disability income contracts are frequently only insured to about 50 percent of need. There are more than 100 million working Americans who own no form of disability protection. It's startling to hear about the absence of adequate coverage and, more importantly, the lack of consumer awareness of this serious risk.

Throughout the last two decades, we've seen significant improvements in the mortality (chances of death) risk, due to advancements in modern medicine. Conversely, there has been a dramatic increase in morbidity (chances of disability). The four leading causes of death had a reduction in mortality of 32 percent; however, the morbidity risk increased 55 percent over the very same time frame. People are becoming, and remaining, disabled on a more frequent basis.

The likelihood of a 40 year old executive dying prior to age 65 is 11.6 percent. Conversely, the risk of long term disability is 18.9 percent. The risk of total disability (lasting 90 days or longer) is greater than the risk of death at all ages between ages 20 and 60. Plus, the larger the management group, the greater the chances of a long term disability. Four executives, age 40, face a 56.7 percent chance that one of them will become disabled prior to age 65. When evaluating the risk of a long term disability for one out of a group of 10 executives, the risk borders on almost 100 percent.

More than 90 percent of businesses in the U.S. employ 20 people or less. The success of these small businesses is usually dependent upon a small staff of key people who function together as a unit. The "chemistry" of this unit may be the single greatest asset of the business. Consider the wide variety of duties performed by the principals. They will usually be multi-talented individuals who wear many hats and are very difficult to replace.

Picture the dilemma of a business with four principals when one of these key people becomes disabled. The total disability of a unit member results in three executives trying to handle the workload intended for four people. The impact can be incredibly disruptive to the firm's business environment and can create a situation from which recovery may be impossible.

We all face the inevitable, unavoidable risk of death. We are also faced with the high probability of a long term disability.

The risk of personal loss faced by a disabled individual is just too significant to ignore. Personal bankruptcy, mortgage foreclosure, and other things that disrupt family harmony with the struggle to keep food on the table are all threats to personal dignity. Let's help our clients focus on the multiple disability risks they face today while they're still insurable.

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