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5 Reasons to Have Maximum Benefits

by Anthony Delvecchio

Over the years I have specialized in selling individual disability insurance (IDI) to individuals, and one of the many requests I get from clients is for reducing the monthly benefit amount to save on cost. They understand the need for the insurance, but they also want to keep the cost as low as possible. The first question I ask them when I hear this comment is, “How much do you think you need”. Below are the 5 reasons I hear most from clients:

1. If I am disabled I have a spouse who also has a full time job who could pick up the slack.

2. I live well below my means and would have no problem surviving on 50% of my income.

3. I have done a great job of saving and don’t need as much.

4. I don’t plan on getting disabled; I am buying this just in case.

5. I know I need the coverage but I also want to manage my monthly expenses.

Let’s take a look at some reasonable objections to someone looking to short change themselves when it comes to maximizing their monthly benefits to save on monthly premium.

1. If I am disabled I have a spouse who also has a full time job who could pick up the slack?

I understand this response. Yes, if you were disabled and your spouse was not disabled (car accident together not withstanding) they would continue to work. Do you think you could live the same way on one income and continue to save for retirement? How about saving money for a rainy day or college for the kids? Could the stress of your disability cause your spouse to not perform at the highest level in their occupation? Could they ignore your situation and continue to put in the hours it takes to make up for your loss of income? I know you have a benefit coming to you at this point but it is much less now compared to your pre-disability earnings. Your spouse will have no choice but to put their head down and put all their efforts into the job to provide for both of you and possible for a family. It makes sense to provide yourself with maximum benefits to offset the stress that will already be there due to your current condition of dealing with a disability.

2. I live well below my means and would have no problem surviving off 50% of my income.

That may be true. You very well may have done a great job of living within your means. Time value of money shows that $1000 today is not going to be $1000 tomorrow. The benefit you have chosen today is not going to be 50% of your income but may very well be 35% of your current income. Also, if you have been living under your means by choice you will now have to live under your means period. There is no choice. You may have savings and that would be great but now you will have to raid those savings if your disability lasts one year or more.

3. I have done a great job of saving and don’t need as much?

As I said above, that very well may be the case, but any disability that last beyond a year can essentially wipe out 20 years of savings. This will also become a double edge sword; you will be draining your savings while not being able to contribute to your savings.

4. I don’t plan on becoming disabled; I am buying just in case.

I know disability insurance is not a glamorous purchase, but it is a necessary one. If something did happen to you, wouldn't you want as much coverage as possible? I have never sold a policy to a client who thought they were going to need it. Nobody thinks they will be the one who becomes disabled. Statistics however prove that disabilities do happen to people. If the “just in case” does happen, you will be very happy with your decision to properly protect your income. Short changing yourself if something did happen will be a regret you may have to live with the rest of your life. Would you replace your single family home with a townhouse?

5. I know I need the coverage but I am trying to manage my monthly expenses.

The one truth I know for successful people in general is this; you will always have something happening that is going to put a stress on your monthly budget, but there will never be a stress more draining then a disability happening without having the proper coverage in force.

The point of this article is to make sure you think about the right benefit amount before you decide to reduce the amount of coverage you have or qualify for. Picture what your life may be like if you do become disabled. Run some of these points through your head and see if maybe it may make sense to properly protect your income. I wish everyone was required to own disability insurance like car insurance and home owners insurance. For now I can only speak to my potential clients and those who are looking for disability insurance and let them know how I feel about maximum protection. In the end you are the decision maker and I will move forward however you would like. I know I did my part.