Are you minding the gaps?

When it comes to disability protection, are you sure that your clients are truly covered? While more attention has recently been paid to disability cover, FMI believes that the general market approach to disability is flawed because temporary cover is largely ignored while permanent cover is seen only in terms of a lump sum pay-out. There's so much more to disability cover than one might think.

The importance of Income Protection...
When most people take out insurance, they are planning for the worst case scenario, like death as a result of a freak accident or, in the case of a disability, a permanent change in lifestyle. But very few people have cover for a temporary disability – one that keeps the individual away from work for just long enough to have an impact on earnings and lifestyle. This is especially true in the case of a small business owner who must generate a monthly income and therefore needs Income Protection. Income Protection is about more than just a disability payment – it ensures continuity of income if the insured cannot generate an income.

Income Protection for permanent and temporary disability
Most industry players consider disability in a generic sense rather than seeing permanent and temporary disability as two different types of risk that need to be protected separately.  This thinking is re-enforced by most FNA tools which simple calculate a client’s disability needs, with emphasis on permanent cover. This approach may leave gaps in your client’s disability portfolio, especially when it comes to temporary disability, which is more likely to occur than permanent disability. In addition, while three out of ten people are likely to suffer a temporary disability in their working lives, temporary disability may occur more than once in a lifetime. In 2011, our claim statistics revealed that 47% of our temporary claims were part of a multiple claim on behalf of the policyholder. As a rule, capital disability benefits do not cover temporary disabilities and do not allow for multiple claims.

The FMI approach
At FMI, we believe that the best way to design a client’s disability cover is to put in place temporary and then permanent cover so that your client is covered for both types of risk. Looking at Income Protection holistically means that, should an individual be disabled, their lifestyle will be protected. The combination of types of income protection cover for your client will depend on their needs.

Your clients need to be educated about the risks temporary disability poses so that they can be adequately insured. The onus is on you, as an Adviser to give your clients the correct advice. A holistic disability cover means that, not only is your client truly protected, you face less risk insurance premiums are protected and lapse rates are minimised, protecting your reputation and commission.