May is Disability Insurance Awareness month.  Why does the insurance industry dedicate a whole month toward educating consumers about disability insurance?  The reason is very simple – most consumers don’t realize how great a need there is for long-term disability insurance.  The largest asset most people have is their ability to earn an income, yet disability insurance is often overlooked by consumers and is rarely mentioned by most insurance agents.  Life insurance sales are much more common than disability insurance sales, yet there is a much greater chance of becoming disabled than dying during your working years.

According to Principal Life insurance:

• In 2007, 12.8 percent of people ages 21-64 surveyed had a disabling illness. [1]
• 43 percent of people age 40 will have a long-term disability event prior to age 65. [2]

Many assume if they became too sick or hurt to work, they could rely on Social Security or disability insurance benefits from their employer to replace their income. These are great sources of income protection, but they may be unavailable or not enough. Even a short-term disability could eliminate years of savings.

So, it’s Disability Insurance Awareness Month.  What better time is there to research disability insurance and discuss your needs with a disability expert?

[1] U.S. Census Bureau, American Community Survey, 2007
[2] JHA Disability Fact Book, 2006

Individual disability insurance is meant to protect one’s income in the event that, as a result of illness or accident, one can’t perform the duties of his/her occupation.  While your personal income might be protected, what happens to your business if you become disabled?

There are several types of disability policies written specifically to cover the business in the event of the owner’s disability:

Overhead Expense Disability insurance, which I covered in an earlier posting, provides benefits to reimburse the normal and customary fixed monthly business expenses of a business or practice of a professional or business owner while he or she is disabled.  Overhead Expense insurance is intended to provide financial protection when the absence of a business owner would result in a significant loss of revenue.

Some other types of disability insurance for business are:

Key Person Disability Insurance protects the business from loss due to the disability of a key employee.  Business owners can suffer from a key employee’s total disability in several ways: Loss of management skill and experience; disruption of the business when clients withhold or delay their business until the impact of the employee’s disability is known; difficulties when cautious creditors wait until they can assess how the disability affects the business; increased expenses associated with the hiring and training a key employee’s replacement.

Business Loan Protection is often required by a bank or lending institution to cover the loan payments in the event of the business owner’s disability.  Dentists and Physicians, when opening a new practice, often secure loans to purchase the practice and/or new equipment.  Business loan protection will cover the loan payments in the event of a total disability.  These policies are written to cover the loan payments over a specific period of time, typically the period of the loan.

As you can see, business owners have several options to protect their businesses from loss in the event of a disability.  These policies are most often written in addition to personal disability coverage.

A mutual life insurance company is a company which has no capital stock or stockholders.  It is owned by its policyholders, and is managed by a board of directors chosen by the policy owners.

Mutual insurance companies have never been looked upon as very exciting or sexy, but they are finally getting some respect.  With the stocks of publicly held life insurers taking a nose dive in this past year  (according to Forbes Magazine), they are scrambling for cash by cutting dividends, issuing new shares (diluting existing investors) and begging regulators for a relaxation of capital requirement and lobbying Washington for a cut of the $700 Billion Wall Street bailout.

Mutual companies, on the other hand have not held out a hand to Wall Street and have statutory surpluses that make their publicly-held brethrens’ mouths water.  Many are paying record-breaking dividends to their policyholders.  A check of the various company ratings (A.M. Best, S&P, and Fitch) validates the financial soundness of these mutual companies.

Why am I mentioning this in a blog about disability insurance?  It’s simple -  two major players in the disability marketplace (and two of the companies we represent) are mutual companies.  They are Guardian Life Insurance (also written by Berkshire Life, a wholly-owned subsidiary of Guardian Life) and Mass Mutual Life Insurance.  Financial strength of the insurance company should be a major factor in your decision when evaluating different policies, so I thought a brief discussion about mutual companies in the environment we are in now was in order.