Do your clients depend on their income? The question has an obvious answer, considering that earning a paycheck is how most people fund their financial needs and wants—from homes and cars to groceries and luxuries. However, too many people overlook purchasing individual disability income insurance and misunderstand its role within a financial plan.

If an unexpected illness or injury interrupts the ability to work and pauses or stops their income stream, finding ways to maintain a lifestyle may quickly become complicated, especially as finances also often become an added burden when dealing with a medical event.

Disability insurance is paycheck protection. In the event of a qualifying disability, this coverage guarantees at least a partial income, potentially preventing the need to deplete savings or incur debt. Protecting one's income should be as automatic as insuring a home or car, particularly for someone reliant on their paycheck.

Nearly half (46%) of U.S. adults say they need some sort of disability insurance, according to the “2024 Insurance Barometer Study," conducted by LIMRA and Life Happens. Yet, currently, less than 1 in 5 consumers (18%) say they have it, and LIMRA estimates that true individual ownership may be far less. 

Helping clients understand the need for disability insurance starts with removing the barriers between perception and reality. Here are some common misunderstandings among consumers about disability insurance: 

1) “The odds are low." Many assume the chances of becoming disabled and being unable to work are unlikely, thinking disability insurance is only necessary in case of an accident or severe illness. But 1 in 4 of today's 20-year-olds will experience a disability that prevents them from working for at least a year before they reach retirement age, according to the Social Security Administration.

2) “I won't get hurt." One misconception is that a qualifying disability is usually an injury from a sudden accident. However, chronic conditions like musculoskeletal disorders, cancer and mental health issues like anxiety and depression are among the leading causes of long-term disability claims, according to the Council for Disability Income Awareness (CDIA).

3) “I have coverage through work." Over 70% of workers depend on their employee benefits plan to fulfill their disability insurance requirements to some extent, according to LIMRA. However, group disability insurance provided by an employer may not fully meet an individual's needs, often having limitations, such as capped benefits or restrictions on coverage. By purchasing personal disability insurance, individuals can have broader coverage tailored to their financial situation and potentially higher benefits to replace their income.

4) “It sounds expensive." Most people assume disability insurance is outside their budget and, therefore, decide not to pursue it. As many as 2 in 3 working adults believe disability insurance is too expensive, according to a 2020 study from the CDA. But generally, annual premiums total 1%-2% of the insured's annual income.

Some disability insurance coverage is always better than none and, despite being relatively inexpensive, there are ways to lower premiums without sacrificing quality coverage. Most carriers observe that the average claim lasts between two-and-a-half to four years. While some policies extend benefits until ages 65, 67 or 70, shortening this period can be an effective cost-saving strategy. Opting for a five-year or 10-year benefit period still covers the typical duration of a disability insurance claim while allowing for flexibility if the claim extends longer.

Employing the “2% Rule" helps lower disability insurance premiums by keeping them within 2% of the client's income. Strategies to achieve this include limiting the benefit period to five years; reducing the benefit amount without dropping it below essential monthly expenses; removing optional features like the cost of living adjustment (COLA) and catastrophic and future purchase riders; extending the elimination period; and running a contingency plan quote.

Kenny Russell is the director of the Crump Disability Solution Center. He has been with Crump for over 20 years and is passionate about raising awareness about the income protection gap.