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Note: My guests in this episode is my sister Analisa Cleland. Insurance has been our family business for three generations.
A young woman in her late twenties sat at my sister’s broker office in the late 1990s, paperwork ready, about to put a disability income policy in place. But her fiancé told her she did not need a disability policy. He said he would take care of her if anything happened. So she never bought the income protection policy. After the wedding, she was diagnosed with multiple autoimmune conditions.
“She went from making about $200,000 a year as a very successful realtor to nothing” my sister Analisa told me.
Closer to half a million in today’s dollars. “She spent the first year after diagnosis on the couch. She could barely get up, and she has lost out on millions as a result.” Twenty years on, the friend still struggles. The friend tells my sister to tell everyone her story.
My sister, Analisa Cleland, has been that broker for 22 years. She runs an independent insurance brokerage in Littleton, Colorado, and partners with MassMutual on worksite and executive benefit programs for employers. Insurance runs three generations deep in our family. What she sees most weeks at the kitchen table is not someone who is uninsured. It is someone who is wrong about what they are insured for.
When I asked her what share of the working professionals who come into her office already insured are catastrophically underprotected, she did not hesitate.
9.5 out of 10. They think they are. They have health insurance, or they’ve got insurance on their car, or they have life insurance, and they might have a $100,000 policy, and they’re 25.
Analisa Cleland
Your Group Long-Term Disability Plan Pays $2,000 a Month
Take a working law firm she is currently quoting. The group long-term disability plan in place, the disability coverage most employers offer through work, pays $2,000 a month. The principal there earns about $500,000 a year. That is roughly $40,000 a month in income against $2,000 in coverage. Even the better group plans Cleland has seen cap somewhere between $10,000 and $15,000 a month. Past a certain income, the group plan stops being a plan and starts being a token.
That is only the first problem. When the employer pays the premium, the benefits are typically taxable, so a stated 60 percent of income replacement does not arrive as 60 percent. Cleland described a client of hers who learned that math the hard way. “He said, ‘Oh, I’m fine. I’ve got a group policy through work, it’ll pay fine,'” she said. “Well, no, it didn’t. They’re on claim, and because their benefit is 60 percent of their income, but it’s taxable, they said it’s equivalent to making minimum wage.”
Group plans also typically require the employee to be completely, totally disabled, not working in any capacity, before they pay. And they almost always require the employee to file for Social Security disability, a process that takes about nine months on average and frequently ends in a denial that requires three appeals before the first check shows up. I have had clients who learned this living through it. One filed both with her employer’s group plan and the individual policy I had written for her. The individual paid. The group denied her for not pursuing the Social Security appeals, while she was, in her own words, in really, really bad shape.
Why a Whole Life Policy With “Living Benefits” Isn’t Income Protection
A colleague told Cleland a statistic that stayed with her. “Of the people that are licensed to be able to sell disability, 92 percent don’t,” she said. Many of them sell whole life policies with what the industry calls living benefits, riders that pay out for a catastrophic event like a heart attack, stroke, cancer, or ALS, and frame those riders as a substitute for disability coverage.
Cleland is direct about why that is wrong. “If a surgeon loses their finger, your great life insurance is not going to help them,” she said. “They’re unable to do surgery.” She has watched the same gap close on other professions. A client of hers who is a CPA suffered a severe concussion and missed tax season because he could not be on a screen. An attorney with a brain tumor could not keep making decisions for clients. None of those triggered a heart-attack-or-stroke rider. All of them ended a person’s ability to do their specific job.
The objection she hears most often is that the buyer is careful. Cleland has been answering it the same way for two decades.
The hospitals are full of people who were healthy yesterday and they were careful. Nobody schedules an accident.
Analisa Cleland
She frames the cost question the same way she frames everything, practically, without hedging. “You probably have insurance on your cell phone, but you don’t have it on your biggest asset,” she said. “Your biggest asset is your ability to earn an income, especially when you’re younger.”
What she wants the audience of The Income Protection Journal Podcast to understand is that the second-best moment to fix this is now. The best moment was earlier, at 25, at 27, while the buyer was still healthy and insurable and the premiums were cheap. For the working professional who cannot get individual coverage anymore because of a chronic condition, worksite-product portability is the second path. The worksite policies Cleland places through MassMutual are written guaranteed-issue when the group meets the minimum size, the rate is locked in at the age of purchase, and the employee keeps the policy when they leave the employer. Most working professionals do not know that path exists.
The realtor friend would have qualified for an individual policy in her late twenties without any difficulty. She had the paperwork in front of her. She let someone she trusted talk her out of it. She has been paying for that decision for twenty years.
The conversation most working professionals never have with a broker is not about what disability insurance costs. It is about what the coverage they think they already have is actually going to do for them, and what it won’t.