Advisor Today - September/October 2012 - (Page 24)
| By Clea Barth
Protecting Gen Y’s Greatest Asset with DI
Education is key to dispelling the myth that ﬁnancial protection is a discretionary need.
sk a cross-section of Americans to name their most important ﬁnancial assets and you would draw some predictable responses: A 401(k) plan, an IRA, a home—perhaps a business. Many may not think about their ability to work and earn an income as their greatest asset, but the importance of future earnings may be especially critical to members of the younger, Gen Y group. A good number of men and women in this group, ages 21 to 31, have not had much opportunity to accumulate large amounts of retirement savings, build up equity in a home, or create a thriving business if they are entrepreneurs. Gen Y individuals are in their early earnings years, just beginning to accumulate ﬁnancial and other assets. They don’t have much of an emergency fund or cushion. For them, a disability could strike at their most precious asset, their stream of earnings. MetLife’s 10th Annual Employee Beneﬁts Trends Study found that half of Gen Y individuals surveyed already admit to living from paycheck to paycheck, but only about half have any income protection through disability income (DI) insurance. Usually, younger people feel more immune to illness or injury than other people. Perhaps what is needed is to point out the many ﬁnancial family obligations that many Gen Y members already have. The MetLife study found that 55 percent of Gen Y workers surveyed are married or in a domestic partnership, 46 percent have young children, and 13 percent
Only about half of Gen Y workers are very conﬁdent in their ability to make the right ﬁnancial decisions.
provide care for an elderly parent or relative. There could be some struggle if a paycheck is interrupted for an extended period of time. An adequate amount Clearly, for someone with no DI insurance protection, any amount of coverage is better than none. However, even those Gen Y employees who have coverage through the workplace (the MetLife study found that seven in ten employers do offer some amount of DI protection) may not have adequate protection for their needs. The study found that the 40 percent of Gen Y surveyed with coverage simply don’t know what percentage of their income is protected. In these circumstances, it will be important to stress the advantages of learning what is available through the workplace and the potential beneﬁt of supplementing that coverage. While a basic rule of thumb is to cover 60 percent to 80 percent of after-tax income, Gen Y may need to aim for the more generous level. This makes sense since the study also found that almost one half of Gen Y surveyed spends 70 percent or more
of their monthly take-home pay on essential expenses, and one-fourth spends 80 percent or more. It may be helpful to position DI protection as something that will help to pay those essential expenses like housing, food, utility bills, which would continue if one is sick or injured, and which are not covered by other insurance beneﬁts like medical insurance. Approximately two-thirds of Gen Y workers surveyed in the MetLife study are very concerned about their family’s ﬁnancial security if the principal wage earner is unable to earn an income due to illness or injury. That statistic makes it seem that selling DI coverage to that demographic would be easy. So why isn’t it? In addition to discretionary money being tight, hesitancy may also be caused by concerns about making the right decision. Only about half (53 percent) of Gen Y workers surveyed in the study said they feel very conﬁdent in their ability to make the right ﬁnancial decisions. Therefore, consumer education can be a key component in selling DI insurance and dispelling the myth of ﬁnancial protection as a discretionary need. It pays to become more familiar with the needs and concerns of Gen Y. The MetLife study also found that this group is more likely than older generations to consult with a ﬁnancial professional about personal ﬁnancial decisions—46 percent of Gen Y consult with ﬁnancial professionals, compared to 40 percent of Gen X and 36 percent of Baby Boomers. ■
Clea Barth is vice president, Individual Disability Insurance, for MetLife.
24 ADVISOR TODAY | September/October 2012
Table of Contents for the Digital Edition of Advisor Today - September/October 2012
From The Editor
Making the Transition
Will We Avoid the Fiscal Cliff at the End of 2012?
Boosting Retirement Plan Participation
Protecting Younger Workers’ Greatest Asset
From Term to Perm
Demystifying Life Insurance
Four Under Forty
My Best Sales Ideas
NAIFA Government Relations
Insuring People in the World of Sports
Advisor Today - September/October 2012