Advisor Today - July/August 2015 - (Page 29)

PRODUCT SPOTLIGHT DISABILITY INSURANCE By Michael Smith Divorce DI This product will follow the terms of a divorce decree and offer benefits if the payer becomes disabled. N ot every marriage is a match made in heaven. Divorce has become all too common and is no longer the "scandal" it used to be. It is not uncommon for a divorce decree to require life insurance on the spouse who is making settlement or support payments. Should the payor pass away, the life insurance can ensure that child support, alimony and other obligations are fulfilled. But what if the payor becomes disabled? Will he be able to continue making the support payments? Disability income (DI) insurance is limited in its benefits. Group DI offered through the employer typically is limited to 40-60 percent of an employee's income. Even if one were to obtain individual DI coverage, it usually only works in conjunction with any group benefits and tops off at 66 percent of income. Yet a divorce decree assumes the payor has access to 100 percent of his income. If the payor has a 40-60 percent reduction in income due to a disability, it is often very difficult to be able to pay his own living expenses, much less pay support or alimony. The payor's option is to go to court and ask for relief or reduction in the payment obligation based upon his current financial circumstance. This is stressful, costly and will open old wounds. The ex-spouse recipient does not want to see any reduction since it could cause her to suffer financially. The recipient would likely fight any reduction with the same costs and stress, and it would be like going through the divorce all over again. Enter Divorce DI Recently developed is a DI product that will follow the terms of the divorce decree and provide benefits should the payor become disabled. Because this is a product that covers a © Mark Bowden specific problem, it can be issued and can pay benefits in addition to any group or individual DI one may have. The payor could become disabled due to illness or injury, collect group or individual disability benefits to cover his own expenses, and have the Divorce DI pay the support and alimony payments. The payor is assured he is meeting his divorce decree requirements, and the recipient is assured that support payments are coming in. There is no need to fight things out in court. Surprisingly affordable, it makes sense to build this into a divorce decree and purchase it along with life insurance. It can be individually customized to meet the needs of most any divorce decree. The policy can pay for alimony, child support, medical insurance premiums, tuition and other items the payor may be obligated to pay. Divorce DI is underwritten in fiveyear increments. Premiums during those five years actually go down because every time the payor makes a payment to the ex-spouse, the overall obligation is reduced. Think of it as decreasing term life insurance. Every five years, the payor is re-underwritten, but because the settlement obligations are lower, the premium should be lower. Divorce DI is underwritten with modified guaranteed issue up to An advisor who can sell Divorce DI could educate attorneys and other advisors and become a referral source for clients. $1,000,000 of benefit. This means that within reason, there should be no exam or medical records needed, and the policy is issued within days. For divorce decree obligations over $1,000,000, an exam and medical records are likely to be needed. Because this is so new, most divorce attorneys, CPAs and other advisors do not yet know about Divorce DI. I believe it is in both the ex-spouses' best interests to seriously consider Divorce DI. Both attorneys should structure coverage into the design of the divorce decree much like they do life insurance. Who should own and make premium payments and how benefits are received can be negotiated between the attorneys and written into the divorce decree. An advisor who can sell Divorce DI could educate attorneys and other advisors and become a referral source for clients. I encourage you to gather more information on this topic and then contact a family planning attorney you know and get his opinion. My experience has been extremely positive. Michael Smith is President of CPS Horizon Financial, a full-service Brokerage General Agency. He is also the current Chair of NAIFA's Member Benefits Committee. He can be reached at July/August 2015 | ADVISOR TODAY 29

Table of Contents for the Digital Edition of Advisor Today - July/August 2015

From The Editor
New Products
How Do You Create the Million-Dollar-Plus Practice?
Traits of Top Performers
The Business Benefits of a Pipeline Mentality
What Does It Mean to Act Ethically?
Variable Universal Life is Back
Sell More LTCI By Selling Less!
Overcoming the Most Common DI Objections
Divorce DI
Mitigating Retirement Risks with Life Insurance
Creating Irreplaceable Capital
Closing the Gap
Financial Future Less than Rosy for Boomers and GenX
Estate Planning and Annuities?
Ignite Your Sales Potential
A Closer Look at BTID
Upholding the Tradition
NAIFA’s Candidates for Election
Addicted to Rejection
What is Keeping Your Senior Clients Up At Night?
Advertiser Index
Back Page

Advisor Today - July/August 2015