Should You Purchase Your Disability Insurance From Your Financial Planner?

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Today I met with an existing client to review their life and disability insurance policies. They brought me some documents from their financial planner which prompted me to answer the question if you should purchase your disability insurance policy from your financial planner.

The answer is… it depends.

Here is what happened:

My client is an orthopedic surgeon. He earns $500,000, is 40 years old, married with two young children. We have handled his insurance since 2005. I’ll call him “Dr. Orthopod.”  Dr. Orthopod met with his financial planner recently to review his overall financial situation and his planner suggested that he replace his current disability insurance policy with a new policy. Here is the problem. The client purchased his disability policy back in 2005 and locked in his rates and health at that time.The client has since had a few surgeries and if he were to apply for coverage today he would most likely be offered a policy with exclusions.  And, since he is 10 years older, the policy would be more expensive.  Furthermore, the existing policy has a true own occupation definition of disability and no exclusions or restrictions. The policy he recommended didn’t even have the own occupation rider on the policy.

In this situation, the planner was not an expert in disability insurance and was providing advice that would have adverse consequences.  How was it in the client’s best interest to pay more, have less and have inferior coverage? The answer is the only person’s best interest at heart was the financial planner’s.

As such, the bigger question is, how do you choose a financial planner and how do you know they are protecting your best interest?

Many financial planners are insurance salespeople who also do financial planning. They get paid commissions from selling products. If they are an agent of a company, they have a greater interest in putting their clients with that company’s products which may or may not be in your best interest.

Here are some questions to ask a financial planner before you commit to working with them:

1) How do you get paid? Do you charge hourly fees or commissions? Or both?!

2) What are your credentials?

3) If you sell products, do you work for one company or are you independent and offer multiple companies?

4) What is your area of expertise?

Disability insurance is a very specialized area of the insurance marketplace. It is important that you find someone who has expertise in this area and can provide you with objective advice to protect your best interest.

 

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