Posted on 01 Dec 09
According to the Social Security Administration, nearly a third of today's workers will be disabled before they retire.¹ When a disabled employee is also the owner of a small business or a key employee, a sudden disability can be financially devastating. In response, The Hartford Financial Services Group, Inc. has become the first of the nation's twenty largest life insurance companies to offer disability coverage as an option on most of its permanent life insurance policies.
Most small business owners understand how important life insurance coverage is to the security of their family and business. The death benefit can be used to replace income, pay estate taxes and help fund business continuation. But the disability of an owner or key employee can be just as disruptive.
The Hartford's new DisabilityAccess Rider is designed to provide small business owners and their key employees with help with critical expenses while those covered by certain Hartford life insurance policies recover from a disability or, in the case of a life-altering illness or injury, find a new way to make a living. Once qualified under the rider, the policy owner receives a monthly disability benefit of as much as $5,000 a month for up to two full years. The rider can be purchased with many new permanent insurance policies at an additional cost of between 6-10 percent of the premium.
"The DisabilityAccess Rider is intended to provide a safety net to small business owners, sole practitioners, and their key employees when they need it most," says Cliff Barron, The Hartford's director of life insurance product development. "For those who already know they need life insurance to protect their family's income, it's an easy add-on. It can also prove useful to a highly skilled person who can no longer practice their craft because of an injury, and who now needs time to find a viable career alternative."
When purchasing one of The Hartford's Bicentennial UL Founders, Leaders VUL Liberty, or Leaders VUL Legacy life insurance policies, a policyholder may purchase a DisabilityAccess Rider for an additional charge and a first-year issue fee. For variable universal life insurance, consumers should carefully consider the investment objectives, risks, charges, and expenses of the product and its underlying funds before investing.
The rider provides a monthly benefit with a maximum lifetime benefit equal to 24 monthly payments and can help bridge the gap between a return to work or, in the case of a permanent disability, the potential receipt of Social Security benefits. Because the DisabilityAccess Rider is on an individually owned life insurance policy, coverage is not lost if an employee changes jobs. It can be renewed up to the policy anniversary date closest to the insured's 65th birthday, though the cost of the coverage may increase.
The monthly benefit amount is determined when the policy is issued and is generally received income-tax free. The maximum monthly benefit is the smallest of the following: 2% of the total initial face amount of the policy, $5,000, or 30% of the monthly salary at the time the policy is issued.
Recent Survey Reveals Severe Gap in Coverage
The Hartford's 2009 Benefit Landscape Study shows that many Americans would struggle to pay for essentials if they could not work due to an injury or illness. The research shows that 97 percent of consumers would have to change their lifestyle if they lost part of their family's income for three to six months. Despite this, many Americans lack income protection. The Hartford study, for example, found that only 36 percent of employees have long-term disability insurance. With the average length of a long-term disability topping two years and nearly half of the 7 million workers currently receiving Social Security disability benefits under the age of 51,² many small business owners and their employees are putting themselves, their business and their families at risk.
1Social Security Administration Fact Sheet (January 31, 2007)
2The Council for Disability Awareness (2007)