The Insurance Coverage Often Overlooked and Why It's So Important!
EPISODE 9
In this episode, Dan Vander Kooi and Blake Witman talk about all things disability insurance. It's oftentimes overlooked and not talked about enough, but it's so important. It helps cover one of your most valuable assets, your income! This conversation dives into why it's important, what is at risk when we don't have disability insurance, and some of the incredible options available out there.
In This Episode:
Why We’re Talking About Disability Insurance
What is Disability Insurance?
What Happens When You Don’t Have Disability Insurance
How To Cover Your Greatest Asset… Your Income
How To Get Back What You’ve Paid Into Your Policy
Understanding The Impact of The Unknown
Helpful Resources At Your Fingertips
Podcast Episode Transcription
Intro:
Welcome to the (un)covered Podcast, brought to you by Manna Insurance Group, where we pull back the curtain on the insurance industry and provide valuable insights, guidance, and truth so that you can make informed decisions when choosing the right insurance.
Dan Vander Kooi:
Hey, everybody. Dan Vander Kooi here with the (Un)covered Podcast. Today on our podcast I have Blake Witman from Manna Insurance Group, one of our team members here, and we're going to be talking about disability insurance. Disability Insurance Awareness Month is the month of May, and so we're talking about it today, right, Blake?
Blake Witman:
Absolutely. Thanks, Dan, for having me come in and hang out. I always love sitting and doing these with you. We've done a couple, but yeah, disability insurance is one of those things that isn't talked about as much as other forms of insurance, and I think it's important to get that out there.
Dan Vander Kooi:
Yeah, absolutely. So one of the things is, we jump right into this, disability insurance is something that covers basically your income. And when you think about it, everyone wants to talk about life insurance. They'll even talk about long-term care insurance providing if there's a medical need ongoing down the road. But oftentimes we forget about replacing what might be one of our most valuable assets. And I'm a big Dave Ramsey guy. If you listen to what Dave says a lot of time, and even Ken Coleman on some of his shows, they talk a lot about your best wealth-making tool is your income.
Absolutely.
And if you don't have that income to provide for your family yourself to start providing and building wealth for your retirement too, what are you going to lean on?
What's going to pay your bills? All that sort of thing. And so disability insurance really comes into play. The disability insurance replaces a good chunk of your income so you can continue to pay the main things like your mortgage, your groceries, your power bill, your water bill, that kind of stuff, and allows you to continue to live life and support those who you love.
Blake Witman:
Right. Well, and I think, as you mentioned, our income being one of our greatest assets, I think many times, even though we love having that income, it's important to us. I think we take it for granted that because I have this set contract or I have this set agreement with my employer, that that's not going away. But if that one thing happens and now all of a sudden it is taken, you're not able to work anymore, you're going to be in a lot of trouble if you don't have that.
Dan Vander Kooi:
And even if you have workers' comp insurance or L&I through the State of Washington for on-the-job stuff, sometimes that only goes so far, and as well as what happens if you get off the job. I know plenty of people that have missed time off work, things like that, for a four-wheeler accident, for falling off a horse. They're maybe putting a new roof on at their house or they're doing something like that and there's a fall, a ladder slip, things like that. And that's where that disability really comes in.
It's for something that is completely unplanned, maybe a car accident, anything like that that happens that could carry on for a long period of time.
And again, life insurance gets talked about because it's final. We all know that at some point we're going to die, right? But disability insurance, a lot of people don't think about. And if you really look at the expense in buying disability insurance, typically it's about on average, so this is average round numbers, your one to 3% of your total annual income is typically what you can purchase it for.
So if you're thinking, hey, I want to really protect this asset that I have in building wealth and providing for my family and my income, man, for 1% of that, I think I'm willing to do that to take the safety net and have that there for us in case there's something that comes up.
Blake Witman:
Well, I think a big portion of that in what you said is just that simple idea of I want to go to bed at night with that peace of mind, knowing that if something were to happen to me tomorrow and I was not able to continue to work, that I would still be providing for my family.
And what a gift that is to your loved ones, your spouse or your children that, hey, I love you enough that I want to protect you, that if something does happen to me, that we can continue moving forward in life.
And to be able to go to bed at night and know that that is there I think is a huge deal.
Dan Vander Kooi:
Yeah, absolutely. It was interesting, this last week I was down at a conference in Dallas and there's a lot of business leaders there and business owners. And a few of the conversations carried on a little bit is succession planning. It's about how to take care of things for when you're gone. I started thinking about that and how that applied to what we're talking about today even a little bit and what's going to happen if maybe a key member from your team or yourself all of a sudden has to be removed from the company that you work at, maybe from the company you own.
I know we're in the process of revaluing just all of our team leads and their roles and things like that and what kind of disability or life insurance should we have on them, that sort of thing. And so it even comes into play where it's not just for an individual like you or me personally. I have a disability insurance policy on myself. That if something happens, it takes care of Erin and the kids from an income standpoint. But I also own a company, so I also have some passive income that can come through that.
But there is a certain portion of that where we would have to hire someone at Manna to replace my role to manage as a CEO role to take that on if all of a sudden I can't get out of bed in the morning or cognitively I'm not there anymore. And so that disability insurance helps offset that salary and allows that to be paid directly to that other person where my disability will then come straight to Erin and I.
So even thinking about it as is there a key person in your company, not only just yourself, but another key person, that if they're gone, man, you really want to make sure they're taken care of still because they might recover from it down the road, but it might take three, four or five years, right?
Blake Witman:
Correct.
Dan Vander Kooi:
And so those are things that a lot of times we don't think about, right?
Blake Witman:
Right. In fact, I just am finalizing two different disability policies for two family members that co-own a business together. And it's exactly what you're talking about. If one of them were to get hurt or injured in some way, they have to be able to continue running that organization. And that's where that disability policy comes in. And not only helps the family and that individual's income, but also is set up to help that company as a whole.
Dan Vander Kooi:
Blake, so you handle a lot of the processing side of things for that for disability, so you see a lot of different things. How difficult is it upfront just to be like, "Hey, I'm brainstorming about this. I think I might want a policy on myself and my wife, or I want it on my executive team, or I want it on this key person in our company that handles all the manufacturing or they handle all the sales," or things like that, how difficult is it to get the ball rolling and get a quote?
Blake Witman:
Right. In all reality, it's incredibly easy. I'm going to need name, date of birth, what your job entails, so your title, and many times it makes it easier if we get a description of what your job is. Is it just completely administration? Are you quoting out business? Just give me a feel for what that job is and then what your income is. And at that point, I just send an email to our broker.
Dan Vander Kooi:
Millennium Brokerage Group. Shout out to Matt and Justin.
Blake Witman:
Yes, MBG. I send an email to Matt and usually within 30 minutes usually. He's incredible. Thank you, Matt.
Dan Vander Kooi:
Let's not over promise a 30-minute turnaround though.
Blake Witman:
Fair enough. Fair enough.
Dan Vander Kooi:
Matt might be upset with us.
Blake Witman:
That's fair. Usually. Anyway, real quick, I'll get a quote back. And then at that point, then it's just a matter of going through the process.
Dan Vander Kooi:
So on those quotes, like Blake was talking about, the reason we ask for a description or a job title is because disability insurance is extremely, extremely discriminatory. Like we've talked about in life insurance, things like that, insurance is all about discrimination. So they want to look at what your job is, how old you are, your health, are you taking any prescriptions, things like that. One of the big reasons for determining what they call class codes in disability insurance or the class level is, is it high risk?
My job sitting behind a desk isn't super high risk. Sometimes I get a little excited and jump around when the Mariners are playing and they hit a home run or something like that. But for the most part, I'm not going to hurt myself at my desk. So then they're going to look at, okay, what's his age? Are there any crazy activities? Is he a race car driver on the side? Is he skydiving? That sort of thing. Which no. So mine is going to be a lower rate because of that. Now, take for instance someone like I'll say my brother and father-in-law.
They're contractors, so they build pool buildings. So if they're climbing up on a roof 30 feet up in the air, things like that, on the ladder, well, that's going to be a different class code. But then they're going to come back and they're going to say, "Okay, if they're a general contractor and they're an owner, how much of it is paperwork versus how much of it is actually on the job site?" And so that's going to make a big difference in playing where their time is split. You got to get a ballpark on that.
And once we get that, then they can break that out. Sometimes they'll break it into two different classes or they'll rate you right in the middle of them and go from there. Once an application is done and a quote is done, Blake, what's the process then at that point to try to push it across the finish line?
Blake Witman:
Yep. Once we get the application submitted to the carrier, it's going to go through underwriting. And underwriting can go quick. Sometimes it doesn't, depending on medical history, which they're going to look into. And it's unbelievable what insurance underwriters find. It can be the smallest little thing that you completely forgot about that ends up popping up and can affect that underwriting process. So I never try and promise a length of time because I don't know your history.
It could go really quick. It could take some time. They might have to ask for your medical records. At that point, then you have to wait for your physician to get that to the carrier. So there's a lot of things in play. But basically they're going to look at, again, that percentage of what you're doing that's going to help them write that out. They're going to look at your medical history, and then they will come back with an offer. And sometimes it's just a straight-up offer. What you applied for is agreed upon.
Other times they might come back with, well, we'll do this, but here's an exemption, that maybe for the next three years if this specific injury happens, then that won't be covered for three years and then that exemption is removed and you go forward.
Dan Vander Kooi:
Yeah, and something like I've seen with that, I've seen that on two or three different people recently where they've had regular chiropractor visits. They've excluded, and I've seen this... There's probably three or four people over the last three or four years I've seen where they're going to do a two or a three-year exclusion on anything related to the spine. And you're like, well, why do I even buy it then? Well, the thing is is you don't know what else is going to happen. And I've also seen it now that I've been doing it long enough that that three year comes up.
I actually just a couple weeks ago I got an email that says, "Hey, it's been three years. There's been no issues. That exclusion has now removed from the policy. It's a full-blown policy again." So it's nice to be able to get it in there, get it going. That two, three years, if there is an exclusion on something can be removed after time. And some of that's negotiable and we can go back and lay out the case and say, "Hey, this is the situation," that sort of thing with the underwriting and have a conversation about it. It's not just always a drop dead.
Blake Witman:
Correct.
Dan Vander Kooi:
At some point they do that and they say, "Well, this is what we're offering. Take it or leave it," right?
Blake Witman:
Correct. Well, the nice thing is those exclusions usually are a period of time. This isn't from the beginning of the policy until the expiration of policy. We're talking for two years or three years, and maybe we negotiate it down to one year. We're able to do that, but at least we know you're covered for everything, but that for this period. And then in three years, again, like you said, now it's a full-blown policy and we don't need to worry about anything.
Dan Vander Kooi:
Yep, exactly. I think one of the other really cool thing is there's constantly new products coming out in disability insurance. So a lot of people say, "Well, if I'm going to pay all that money over the next 20 years until let's say you're 45 and you plan on working until you're 65, I'm going to pay all that money over the years. Well, why don't I just put it in a savings count or do something like that?" Well, the bottom line is it's going to replace... Typically, disability insurance replaces about 60% of your income. 60, sometimes you can get up to 70. It's usually 60 to 65...
Blake Witman:
I was going to say 65.
Dan Vander Kooi:
...yeah, percent of it. The reason they only replace 65% of your income is because they eventually want you to get back to work. They don't want you to just take it and be like, "Oh, I'm just going to take this check the rest of my life." And so they're trying to get you back there. Now, as you get into a lot of the different nuances of a disability insurance policy, I like to say there's the stripped down version and then there's the Cadillac version.
And with the Cadillac version, there's things like own occupation rider, which means basically you're covered, basically you can go back to the job or the occupation you were in. You don't have to take a lesser job for something like that. The other thing that's been to me is a really interesting deal, and I have this on my own policy, it's called a return of premium waiver or rider. And what that does is that allows me... I'm paying into this X amount per year knowing that I'm going to get my 60-65% of my income if something happens.
But when I turn 67, if I haven't used any of that money in that policy, I get all that money back that I paid in premium. Now, number two, if I even used part of that for a period of time, if that's less than the amount I paid in, I get that money back, which to me is a game changer. And now, not every company does this. There's very few companies that do, but it's out there. I have it on me. I have it on a couple other clients.
But to me, I'm just like, man, if I know I'm going to pay this and if I never use it, I know I'm going to get a check for however many hundreds of thousands of dollars down the road, 20, 30 years down the road. Well, maybe not that much, but all that money back at the end of it, man, to me, that's a no-brainer. Now, you have to pay a little bit more to get that return of premium rider. It's not quite double the premium.
It's probably about one and a half times-ish. So you're paying more upfront. And I guess the argument against it would be, well, can't people argue with me? Can't people just take that extra money and invest it? But I'm like, yeah, but are you going to really?
Blake Witman:
Right. Totally. I mean, everyone has the right thought in that, but here's something that it's a win-win situation when it comes to that return or premium rider is you're covered. If you get injured and you can't work, you are going to be covered, first and foremost. Hopefully, and we live in the world of insurance, and I tell my clients this a lot when they ask, why do I need this? My response is, let's look worst case scenario. It's got to be worst case scenario because that's what we're insuring against.
And we could go no matter what type of insurance we're talking about. But here in this situation, worst case scenario, you were injured and you can no longer provide for your family. That happens. Now you're covered. But with the return of premium rider, worst case scenario doesn't happen, you don't put in a claim, now all that money that you paid out is now coming back to you. Yes. Is it more expensive? It is, but that's an investment.
Dan Vander Kooi:
You're going to get back.
Blake Witman:
You're going to get it back.
Dan Vander Kooi:
Let's say you never use it and you put all that money year after year into this premium that you're paying for this disability insurance policy and you never need it, which is an incredible thing, because that means the Lord's blessed you with good health, that you've never had any crazy incidents, things like that. That's awesome. But what a great thing to get a check back at the end of it. And in that meantime, you have protected and you have basically made sure that your most valuable asset in your income has been protected the entire time.
Blake Witman:
100%.
Dan Vander Kooi:
It was interesting, James Clear wrote a book, he's a bestselling author, probably a lot of people have heard of this book now, called Atomic Habits. He spoke at the convention I was just at. I'm in the middle of reading his book and his big thing is trying to get 1% better every single day. And basically the fractional small gains over a long period of time make up very large gains.
And part of that is being able to predict what you're going to do. From a habitual standpoint, if you can basically turn your brain that says, I'm going to do this no matter what, and I'm going to plan for this ahead of time, then when the decision comes to do it, it's already made up.
He used the example of like, hey, when my wife and I come home from work, the minute we get home from work, if we put on our workout clothes right away, then the next two hours is taken care of. We grab a quick bite to eat. We go to the gym. We do our workout. We come home, because the decision's already being made because I put those clothes on.
Blake Witman:
That's well said.
Dan Vander Kooi:
It's the same thing. When you're planning your financial future, when you're planning, you're saying, "I'm going to budget this. I'm going to put X amount in savings. I'm going to put X amount towards retirement. I'm going to put X amount to my disability or long-term care. I'm going to make sure my house is insured properly," all of those different things, you've taken out the guesswork of what happens down the road when something crazy out of the blue, out of left field emotionally that could destroy you. You've already got a process in a plan in place to do that, right?
Blake Witman:
Yep. Well, I always even say to those that are younger, maybe newly married, you haven't set up those habits yet. So let's get going with it now. Let's start that new marriage or let's start getting into the workforce. Maybe you're still single, beginning into the workforce. And get into that routine from the very beginning that this is something that is important to me. I'm going to start it now.
And that sets up victory over the rest of your life because it's already ingrained that I expect this for myself. I'm going to do this. There's a lot of things in my own life that I wish knowing what I know now, I could go back to when I was 23 years old and start putting money in different places because I'd be set up really well at this point.
Dan Vander Kooi:
Yep, yep.
It's understanding what the impact of the unknown could do to you and your household.
And I think that's the biggest thing that disability insurance is going to cover. It's covering the unknown. You can't predict tomorrow. You can't tell me that you know you're going to live until X day or X age, things like that. The biggest thing that you're going to get out of this is knowing that you and your family are protected in a time of need.
What is something that you're seeing out there with clients on maybe a reason why they're not asking for disability or things like that? Do you feel like there's an understanding of what it really is, or do you feel like it's one of those things, you got to have your car insurance, you got to have your house insurance because your mortgage is going to require or renter's insurance because your landlord's going to require it? But what do you think the hang-ups of why disability insurance isn't always top-of-mind?
Blake Witman:
I think probably the first one goes off of what you just talked about was, am I really going to need it?
I'm not going to get hurt. Like you just said, you don't know what's going to happen tomorrow. And I think that's assumption that we all make on a regular basis is we just expect tomorrow to be there, but we're only given today. Even scripture says that.
And I think if you allow yourself to think about that reality that you may not have tomorrow or whatever that looks like, you may not have that ability to work tomorrow, let's take care of that. Let's go to bed at night with that peace. I think that's the number one thing. The number two thing I think is just that thought of not really understanding what it is and how it works and how simple it really is.
Like I said, basic information up front. And if we get approved, 60 to 65% of that income is taken care of. Period. And we work with great carriers because that's another one that I hear. Well, are they really going to pay out? If this happens, are they really going to pay me this? We do a very good job here at Manna. And again, with working with MBG, we are working with top-notch carriers that are very financially stable. So that is not a concern.
Dan Vander Kooi:
I think one of the things I'd like to hit on too is there is a ton of resources out there to figure out how much disability insurance you need. And it really depends on your income level and your lifestyle. So the other thing to take into consideration as you go through this, and we do a lot of this for life insurance too, is in life insurance side of things, if you were to pass away, how much income do you need to make sure that your spouse or your significant other or your kids can live off of?
The worst case scenario is you're like, well, they'll be fine on this. It's like, well, you've become accustomed to a certain lifestyle, so don't you think you'd want your loved ones to continue that? And that kind of is the same as disability insurance. Now, the flip side of it is if you're like, "Wow, I make $50,000 a year, but I want to buy a big disability insurance policy so it can pay out more," it doesn't work that way. It's tied to your income. You can't just say, "Hey, I want $150,000 when I make $50,000, or I want half a million dollars when I make $100,000."
It doesn't work that way. It's tied directly to what your income is. So one of the other things that disability insurance will ask for, and it's really nice if we have this upfront, but it's something we can do in the underwriting process, is they always want your last two years of tax returns. So that is something that's required in the application process to make sure that we're being accurate. Now, if you're in a job where you know you're going to get raises or promotions or maybe you're commissions based, you're self-employed, that number can fluctuate year to year, so they take the average.
The other thing that you can do is you can say, "Hey, I know I'm making X right now, or this is the average over the last two years, but I know that we're on a path with our company that five years from now I'm probably going to be making around X. And even though right now I'm only making this, I know that from the trajectory, from my experience in this industry, that I'm going to be making this in five years."
So what's really nice, typically, and Millennium does a good job with this, is they're our resource as a broker, is that we can go back to them and just say, "Hey, we believe that the company is going to be doing this or their income is going to do this over the next five years. Let's make a note in the file." And then in that period of time, we can go back and there's an opportunity then to increase that benefit amount. You can't just start off and saying, "I know I'm going to make this in five years now." It doesn't work that way.
Blake Witman:
They're not going to buy it.
Dan Vander Kooi:
They're not going to buy it. Everyone, especially people like me who's like a dreamer and glass is always half full, oh no, I'm going to make this. I land there. I was like, well, I'm still making more. I shot for the moon and land in the stars. But that's another big thing is understanding how to get there and then also having that relationship with your broker that you can go back and just say, "Hey, it's time to increase this."
Blake Witman:
Yep. Correct.
Dan Vander Kooi:
So I think that's another big thing. The other thing I'd like to just hit on a little bit is the resources that are out there. So number one, mannainsurancegroup.com. You can contact us. We can walk you through the entire process. But the other big resource out there is lifehappens.org. Are you familiar with that?
Blake Witman:
A little bit.
Dan Vander Kooi:
A little bit?
Blake Witman:
Yep.
Dan Vander Kooi:
So lifehappens.org has a ton of information. It has disability insurance calculators, so you can calculate how much you need. It has life insurance calculators, long-term care, all that. There are a ton of resources at lifehappens.org to educate you on the process of what disability insurance is, what life insurance is, long-term care insurance.
It is a nonprofit that is specifically for consumers to understand what this is and how they can utilize it and how it brings benefit to their life. Lifehappens.org, a big plug for that. But Blake, is there anything else you'd like to share before we wrap up just about disability and our team here at Manna?
Blake Witman:
Yeah. Well, no, I look forward to anyone that is interested in this to give us a call and we can help educate. We can get the process started. Real simple. But I guess at the end of the day, my question is, what is important to you? And if your family is important to you, I believe this is a must needed gift to give to your family. I want to make sure we keep it with disability, but we just processed a life insurance policy.
And what an amazing gift that was to someone that passed away to be able to gift his spouse and his family with a death benefit. I would say the exact same thing with disability. What a gift that you can give to your family that if you become injured or unable to work, that you are gifting this to your loved ones, that they're still going to be taken care of. And at the end of the day, as a husband and a father, that's all I'm looking to do is to provide.
Dan Vander Kooi:
Well, and that's the biggest thing. Everyone comes to work to provide for themselves and their family. And now all of a sudden, if that opportunity is taken away from you, what are you going to do? My thought would be, you fix that ahead of time before something could happen with disability insurance and that'll fill the gap.
Blake Witman:
And then you sleep well at night.
Dan Vander Kooi:
Exactly. Exactly. Well, Blake, thanks for coming on and chatting a little bit about this. May is Disability Insurance Awareness Month. And make sure to hit us up. We'd love to walk through it with you and your family and just see what's out there. We can shop the entire market for you and figure out what is really best for you as an individual and for your family, because every household's different.
And that's I think what sets us apart is we not just try to shove a square peg in a round hole. We want to make sure that everyone is met where their needs are at and work with you on that. So thanks for joining the (Un)covered Podcast. Make sure to give us a five-star review and share with your friends and we'll see you guys next time.
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