Disability Insurance Insights...
Even Great Executives Need Disability Insurance Advice
W. Harold Petersen
April 2017

I recall the Los Angeles Times newspaper carrying an article with the headline: “Executive On Leave Since Injury.”  The article was of local and national importance because it involved the CEO of a large national company that provides many jobs in several major cities.

The firm is a stable older firm that has been pressured by Wall Street to get its stock price up.  Investors were not happy because the stock price has been stagnant for several years.

In response to the investors’ call for action, a new, highly-regarded CEO was brought in to run the company.  The new CEO’s quick and immediate actions were calming to Wall Street.  Things at the company became very promising and the great stress that pervaded the firm was easing.  Management was beginning to relax now that the stock price had stabilized and was heading up.

Significantly, the story pointed out that the 55-year-old CEO injured his spine in a skiing accident in Aspen, Colorado, over a holiday vacation.  It reported his condition as “stable,” a word chosen to minimize apprehension, but the article also laid out the fact that the CEO was on leave and his duties were being attended to by a top-ranking vice president of the firm.  Further details were suppressed for privacy reasons.  No information as to the expected duration of the leave was expressed.

Hard-driving companies have little patience for disabled executives to recuperate.  Business must be tended to daily and with vigor.  The disabled executive hopes to begin tenderly working-up to, once again, being a hard driving executive.   I hope to be wrong, but my feeling is this man will almost immediately be permanently replaced.  This is a sad happening in the career of a professional manager.  If he recovers and becomes a viable candidate for a new management position, he will have a new start, but disappointment will continue to depress him.  A new position, at this age, will likely be with a smaller, lesser-known company.  Compensation will suffer and his ego will smart for some time. 

But he may be permanently paralyzed to the degree he will not be eligible for a new job.  If he recovers, or if he remains disabled, his personal financial concerns are great.  The story and my assumptions, based on experience with executive disability insurance, helps all of us in being alert to the income cash flow needs of executives when their unfortunate turn comes to be disabled.

The U.S. Department of Labor Statistics studies consumers spending habits on a monthly basis.  They suggest a person must have an income cash flow of 65%-75% of normal in order to stay even.

Solutions to the Shortfall
Optional Supplemental Income Insurance - To Create an Adequate Disability Financial Plan.

Who should have proposed supplemental disability insurance to the CEO?

  • The employee benefits broker?
  • The casualty broker?
  • The life/financial broker?

Who did?

Probably none of the above.  The subject of supplemental disability income insurance was probably brushed aside by both the CEO and his advisors because of the assumption that company benefits would be adequate.

The unfortunate CEO we have discussed should have had high-limit disability insurance to sustain his lifestyle.  He may never work again or he may slowly recover.  His health, his stamina, his ability to produce on a 24/7 basis will forevermore be questioned.  An adequate disability program for temporary need or permanent need is the salvation of his life and lifestyle.  Every executive needs advice, for financial reliance on the company provided plans will result in extreme disappointment and economic hardship.

Producers must co-mingle business plans and personal plans to keep their clients financially whole during periods of disability. 

Author's Bio
W. Harold Petersen, RHU, DFP
RHU, DFP, is founder and chairperson of Petersen International Underwriters. He is recognized as an expert in underwriting development and policy innovation for such products as high-limit disability insurance, residual disability benefits, cash-value DI, and the expanding field of disability financial planning. The life/disability industry has acknowledged his leadership as an author, educator, motivator and leader, and has bestowed upon him the Harold R. Gordon Memorial Award (NAHU), the Will G. Farrell Award (NAIFA Los Angeles), the Lifetime Achievement Award (IDIS) and the Distinguished Service Award (NAIFA CA). His extensive industry involvement includes NAIFA, LIMRA, NAHU and The American College, all on local, state and national levels as well as IDIS. Petersen can be reached at Petersen International Underwriters, 23929 Valencia Boulevard, Valencia, CA 91355. Telephone: 800-345-8816. Email: whp@piu.org.

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