What existing benefits really cover

What the lesson covers

1. 01

   The client

   Jenna tells her advisor: I’m covered at work and on my car loan, so I don’t need disability insurance. What she has is creditor disability insurance on her car loan, and a health spending account through her employer. Both sound like protection. But covered is a label. It does not tell you what gets paid.

2. 02

   Four questions

   For any benefit, ask four questions: what triggers it, who receives the money, how much is paid, and when it stops. Her creditor coverage pays the car-loan payment to the lender, for a limited period. It does not pay her. The spending account reimburses eligible health and dental expenses, up to its balance. It pays no income at all.

3. 03

   The gap

   Now picture her unable to work. Rent, food and utilities still come due, along with the car payment. Of about three thousand one hundred and fifty dollars a month, only the four-hundred-and-fifty-dollar car payment is handled. The other two thousand seven hundred a month is the uncovered risk. That is the gap individual disability insurance is meant to fill.

4. 04

   Exam move

   Here is how the exam asks it. The full loan balance? No. Creditor disability makes the payments. It does not pay off the balance. Income replacement? No. The benefit goes to the lender, not to her household. The same as individual disability coverage? No. Individual coverage replaces income broadly. A benefit that covers the loan payment for a limited period, and is not income replacement. That is the answer.

5. 05

   Takeaway

   A coverage review is not a count of policies. It is a map of which risk each benefit actually transfers. Name the uncovered risk first, then solve for it.