Protecting Gen Y’s Greatest Asset with DI
Education is key to dispelling the myth that financial protection is a discretionary need.
As a cross-section of Americans to name their most important fianncial assets and you would draw some predictable responses: 401K plan, and IRA, a home – perhaps a business.
Many may not hink about their ability to work and earn an income as their greatest asset, but the importance of future earnings may be especially critical to members of the younger, Gen Y group. A good number of men and women in theis group, ages 21 to 31, have not had much opportunity to accumulate large amounts of retirement savings, build up equity in a home, or create a thriving business if they are entrepeneurs.
Gen Y individuals are in their early earnings years, just beginning to accumulate financial and other assets. They don’t have much of an emergency fund or cushion. For them, a disability could strike at their most precious asset, their stream of earnings.
MetLife’s 10th Annual Employee Benefits Trends Study found that found that half of Gen Y individuals surveyed already admit to living from paycheck to paycheck, but only about half have any income protection through disability income DI insurance.
Usually, younger people feel more immune to illness or injury than other people. Perhaps what is need is to point out the many financial family obligations that many Gen Y members already have. The MetLife study found that 55 percent of Gen Y workers surveys are married or in a domestic partnership, 46 percent have young children, and 13 percent provide care for an elderly parent or relative. There could be some stuggle if a paycheck is interrupted for an extended period of time.
An Adequate Amount
Clearly, for someone with no DI insurance protection, any amount of coverage is better than none. However, even those Gen Y employees who have coverage through the workplace (the MetLife study found that seven in ten employers do offer some amount of DI protection) may not have adedquate protection for their needs.
The study found that the 40 percent of Gen Y surveyed with coverage simply don’t know what percentage of their income is protected. In these circumstances, it will be important to stress the advantage of learning what is available through the workplace and the potentional benefit of supplementing that coverage.
While the basic rule of thumb is to cover 60 to 80 percent of after-tax income, Gen Y may need to aim for the more generous level. This makes sense since the study also found that almost one half of Gen Y surveyed spends 70 percent or more of thie monthly take-home pay on essential expense, and one-fourth spends 80 percent or more. It may be helpful to position DI protection as something that will help to pay those essential expenses like housing, food, utility bills which would continue if one is sick or injured and which are not covered by other insurance benefits like medical insurance.
Approximately two-thirds of Gen Y workers surveyed in the MetLife study are very concerned about their family’s financial security if the principal wage earner is unable to earn an income due to illness or injury.
That statistic makes it seem that selling DI coverage to that demographic would be easy. So why isn’t it? In addition to discretionary money being tight, hesitancy may also be caused by concern about making the right decision. Only about half (53%) of Gen Y workers surveyed in the study said they feel very confident in their ability to make the right financial decision. Therefore, consumer education can be a key component in selling DI insurance. and dispelling the myth of financial protection as a discretionary need.
It pays to become more familiar with the needs and concerns of Gen Y. THe MetLife study also found that this group is more likely than older generations to consult with a financial professional about personal financial decisions – 46 percent of Gen Y consult with financial professionals, compared to 40 percent of Gen X and 36 percent of Baby Boomers.