What if the greatest financial threat to your family isn’t dying too soon, but surviving an illness or injury without a paycheck? Welcome to the dibrokerWest podcast. I’m Doug Lenhoff and this is the show where we ask the question but what if I don’t die?

If you’ve watched TV or streaming video lately, you’ve probably seen the commercial about the healthy young father who has a stroke, passes away and fortunately had life insurance. But that story overlooks a far more likely outcome, surviving the stroke with a disability that prevents him from earning an income.

So we ask again, what if I don’t die? Should income protection or disability insurance be one of the first risks that a young father or mother considers?

Welcome back to the dibrokerWest podcast. I’m Doug Lenhoff, and today I’m again joined by Brock Falconer, Regional Representative with dibrokerWest. Brock, good to have you back.

Doug, good to be here. Important topic today.

Brock, you talked in previous episodes about the individual DI opportunity hiding inside group LTD cases. Today, it’s a different angle, something called qualified sick pay plans. Go ahead, set it up for us.

Absolutely.

Most advisors haven’t heard of this, or if they have, they haven’t thought about it as a planning opportunity. That’s what I’d like to change today. Qualified sick pay plans under section 105 in the Internal Revenue Code, often called salary continuation, probably a term we’ve heard more often, give business owners a documented framework for continuing compensation to a disabled executive or key employee.

And when you pair that with individual disability insurance and proper legal documentation, it becomes one of the strongest business owner planning conversations an advisor can have.

Okay. Let’s start with what happens when a business doesn’t have this structure in place. What does that look like?

Let me paint you the scenario. Key executive or essential employee becomes disabled. The employer does what feels natural. They keep paying the person, whether it’s out of loyalty, out of uncertainty or simply because they want to do the right thing. And in that moment, that feels like the right call.

But it creates problems?

Significant ones. Without a documented plan, what started as goodwill can quickly become a legal tax and administrative liability. Payment expectations, sorry, can become unclear. Does the employee expect this to continue indefinitely? What happens if the disability is long term? If the employer eventually stops paying, is there an implied obligation that creates legal expectancy and exposure? Is the compensation being handled correctly from a tax standpoint? Internal consistency and continuity breaks down when there’s no formal structure. And the business may realize too late that it’s been making improvised decisions on a legally and financially exposed situation.

So the employer thought they were doing the right thing and inadvertently created a problem.

Exactly. And what happens more often than business owners realize because no one plans for it in advance. The disability arrives unexpectedly. The emotional response takes over and decisions get made without framework. That’s the gap a qualified sick pay plan is specifically designed to close.

I would compare it to a will when someone passes away. Obviously there’s a high motivation there. This is a similar framework when talking about a disabled individual at a company.

All right, well walk us through how this works. What does a qualified sick pay plan, how does that actually, what does that actually provide?

At its core, it creates a documented framework established before a disability occurs. Obviously, that’s a key point, right, established up front for how the employer will handle compensation continuation for a disabled executive or key employee. Reminder, those are going to be very valuable employees of the business.

It spells out who was covered, under what conditions, for how long and at what level. Because it’s formalized in advanced, the employer isn’t improvising under pressure. The decisions are already made, the structure is already in place.

And what’s the tax treatment?

Under section 105 in the Internal Revenue Code, properly structured salary continuation payments can be handled in a taxed, advantaged way for the employer. The details depend on how the plan is designed and documented, which is why legal and tax coordination matters, right. Attorneys and should be involved.

But the framework exists specifically to give employers a legitimate, structured path for continued compensation to a disabled key person, key individual, key employee without the improvised liability coming from doing it informally.

So how does individual disability insurance fit into this?

Think of it as the funding mechanism. The plan creates the structure and the obligation. The individual disability insurance provides the benefit that supports the obligation if the key employee becomes disabled. When those two pieces work together, the documented plan and the insurance funding, the employer has a complete strategy. They’ve defined what they’ll do, they have the financial resources to actually do it and without reaching into operating cash.

So for advisors, how does bringing this into a business owner conversation change their positioning?

Absolutely and I think that’s a key piece to focus on. It moves the conversation out of the employee benefits and into executive protection and continuity planning. Those are very different conversations in the eyes of a business owner, as well as in that relationship that they have with the business owner.

When you talk about disability insurance as a benefit, it lands as a cost. When you talk about protecting a key employee, preserving continuity and reducing avoidable liability before a crisis forces a decision, that lands as a strategy. Business owners respond to that completely differently.

I see, so what’s the entry point then? What does an advisor, or how does an advisor introduce this so it ends up neutrally?

I would say lead with the risk, not the product. Ask the business owner, as one of your key executives became disabled tomorrow, what would you do? Most owners say they would keep paying them. That’s the answer that should trigger your opening, because the follow-up question is, do you have a documented plan that defines what this looks like? What the scenario outcome would be for how long? How would it be funded? And when the answer is no, as we know it probably will be and it most often is, you’ve surfaced a real planning gap without ever mentioning insurance.

And the advisor who then services the gap becomes one who also brought the solution.

That’s the positioning shift, right? Because you’re not waiting until the end of the conversation to mention disability insurance. You’re leading with the bigger planning issue, executive protection, continuity risk, liability reduction and the insurance is the practical tool that makes the strategy work. That’s the fundamentally stronger way to enter the room.

Brock, for advisors who want to bring this into their practice, where do they start?

Well, easiest place to start is with your existing business owner clients. Think about which ones have key executives or essential employees whose absence would create a real disruption.

Ask the question, if that person became disabled, what’s your plan? Let the conversation develop from there. You don’t need to walk into a technical presentation on section 105. You need to ask the right question and recognize when the answer points to a gap.

And dibrokerWest’s role there?

We help advisors turn that gap into a clear and compelling planning opportunity. Salary continuation strategy, case design, individual disability insurance, carrier selection, coordination with the client’s legal and tax advisors. We support the full process while the advisor stays in the lead.

Mentioned before in previous podcasts, we are an extension of that advisor and producer’s office and I can’t emphasize that enough. Our specialized expertise, producer first execution and what we bring in every case.

Brock Falconer from dibrokerWest, thanks for being on today.

Thanks, Doug. Good conversation.