I’ll never forget on the first day of my college internship as a financial sales representative (fortunately the same company I work for 10 years later), I was given the task of creating a “Dreamboard.” The board was to be made up of pictures of who I thought I could be 20-30 years down the road if everything went as planned… A mansion with a pool, Ferrari in the garage, membership at an exclusive golf club, little kids and a beautiful wife, exotic destinations for vacation, an ornate office decorated with awards, etc. Therein lay a Millennial’s vision of success.
So ask yourself: If you had it all, what could possibly go wrong? Lawsuit-$52,900 (average for personal injury claim, though this can vary, which is why seeking professional advice is important).1 House catches on fire-$203,400 (average home value in in 2017).2 Car gets totaled-$18,800 (average used car price).3 Unemployed-$25,000 (national average of 3 months unemployment and sample $100,000 salary).4 Death-$6,046,208 (assumed earnings to Age 65 for a 30-year-old making $100,000 with a three percent COLA). Divorced-there goes half.
Let that morbid paragraph sink in for a moment. Each one of these potential occurrences receives significant thought by the average household, and most come up with some sort of contingency. Which carries the greatest financial exposure? Premature death (typical industry jargon, as if we all reach a point where death is no longer premature and gladly welcomed). Fortunately, 80 percent of men and 86 percent of women will live out their career to Age 70.5 However, there is one more pitfall of catastrophic severity with surprisingly high probability that consumers are prone to forget-sickness or injury. Just over one in four Americans will suffer a disability before retirement,6 yet it’s often the least discussed item by financial advisors and consumers alike. This appalling reality is elucidated by pure numbers-as a reference point, there are about 290 million life insurance policies in force.7 As for disability insurance, 167,000 policies in force.8
The current state of disability Insurance begs the question, how did we get here and why are we staying here? It’s the customer’s age-old judgement of perceived value versus realized cost. Disability simply cannot happen to me! Neither can “premature death,” so why so many policies in the life industry? From an economic standpoint, term life insurance is a relatively cheap expense. The pricier alternatives like whole life provide a guaranteed death benefit to family and/or guaranteed cash value for our enjoyment-both can alleviate the idea of “expense.” Additionally, the finality of death leaves no hope. The only financial fix is life insurance.
Disability, however, need not be permanent. Such sad circumstances still leave the hope that even if one did become disabled, which can’t possibly happen, at least one can rebound from it and continue to work, right? Then the consumer asks, “Why pay a premium for anything more than term life insurance if the same alleged likelihood and expectation of never using the policy exists?” Couple that with the inability to purchase a participating policy with cash values and the consumer is left with apparently poor choices.
Therefore, individual disability insurance is not bought… it’s sold. The product is sold on stories that motivate the consumer to act in their best self-interests. Even as a successful insurance agent, individual disability insurance was admittedly the last financial product I added to my plan. I adhered to the same previously mentioned philosophies as the general public does. It wasn’t until I heard the following two stories that I took action.
Financial planning is not a science or we would all follow a textbook to prosperity. A senior partner at my firm posed it this way: If you were to go your entire career paying your disability insurance premiums at about one to two percent of your income (it’s not so expensive when the customer views it that way) and make it all the way to retirement age without a hitch, that lost opportunity cost would amount to a small mistake. Conversely, if you were to forgo disability insurance and one day wake up unable to perform your duty, with a family and business on the line, then it’s a catastrophic mistake. Financial planning boils down to trading small mistakes and big mistakes. I personally heard that anecdote and it made perfect sense to the economist in me. Yet I still passed up buying income protection.
It wasn’t until a mentor of mine shared an impactful story of his favorite client that the lightbulb went on. He served as the wealth manager to an iconic attorney making nearly $1 million per year. As an avid marathon runner and passionate lawyer, the client swore to practice law for life-even if from the confines of a wheelchair. It took a solid two years of convincing from my friend to seemingly force this client to buy disability insurance. Fast forward another year and my friend received an out-of-the-blue call from the attorney’s paralegal asking about any disability insurance. Sadly, this unstoppable lawyer lost his only son in a car accident. Two years transpired before he was able to walk back in the office, let alone practice law. During those two dark years the check that kept his household afloat came not from his firm but rather an insurance company.
It took this last story for me to realize that we never know what could one day derail our “Dreamboard.” Less than 10 percent of all disabilities come from an injury.9 The other 90 percent are not as visible. Stories sell disability insurance, not numbers. Being referred to a cardiac surgeon suffering from migraines and severe dry-eye following a popular Lasik surgery and blindsided by a denial letter from his insurance carrier citing an “Any Occupation Definition” he did not even notice-is a story. Providing checks to an Orthodontist, a father and husband, suffering from carpal tunnel while teaching at a renowned college because of his “True Own Occupation Definition”-is a story.
A client is not fixated on knowing that the product or plan are right, but rather on knowing that you are right. A financial advisor looking to succeed in the disability insurance marketplace must first become their own biggest customer. Then it is easy to relay those same stories that pushed you towards maximum protection along to your prospects. There are financial decisions and emotional decisions. Thoroughly understand both and unlock your potential to make the most ethical of sales-disability insurance.
References:
- “Personal Injury Survey”-Martindale-Nolo Research. 2017.
- “United States Home Prices and Values”-Zillow. 10/31/2017.
- “Used Car Prices Increase 8% to Record High”-Edmunds. 08/20/2015.
- National Bureau of Labor Statistics.
- Social Security Administration.
- Social Security Administration-Fact Sheet. 02/7/2013.
- Statista-2017.
- Statista-2017.
- Council for Disability Awareness, Long-Term Disability Claims Review, 2012.
