Cindy V. Gentry, CLU, ChFC, LUTCF

You would think that in this age of technology and the fact that laptops are used in most doctors’ offices today, the retrieval of an Attending Physicians Statement (APS) would be lickety-split.  The truth is this process is still antiquated and if we, the Brokerage General Agency (BGA), do not know the medical history from the inception of the application process, the ordering of an APS can be delayed.

Case in point: Today we have both express apps and drop ticket applications. Neither requires the agent to get any medical information in advance.  The application and medical information is done via phone interview.  Once that is completed, the carrier may take three to five working days to review and then make a request for an APS.  The APS is ordered by the BGA, through that carrier’s approved service provider, typically that same day. This is where the fun starts!

4/19—Request for an APS is made.

4/19—Service provider faxes request to the doctor’s office.

4/20—Call made to see if the request was received; had to leave message requesting callback to confirm receipt. Re-faxed request to ensure receipt.

4/25—Medical Records clerk for the doctor’s office verified that the request was not yet received and that they had a preferred fax number. Re-faxed request.

4/26—Called medical records area of doctor’s office to verify receipt of faxed request. Voicemail states to allow two to three days to verify request was received.  Left message and requested callback to confirm receipt.

4/28—Receipt of request confirmed!  Doctor’s medical records clerk advised that the turnaround time for an APS is 15 days to be copied.  Once copied they will fax an invoice for payment, once paid they will release the records.

5/2—Follow up on invoice.  Not released yet.

5/4—Follow up on invoice. No invoice generated yet.

5/5—Follow up on invoice. No invoice yet.

5/8—No invoice as of today.  Called doctor’s office medical records area and was advised that they process APS copies in order of receipt and have not gotten to this APS yet.

5/10—Follow up on invoice. No invoice yet.

 I could go on but I think you see my point.  Making matters even worse, many medical facilities, including hospitals and doctors’ offices, now utilize copy services for getting medical records sent out.  These copy services are merely processors and have not a care about getting the records out in a timely manner. They simply put the request in a queue.  There is no sense of urgency no matter how hard we push!  

HIPPA is also making the process harder. Some facilities do not accept the HIPPA forms provided by the insurance companies as part of their application packets, causing delays, and/or do not accept electronic signatures, causing delays.

There are actually state laws under HIPAA1 directing how long a medical facility or doctor’s office has for release of medical records. In the state of Texas, a hospital must make a patient’s recorded health care information available to the patient no later than 15 business days after receiving a written authorization.  This may sound good; however, there is no recourse if they go beyond the 15 days leaving a state law that is violated.  Even with this, as in our example above, the copy service gives themselves three days just to verify the authorization was received!

This is still an antiquated process.  As a BGA we have tried several methods of speeding this process along including:

• Picking up the APS if the facility is in our vicinity.
• Asking the client to push their doctor in getting the records sent out.
• Asking the client to retrieve their records.
• Sending a letter to the doctor’s office letting them know they will be liable if they delay the process of our mutual client getting life insurance and the client passes away.

 As a producer you can help too:  

• If your client is a woman, make sure you have her correct name and maiden name—records may be in both.
• If you know there may be an APS required on your client due to their medical history, ask your client to wet sign a HIPPA Authorization even if you are dropping a ticket.
• Prepare your client for the medical history interview. They will need to know their own history such as doctor or facility names, addresses and the time frames regarding visits.

There is a silver lining.  If you have been to the doctor’s office lately, most have laptops right in the examination room and are updating your records electronically.  Electronic health records2 are coming of age and will make the retrieval of medical records almost instantaneous. Several records vendors are in the trial stage, and we may see them going live by the end of this year.  Electronic APS services will eliminate copy services and immensely reduce the life application cycle time.

In the meantime, know your BGA is doing all they can to get the medical records to the carrier for a speedy decision on your client’s life insurance benefits.  Although we can’t move mountains, we do try. 

Reference:

1. http://www.healthinfolaw.org/comparative-analysis/individual-access-medical-records-50-state-comparison.
   
2. https://www.healthit.gov/providers-professionals/frequently-asked-questions/334#id2.
   

I don’t know about you, but we keep a close eye on our placement ratio here.  In my mind a lot is determined by our placement. (By the way, we also like to refer to it as lives protected.)  One way placement ratios are used is to measure the quality of your performance.  It is a simple concept really.  If neither you nor we can get policies placed because of the quality of the field underwriting, the placement will be down and your income will fall with it.  To get a better understanding, let’s break down how to find your placement ratio.

How to calculate placement ratio:
First, it is important to understand that quantity does not equal quality.

If you submit 10 cases but only eight cases have been placed and made it past the free look period (typically 30 days, but some states and products may vary), you take the number of placed cases over the number of submitted cases and divide.

8 Placed Cases  = 80% Placement
10 Submitted Cases

Again remembering quantity does not equal quality, say you increase your submitted cases to 100 but you are only able to place 70 cases.  That brings your placement down to 70 percent.

Let’s break this down to dollars.
Say your average case has a $2,000 annual premium.  If you are getting 80 percent  commission on those cases, you earn $1,600 per case.

Taking the example above and going back to our 100 cases submitted in any given year, if you were to place 100 percent of that business, you would earn $160,000.  If you placed 80 percent of that business you would earn $128,000, losing $32,000 that year.  Don’t get me wrong, 80 percent placement in the industry is not bad! One major carrier told me their life placement was 68.2 percent. A common measure which we use for setting goals is 70 percent. If you meet that goal, your income just dropped by another $16,000 for a total of $48,000 lost for the year.  Annual earnings then would be $112,000. Breaking it down even further, if you work a 40 hour week, your hourly income went from $61.54 per hour to $53.85.  

Part of the point to all this is that the time you take to submit that 20 or 30 percent that is not getting placed is costing you time and money!  Making sure you spend time prior to submission of an application can save you money if the insured does not qualify or their expectations in the process are not met.   How do you make sure everyone is happy from the beginning to the end of the life insurance benefit process and improve your placement ratio? 

1. Know their medical history. Make sure you ask them about their medical history to provide a proper rate classification when giving them the cost for their life benefits.  Most BGAs will have questionnaires available if you need help with this.  Send the history to your BGA to shop your case and provide your client with the best tentative offer.

2. Set proper expectation.  According to a LIMRA study, seven in 10 people feel, once they have applied, they should have their policy in 14 days or less. Buying life insurance is not a quick process.  It is getting better for smaller term cases, but on average the process can take four to eight weeks.  Make sure your clients know that and the steps they will be going through to get the coverage.

3. Include a cover letter with your application. 

4. Make it affordable. Your client may want and need a million dollar policy, but if it is not affordable they are going to have buyer’s remorse and not take the policy even after going through the process.  

5. Know what to do if your client gets a rated classification.  I just cringe every time a case gets rated unexpectedly because the health history was not known up front and then the unhealthy client does not take the coverage—either because they are upset because of the rating or because of the cost.  They are the ones that need it the most.  Congratulate them on being able to get the coverage. Explain to them the increased need for coverage and that having the coverage is more important because of their health history.  If the cost is an issue, adjust the benefit amount or, in the case of term, adjust the level premium period.  You may even consider laddering coverage to help control the cost.   

Keeping your placement ratio high is an important part of not wasting your time.  Just a few extra minutes on the front end of a life insurance sale can keep you in the money!

I know a family that has a beautiful home with about 30 acres surrounding the lake. The family has enjoyed making memories at the lake house.  First, just with Mom, Dad and the five kids, but the family has now grown to 17 kids and grandkids total.  Mom and Dad are getting up in their years and can no longer open and close down the lake home as seasons change.  There are already murmurs among the kids about who should help with these seasonal chores and who is really spending the most time at the lake house. 

In a conversation with my friend, who is married to one of the children involved in the lake house, I asked, “What are they planning to do with the lake house when they pass?”  She told me they were planning to give it to the 17 children and grandkids!  I was shocked.  I said to my friend, “What a mess that will make.”  I understand that they love their family equally and want them to continue to make memories at the lake house long after they are gone, but this is going to cause family conflict.  It may actually cause the children not to get together at the holidays because they are fighting over responsibility for the lake house!

The same can happen with a family owned business.
You may have a business owner who has three children but only one works in the business and is interested in carrying on after the father passes, yet the father wants to make sure each shares equally in his assets.  If he really wants the business to continue and to have those children not involved in the business to continue in their chosen professions, it is imperative that he take the time now to equalize their inheritance in a way that is equitable for all of the children.

This dilemma can be easily solved!
The solution may be to create inheritance equalization using life insurance.  Here is how. Upon the death of the father, the child involved in the business inherits all stock becoming 100 percent owner in the business.  The children that are not involved receive an amount equal to the value of the stock in life insurance proceeds and any other non-business assets.

What does that look like?  An example:
Elaine and Tony own a business worth $2 million and have additional assets worth $1 million. One of their children, Bob, works in the business. Their other two children, Jan and Steve, do not.  Elaine and Tony want to share their estate equally with their three children when they pass. The problem is that a portion of that asset transfer will be in company stock.  This could be a disaster because Bob would likely be resentful having to pass profits from his sweat equity to his siblings.  Jan and Steve might wonder if they are really getting their fair share.

To solve the problem, Elaine and Tony purchase a $3 million survivor life insurance policy that pays out at the second death of Elaine or Tony. The receipt of the proceeds plus the additional assets of $1 million would give Jan and Steve $2 million each while Bob inherits the business worth $2 million.  The children are all treated equally and equitably.  Plus, they remain friends and enjoy each other’s company on the holidays! 

It is always disheartening when we receive an application for life insurance submitted as a preferred rate classification and, after gathering the appropriate medical information, we find the client has health risks that will reduce their life expectancy. The case may end up coming back as a Table 2 or Table 4, and once the client is presented with the rates they do not take the coverage at a time when they need it most!

They do not take the coverage because of cost or pride, but the worst part is they lose sight of the reason they went through the process in the first place. This was to protect their loved ones in case they are to pass unexpectedly, to which having a health impairment of some kind could contribute.

Having a rated case is not a reason to give up. As an advisor, you should be pleased to be able to provide your client with coverage. Attitude is important. To be effective in the delivery of a rated policy, it is extremely important that you have a positive attitude regarding the rate. The insurance carrier’s underwriter goes into great detail to assess risk on an individual basis and assigns a specific rate, so you should be confident that the rate given to your client is fair and equitable.

Here are some facts to take into consideration to help you be successful in placing a rated policy.  Basically there are three things that can happen:

1. Your client could die prematurely.  If that happens, the family will be infinitely better off and will certainly not ask if the case was rated.
2. Your client’s condition could grow worse. If they have a questionable health condition, they could be in their best health right now. As they get older and their health deteriorates, life insurance will become more expensive or they may become an unacceptable risk to the insurance carriers.
3. Your client’s condition could improve. Perhaps they were able to improve their condition by having surgery or changes in health habits. If that happens, your client could request a reduction in premium. The carrier would happily review the client’s improved medical history and, perhaps, lower the rates.

So what should you do when you are in this situation?  First assure the client that you have gone out to several carriers to make sure you have the best possible cost (we always do this on a rated case).  Let them know they do have the opportunity to protect the ones they love and, with their health history, how important it is that they do it now before the opportunity to purchase life insurance is no longer available to them.

If cost is still an issue, talk about looking at other products or face amounts.  Let’s look at an example.  Joe is a 55 year old wanting $500,000 of 20 year level term coverage. At a preferred rate classification, the premium would be $135.33 monthly.  Unfortunately, Joe was rated a table 2 because of his undisclosed insulin dependent diabetes, which takes his rate to $295.31. Yikes!  But Joe has options, so let’s look at them:

Option 1
250,000 10 year level term – $91.87
250,000 20 year level term – $152.59
Total cost – 244.46

Option 2
500,000 15 year level term – $226.98

Option 3
200,000 20 year term – $141.34

These are just of few examples of what Joe could do to help control the cost of the benefit.  You must also help Joe not lose sight of what the insurance is for in the first place—he wants to make sure his family would be taken care of if he died unexpectedly—and how important that is. 

Americans are worried!  They are worried about getting sick as they age and those costs eating away their assets.  The biggest problem is that they are not doing any early planning for that financial challenge.

The good news, you can help.  Today’s life insurance benefit plans will allow your clients to create a pool of money that they can either pass to their loved ones or use during their lifetime if they have a chronic illness later in life that may be very costly.  And they can create this pool of money at no additional cost!

What I am talking about is the living benefits in life insurance plans that use the “discount method” of distributing the benefit when necessary.  Let me explain. There are two types of living benefits available in life plans today.  One your clients pay for up front that allows them to know that they will receive the living benefit if they need to use it.  Typically they can choose to receive two to four percent of the benefit amount on a monthly basis. With the discount method your clients do not pay any additional premium up front for the benefit, but if it is needed, they can choose to accelerate a certain percentage of the face amount and then that amount is discounted based on certain factors like:

• Severity of the chronic impairment

• Client’s age

• Administration fees

There are several different formulae in life plans so let’s look at a common one to get a better understanding of how they work.

Example: 
Joe, age 50, purchases a $500,000 life insurance policy to protect his loved ones.  This policy has a chronic illness rider that utilizes the discount method of payment, for which he pays no additional premium.

At age 75 Joe is diagnosed with a chronic illness and cannot perform two out of the six activities of daily living.

He elects to receive the maximum benefit amount (24 percent or $240,000, whichever is less) during each election period (12 months). He can elect to receive his benefit:

• Lump sum

• Every 6 months

• Monthly

• Joe has passed his 90 day elimination period and the benefit is paid.

What does that look like from Joe’s $500,000 pool of money?

• His maximum benefit per election period—24 percent or $120,000.

• Discount based on age and charges are applied. Actual payment received—$87,298.

• What happens to the difference? Lost.

• Pool of money reduced by maximum benefit election.

Each election period, Joe can elect the maximum benefit based on the full face amount.  He can receive money until his pool of money is used up.

Table 1 shows another way of looking at it.

So which is better?  I will let you be the judge of that.  But if you can add this type of value to your client’s life insurance policy at no extra cost, I certainly think it is worth talking to them about. 

Kenneth A. Bloch,  The Bloch Agency

Eugene Cohen, Eugene Cohen Insurance Agency, Inc.

George G. Davidson, Secura Consultants

Cindy V. Gentry, Life Happens and BBA Life Brokerage Agency

Barry Lundquist, Council for Disability Awareness

Thomas R. Petersen, Petersen International Underwriters

Thomas Petsche, Sr., International DI Society and Brokerage Solutions

Raymond J. Phillips, Jr., The Brokers Source, Ltd.

Q: What advice do you have for brokers on how to take advantage of Disability Insurance Awareness Month?

Eugene Cohen: The best kept insurance  secret is disability income protection. I ask myself, “Why?” It is such an important part of financial planning. Most advertisements for financial planning are geared toward income for retirement years, not taking into consideration that many individuals may be forced to retire before age 65 due to disabilities.

Brokers should take advantage of Disability Insurance Awareness Month (DIAM)by calling their policyholders and telling them that the month of May is DIAM, and follow that up by asking their clients questions such as:

 • “What is the longest vacation you have ever taken?” Most will respond, “Two or three weeks.” You ask why that is the longest and the response will usually be, “I have to work. Who can afford to take a longer vacation?”

 • “If you were to have an illness or accident and you were out of work two or three years, would you have an income problem?” If the answer is yes, you respond, “We have to talk.”

 • “Do you have a plan if, due to an illness or an accident, your income should stop?”

 • “Would you agree that your greatest asset is the ability to earn an income?”

It is my belief that if brokers asked their clients these questions, the clients would see the need for disability income protection.

George Davidson: While many organizations and carriers support the Disability Insurance Awareness Month initiative, it does not matter if financial professionals don’t embrace the concept, utilize the tools, and launch a campaign to reach their clients and prospects.

However, the first order of business should be a review of your own disability planning! As I was recently reminded, you sell what you own. Many financial professionals are woefully underinsured themselves, and you can’t preach the message if you don’t heed your own advice.

Cindy Gentry: The easiest way is to let someone else do the heavy lifting for you. Life Happens (formerly LIFE Foundation), which is the nonprofit organization that coordinates the national DIAM campaign each year, has free turnkey tools for brokers and agents to use during DIAM—and beyond. There is really nothing that you have to do from scratch. You can find the DI tools and resources at www.lifehappens.org/industry. (The sidebar gives you some concrete examples.)

Success with the campaign, however, lies in consistency. Plan ahead, choose the resources that you’d like to use, distribute them and then be sure to communicate about DIAM and DI on a consistent basis. In my business, besides a monthly newsletter, we also send out two weekly emails with sales ideas, marketing resources and product information. This consistent drip of information is invaluable. If you want them to sell it, they have to hear about it and know more about it.

Barry Lundquist: A broker’s responsibility is to help people protect what is most important to them. We know from research conducted by the Council for Disability Awareness that consumers, brokers and employers all agree that the ability to earn an income is a wage earner’s most valuable financial resource; income is what pays the bills, pays for housing, food, clothing, transportation and other living essentials, as well as giving breadwinners an opportunity to save for retirement, a new home, a child’s education, or just for a rainy day. Disability Insurance Awareness Month  gives a broker a reason to contact prospects and clients and start a conversation about the importance of income to their financial security, about the risk of income loss related to illness or injury, and about solutions that can help them protect that most valuable resource. It’s also a great time to remind those clients who have already purchased disability insurance how important it is and to suggest a checkup to make sure that the income protection they have remains appropriate. For those brokers who do not talk to clients about protecting their income, DIAM is a great reminder to them of what being a trusted advisor is all about. After all, their responsibility is to help people protect what is most valuable to them, and for most working Americans, nothing is more valuable than their income.

Tom Petersen: Disability Insurance Awareness Month is just as the name implies—awareness. Disability insurance does not sell itself like many other forms of insurance. It has to be sold. It is also difficult for the average person to picture himself disabled much beyond a cold or flu. DIAM does an enormous job of marketing and spreading awareness at both the consumer and industry professional levels. Groups such as CDA, Life Happens, and IDIS have great tools to help make marketing DI easier. But don’t start in May! Start in April! May is when the blitz to the public happens, and it is best to have all the resources going at once!

A side note: When May ends, the need for disability insurance doesn’t! Hopefully, insurance professionals recognize that DI can be sold, should be sold, and should be part of our everyday sales activities.

Thomas Petsche: We need to start ASAP getting emails, mailers and brochures sent out to brokers and clients just to get DI on their radar.

Ray Phillips: Invest in the tools available from Life Happens. Invest the time to know what is on their website. Invest the money in those marketing pieces that might help spread the word about disability income insurance.

Use the benchmark reminder of Disability Insurance Awareness Month as a reason to start a conversation with clients about DI.

For clients who have purchased DI, use this as a time for brief review of the client’s situation to confirm that benefit amounts are accurate; review the definitions and features of the plan so the client knows what he has and can expect if a claim arises. Provide a brief overview of the actual claims process—how to file, what happens, etc.—in case a claim does arise.

Q: What tools, process or technique do you recommend that brokers make use of to engage clients in a DI discussion?

Cohen: I recommend asking clients questions to engage them in the mindset of disability income protection. Ask them how important their earned income is to them. Ask them how they would fund their retirement plan if they were to become disabled. Ask a small business owner how he would pay his business expenses if he had a disability.

Selling disability income protection is easy when the need is established.

Davidson: The important news is that you don’t have to “reinvent the wheel.” There are ample materials provided by Life Happens and the Council for Disability Awareness. Take a few minutes to find the tools that fit your practice style and put them to use.

Gentry: Increasingly, one of the most effective means of connecting with people on a very personal level—especially with Gen Xers and Millennials—is through social media. None of us really seems to have the time necessary to devote to these new channels of communication, but the truth is that we ignore them at our business peril. Again, free resources from Life Happens can make it much easier. They have pre-written “compliance neutral” content about DI, including images and “info-statistics” that you can literally copy and paste to share. You can also follow them on the Life Happens social media channels, such as Facebook and Twitter, and simply share the new content that they post several times a day.

Lundquist: From knowing and observing hundreds of brokers over the years, I have tried to discern what differentiates those who are highly successful from the others. I have observed four traits common to the best of the best:

 • They are dedicated, lifelong learners. They never stop learning; never stop striving to be more educated and professional.

 • They are passionate. For them, selling is not about commissions, it’s about doing the very best job to protect their clients and best meet their most important needs.

 • They tell stories. They share stories from their personal and professional lives; stories from which, for many, their passion derives; stories about how important it is for people to protect themselves from the most catastrophic risks.

 • They ask great questions and then they shut up and listen. Clients don’t want to be sold, they want to be listened to, they want to be educated, and then they want to make their own decisions based on advice from someone they trust.

So I think the answers to this question are apparent from these four traits. There are no silver bullets. Clearly, being the best requires hard work. But those who dedicate themselves to learning, who are passionate, who have stories to share, and who have great questions to ask will be successful.

Some good questions to start a conversation about income protection include:

 1) If you were sick or injured and couldn’t work, how would you pay your bills?

Know what all the responses might be and have answers prepared. For example, if the person says, “We’d live on my spouse’s income,” what would your response be? What follow-up question would you ask? If the person said, “I have disability insurance,” that’s an opportunity to ask about their protection and to help them determine whether it is enough.

 2) What is your most valuable financial resource? What is it worth?

When they respond, they may talk about their home, their retirement nest egg, etc. Use the Earnable Income Quotient calculator, which is a great tool made available by the Council for Disability Awareness, to help them estimate the value of their income. It is typically a very large number, much larger than the value of their home or 401(k) balance.

 3) What are your odds of experiencing an illness or injury during your working career that will prevent you from earning a paycheck for three months or longer?

We know that most people dramatically underestimate their odds of becoming disabled. Use the CDA’s Personal Disability Quotient calculator to demonstrate that their risk is higher than they think. The good news? Solutions are available.

The key is to ask the question and then let the client talk

Petersen: There is no one way to engage someone. Some people are visual. Some are analytical and need statistical information. Some people empathize with stories, and others feel a need to protect their family or business. And finally, there is a group that buys because they are told they need it (usually by an attorney, friend, parent, business partner, etc.). As a professional salesperson (it doesn’t matter if you sell insurance, refrigerators or widgets), you need to be able to engage people on their level. Do you have a story to share? Do you have statistics? Do you have pictures? If not, get them! Life Happens, CDA and IDIS all have great tools to help.

One other source that is not to be overlooked is your local disability insurance brokerage outlet. These are the experts in many areas, all on DI. They have tools, they have knowledge, they can help with marketing, and they can help with sales calls in some cases. Most DI brokerage outlets represent several carriers so that they can provide you an assortment of products to solve insurance needs.

Petsche: I have my three questions:

 1. If your car were stolen or destroyed tomorrow, how quickly could you find another car to drive?

 2. If your house burned down, how soon could you find a place to live?

 3. If you became sick or hurt and your doctor told you that you could not work for the next six months, two years, or the rest of your life, do you have an income guaranteed to cover your regular monthly bills, no matter how long you cannot work? Your income potential in your working lifetime is several million dollars—that is, if you don’t become disabled.

Phillips: ASK! Ask clients if they have DI.

If they do have DI, ask if they know what they have (chances are they won’t). If they have group coverage at work, ask to review the policy to point out any shortfalls and perhaps provide input on insuring any benefit shortfall relative to their income. Ask if an individual policy they have will cover their current situation. Ask if you can do a DI policy audit to ensure proper coverage.

If clients do not have coverage, ask how it would impact their lifestyle if they were sick or injured and couldn’t work. Ask if you can provide an affordable solution to the exposure they have.

Q: Many DI specialists share the view that every month should be treated as if it were DIAM. What can be done to convince specialists in other insurance fields to impress upon their clients the need to protect their income?

Cohen: Specialists in disability income protection find selling the product quite easy. This is because they know and understand the policies. Specialists in other insurance fields need to be educated so they, too, become knowledgeable and comfortable addressing the concept of disability income protection with their clients. At our agency we spend as much time as needed going over the disability policy illustration with our brokers, preparing them for the appointment; we are not satisfied until we have done our job of making the broker secure in his knowledge and comfortable with the previously uncomfortable. Knowledge is power.

Davidson: Unfortunately many financial advisors wake up to the importance of this issue only after one of their clients suffers a disabling illness or injury. In our practice we spend every day attempting to save these individuals from becoming an example which motivates their financial advisor to do the right thing.

Gentry: The great part about DIAM and using the Life Happens resources is that May becomes the launching pad for DI outreach—a great beginning. You can give your own campaign a big burst of energy while the national campaign is underway, and you can leverage the national attention that’s being put on DI. Then it goes back to consistency. Continue to use those DI resources throughout the year. Most of Life Happens resources—realLIFEstories flyers and videos, and social media posts—can be used any time of the year. Set up a calendar of when and how you are going to communicate about DI, and then stick to it.

Lundquist: As I noted earlier, a financial advisor’s responsibility is to help people protect what is most important. For nearly all wage earners, income is most important. If the broker is not familiar with disability insurance, that is not a valid excuse for not addressing income protection. There is plenty of help available to get educated, and plenty of opportunities to partner with experts to create the best solutions for a client. Some years back, LIMRA surveyed brokers who did not sell disability insurance and asked them why. The most common response was “the client didn’t ask for it.” That is simply not acceptable. The advisor’s job is to help the client understand his risks and to protect against them. Some people will talk about the broker’s liability because they didn’t talk about disability insurance to a client who subsequently became disabled. As a trusted professional, I cannot imagine having a conversation with a client who has suffered a disabling illness or injury, or perhaps having that conversation with one of that person’s loved ones, and having to explain to that person why there is no protection in place for that person’s lost income. For many, their lives will be completely ruined.

Petersen: While we in the disability insurance industry believe every insurance professional should always include DI, the reality is that they can’t (or won’t), for many reasons. This is one reason the need to network with others in our industry can be a useful tool. The specialists in other fields don’t need to know about disability insurance as much as they need to know (and use) the resources that can analyze, design and implement a DI plan. That may be a producer to split cases, or a brokerage outlet, or a carrier rep. If they want to do it alone, they should also know the online tools and resources we have already mentioned. A specialist in another field should understand that if their client becomes permanently disabled, he may lose them as a client! A CPA will not have a business client. However, a business owner disabled and with business overhead expense DI coverage will need a CPA! An investment advisor will find that a disabled person becomes a survivalist, and discretionary income for investing is much tougher to part with during a disability. A life insurance specialist should ask himself, “What if my client doesn’t die from a severe accident or heart attack?”

Petsche: Every plan/program that you can set up in the financial services area is dependent on your income to keep them going, and once that money machine—you—breaks down, all your plans just become liabilities. Should we protect the goose? Or the golden eggs the goose lays? Too many advisors and their clients want to insure the golden eggs.

Phillips: If a person becomes disabled, the other specialists need to recognize that there is a good chance it will affect the client’s ability to pay the premiums on the products or investments they have sold. The fact is, before IRAs, before life insurance, before 401(k)s, before long term care insurance, there should be disability income insurance. Not only does it protect a paycheck, not only does it protect the lifestyle a client has grown accustomed to, it also protects the very plans that have been implemented to secure the individual’s and family’s financial future.

Q: In your experience, what are the main difficulties/objections you encounter in trying to market DI either to agents or to consumers, and how do you overcome them?

Ken Bloch: The biggest consumer objection is “sticker shock.” If the producer explains disability insurance in understandable terms with the policy premium at 2 percent or less of gross income as a starting point, the consumer can then design a policy that will provide value and peace of mind. [KB]

Cohen: This is a typical conversation when talking to a new broker: “Do you offer disability income protection to your clients?” Most answer no. “Why?” we ask. The most common answers we get are: “I don’t want to be bothered.” “I am busy with my casualty business, health insurance, etc.” “It’s too complicated.”

The real objection is that the broker is uncomfortable with his lack of product knowledge. We help brokers overcome the real objection of why they do not offer disability income protection to their clients by letting them know that our agency marketers are here to help them understand the product and how to offer it.

In overcoming objections from the consumer there are only four basic objections. Everything else is not a real objection. The four basic objections are: 1) no need, 2) no hurry, 3) no confidence, and 4) no money.

I gave examples earlier of questions to ask to establish the need for disability income protection. Once the client understands that he needs the policy, you have overcome objection number 1. 

Objection number 2 is “no hurry.” When your client knows he needs disability income protection, he will act. You have overcome the “no hurry” objection.

Objection number 3 is “no confidence.” If you have the knowledge, your client will have confidence in you. It is your job to obtain the knowledge by reading the material that companies have developed for producers and by working with a knowledgeable brokerage agency that can give you all the time and support you need.

Objection number 4 is “no money.” This is the final objection and this is when you ask the client, “If the company were to deduct x amount of dollars from your checking account every month, would this create a financial problem?” If the client says no, you are done! If the client says yes, then you state, “I am not here to create a financial problem, I am here to solve one.” (This approach only works because of its sincerity.) Then we work together to reduce the benefit and premium to something the client can manage.

Every day in our office is disability income protection awareness day. Every day we are teaching, training and talking disability income protection to our brokers and to each other. It is great to be a part of an industry that does so much good for people. [EC]

Davidson: A well-versed and motivated financial advisor encounters very few legitimate objections. We have worked closely with advisors whose placement ratio is almost 100 percent. This comes from understanding the needs of the client and the solutions that are available. Everyone wants what disability insurance does—our job is to help the client position it into their plan and budget. [GD]

Gentry: I see it less as an objection and more of an issue of something we don’t talk enough about. Health agents aren’t selling DI, P&C agents certainly aren’t selling it, and most life agents don’t sell it either. But the truth is, none of those other types of insurance meet the need that DI does. There is a huge gap between consumers who need DI and those who have adequate coverage.

I think the key is focusing the conversation on “protecting your paycheck.” People aren’t necessarily open to talking about disability insurance—they may not even know what it is. However, they will be open to knowing what can help them if an injury or illness keeps them out of work for an extended period of time. Life Happens did a survey that found that 50 percent of people would have financial troubles either immediately or within one month of not receiving a paycheck. That’s a crisis. We have the tools so that agents can help their clients solve this problem. Now we need to start using them. [CG]

Lundquist: Some common objections from brokers: It’s too complicated, it takes too long, and policies are too often modified from what was applied for. The first thing I’d say is: Just because something is hard doesn’t mean for a second that it is any less important. The more brokers learn about disability insurance, the more policies they sell and the easier it becomes. They can make sure the prospect knows what to expect if they themselves know what to expect.

Many very successful disability brokers that I know have made the observation: If I knew then what I know now I would have started selling disability insurance much sooner. Many companies today are offering multi-life programs on a guaranteed issue, simplified administration basis. Those multi-life programs can certainly make the process easier.

Another tip is to focus on younger wage earners. When someone is early in his career, his risk of disability over the many years he will work until his retirement is much higher than an older worker who has fewer years of work remaining. That younger worker’s earnings potential is significantly higher than the older worker for whom many of his earning years are behind him.

So the youngest prospect has the most to lose and the highest odds of losing it. Younger workers often have few financial resources to fall back on. And for younger workers, it is typically much easier and less expensive to purchase income protection.

Other benefits to brokers besides doing what is right for clients: There is less competition in the disability insurance marketplace and commissions are lucrative, especially renewals.

Some common objections from prospects: “It costs too much.” This may simply be a reflection of not appreciating their level of risk. Discuss the consequences of disability; ask how they would pay the bills. Ask if they know others who have had cancer, or a stroke, or experienced a bad accident. Use the Personal Disability Quotient calculator. Many wage earners assume that disability insurance is much more expensive than it is. Finally, don’t forget that having something is better than having nothing. Help them get something in place that can be built on in later years.

“I’m healthy.” It is certainly the case that a person can lower his risk of disability substantially by living a healthy lifestyle, keeping weight in line, eating right, exercising and so on. In fact, a person can cut his risk of disability in half. But even the youngest, healthiest person has a risk of disability that is too high to ignore.

“We can get by on our savings and (other sources).” Help them do some math. How much do they need each month to pay the bills? What sources of income would they tap into, how much would be available, and how long would the sources last? Finally, quantify the gap between needs and income sources. Help them learn how to best fill that gap.

Also keep in mind that the average long term disability, once the claimant satisfies his elimination period, exceeds 2.5 years. He needs to be prepared to withstand a disability that can last for several years, or one that may even end his working career.

Helping overcome objections is where stories and passion come most into play. Telling stories about others who have experienced disability and especially getting clients to talk about people they know who have experienced illnesses or injuries can certainly help. Many people don’t think they know anyone who was “disabled,” but when asked if they know someone who has had cancer, a stroke, or even chronic back pain, most everyone will say yes. Our Council for Disability Awareness research demonstrates that when an individual knows someone who has experienced a disability, they think their own risk of disability is higher.

Perseverance counts. Keep asking, keep reminding. As any successful salesperson can attest, the sale is very often made after many attempts. [BL]

Petersen: The DI industry has done a great job of educating insurance professionals that disability insurance is cash flow. More life insurance is sold for asset protection than for a “need for cash.” When insurance professionals who speak about assets as things that are important to insure realize that disability insurance is asset protection, then they begin to include it in their day-to-day sales. The same perception applies to the end buyers, too. People don’t visualize losing income as easily as losing a house, keeping kids in school, wrecking a car, etc. A long term disability will result in the same liquidation of those assets if they are not protected by disability insurance. We must do a paradigm shift in thinking about what disability insurance truly is. It is asset protection! [TP]

Petsche: The biggest obstacle we have to overcome with both brokers and consumers is the perception that “disability will not happen to me.” The best way to overcome this objection is by telling emotional and motivating stories about our experiences dealing with what happens to individuals with and without disability insurance. Also, show the law of averages that relates to disability, because the odds are not in their favor. [TP]

Phillips: The biggest hurdles, in my experience, have been cost, recognition of exposure, and perception of the underwriting process.

Cost is the major objection to many insurance sales. I’ve found that if the advisor gets the client to focus on the amount of annual and total payouts the DI plan could provide in the event of a claim, it helps. For instance, for a 40-year-old business owner who is considering a $5,000 monthly benefit, stress that this is $60,000 per year; and that the total potential payout to age 65 is $1.5 million. In that context, the premium relative to the benefits provided is perceived as much less than if presented monthly.

Statistics abound that provide the realities of the exposure an income earner has to a disability. The Council on Disability Awareness has information available to help point out this exposure, as does the Life Happens site, www.lifehappens.org.

The facts are that the DI underwriting process can be involved and tedious. Accurately pre-screening the client as well as detailing the process and the reasons behind the scrutiny involved must be explained to the client. The amount of potential benefits requires a process that allows carriers to mitigate their own exposures.

But within that framework a number of carriers have come out with a simplified underwriting process that can be less invasive for clients up to a certain age and benefit amount. Exploring that process for the client’s particular situation can be an effective way to cut the time and consideration involved. [RP]

I am always a bit disheartened when an application for life insurance is submitted as a preferred rate classification and, after gathering the appropriate medical information, we find a client has health risks that will reduce his life expectancy. Even though the case may end up coming back as a Table 2 or Table 4, once a client is presented with the rates, he does not take the coverage.

No matter whether the coverage is not taken because of cost or pride, the worst part is the client loses sight of the reason he went through the process in the first place—to protect loved ones in case of his unexpected death. Ironically (unfortunately), having a health impairment of some kind could contribute to such an occurrence.

Having a rated case is not a reason to give up. As an advisor, you should be pleased to be able to provide your client with coverage.

Attitude is important: To be effective in delivering a rated policy, you must have a positive attitude regarding the rate. Underwriters who represent insurance carriers assess risk in great detail in order to assign a specific rate for each applicant, so you should be confident that the rate given to your client is fair and equitable.

Here are some facts that can help you be successful in placing a rated policy. Basically there are three things that can happen:

 1. Your client can die prematurely. If that happens, the family will be infinitely better off and will certainly not ask if the case was rated.

 2. Your client’s condition could grow worse. If he has a questionable health condition, he could be in the best health right now. Plus, as he gets older and his health deteriorates, life insurance will become more expensive or not available because he has become an unacceptable risk to the insurance carriers.

 3. Your client’s condition could improve. Perhaps through surgery or a change in lifestyle he might be able to improve his condition. At that time, he could request a reduction in premium and the carrier would be willing to review the improved medical history and perhaps lower the rates.

If rated coverage is unaffordable for your client, look at alternatives. Reduce the face amount or offer 15 year level term instead of 20 years.

Bottom line: Make sure your client is fulfilling his primary need by having that insurance safety net for his loved ones. 

With all the inconsistency in the market and low interest rates, equity indexed universal life (EIUL) sales are booming! Savvy baby boomers as well as the upcoming Gen-X better understand the advantages of dealing in the equities market. That being said, your clients should know that they can take a loss when dealing with cash accumulation and lifetime insurance protection.

Enter EIUL, a life insurance contract that offers more upside growth potential without the unpredictable losses. Let me explain. EIUL is like the middle road between fixed universal life insurance and variable universal life. With EIUL, the cash value is linked to a certain index, commonly the S&P 500, but not always. If the index is higher at the end of the year than at the beginning of the year, your client’s cash value goes up. If the index stays flat or goes down, your client’s cash value earns zero, or the minimum guaranteed interest rate, which is typically between 1.5 and 2 percent—the beauty here is that they don’t lose.

Keep in mind that your client may not share in the entire increase because of product design. A particular carrier’s product may credit interest using a point-to-point method that resets annually with either a participation rate in the index that is lower than 100 percent, or they may credit interest at 100 percent with a cap or spread on the overall interest that can be earned. You want to take a look at how many “moving parts” the contract might have—can the participation rate, the cap or spread change from year to year?

Let’s take a look at a basic EIUL product and how the interest rate is credited. As with any universal life contract, premiums are paid, expenses are taken out of the premium, and the net premiums are credited to the index account. In this simple example we calculate the interest rate return by measuring the change in the S&P 500 using the investment date as the starting point and 12 months later as the ending point. The difference in the start point and end point gives us a 10 percent return. We’ll assume the participation rate is 100 percent with a cap of 9 percent, giving your client a return of 9 percent for this 12-month period. Then the start point is reset to the current date, with the 12-month period starting again. This crediting method is commonly referred to as a point-to-point with a cap.

Interest may also be credited using the point-to-point with no cap, but a participation rate that is less than 100 percent, which could equate to about the same return. Some contracts may even use a combination of crediting methods, so you do need to pay attention to the details—not only with the crediting method, but also how often the interest is credited.

So Why Should Your Client Consider EIUL?

Not only does it offer the traditional benefit of a permanent life insurance contract, it offers:

 •Tax-advantaged insurance protection

 • Tax-deferred interest earnings

 • Premium flexibility

 • Cash value access, tax-free through policy loans

EIUL also offers:

 • Opportunity for higher potential interest return

 • Cash value protection against market declines

 • Annual lock-in of earnings

Why Should Your Clients Purchase EIUL?

It offers an attractive middle ground for clients who want to share in the potential higher returns but remember the downturn in the market of 2001-2002 and 2008 and do not want the volatility or risk of the variable market. They want the certainty of knowing they’ll earn at least a minimum return in both good and bad times. They also want greater flexibility and control than is available in the fixed market.

If this is what your client is looking for, there are several carriers that offer EIUL for you to explore. But before you make any recommendations to your clients, make sure you review the product and the carrier behind it. You want to make sure you are offering your client a solid product with a strong carrier. Knowing all this, EIUL may be exactly what your client needs.

You may get the wrong impression by the title of this article, but don’t let it throw you off. I am still a great proponent of term life and no-lapse guarantee universal life; however, in today’s economy, the value of cash value is still strong.

Unfortunately, once again the tax advantages of life insurance products are being threatened! Millions of families are unaware that a slight change in tax law on life insurance can have enormous implications for their financial future and dire consequences for 20 percent of Americans’ savings.

Let’s take a moment to revisit some of the benefits of cash value life insurance. First and foremost, it is a permanent life insurance policy designed for protecting loved ones for an insured’s lifetime, being there when needed. Here are some other benefits that you may not have thought about in a while.

 • Forced Savings. When you sell a whole life or universal life insurance policy, your client is forced into saving money. These types of policies build cash value, unlike a term policy. Many of us do not have the discipline needed to invest money every single month without exception. We get around to it whenever we can, and that usually is not very often. With whole life and universal life policies, your clients will be saving part of their premiums paid every month—which will grow over the years to a fairly large balance.

 • Tax Deferral. The interest accumulation in permanent life insurance grows tax deferred, which means your client does not have to pay tax on any of the growth until it is withdrawn.

    • Accessing the Cash. The cash value of a life insurance policy can be accessed in two ways.

 1. Withdrawals. When withdrawals are made from a policy, your client first receives the premium paid or cost basis and no tax is due on that return.

 2. Policy Loans. Loans are made from the general funds of a life insurance company using the life policy as collateral, and interest is charged on the loan balance. Funds still accumulate inside your client’s policy even with a loan, but keep in mind that loans do reduce the face amount of the policy if not repaid. The net cost of the loan can be 1 to 2 percent net. Generally, loans are not considered a taxable distribution unless the policy is classified as a modified endowment contract. In that case, a loan may be reportable as taxable income if the policy’s cash value exceeds the cost basis (premiums paid into the contract).

Reasons why your client may need to access the cash: medical bills, starting a new business, college tuition, retirement income, premium offset, unexpected expenses, etc.

I challenge you to take another look at permanent life insurance that accumulates cash value—whether it is whole life, accumulation universal life, or indexed universal life. Offer your clients the value of cash value, forced savings and some of the last tax advantaged products available to them today! 

If you can say one thing about the life insurance industry (being as conservative as it is), innovation and overcoming the obstacles of regulations and new law is its distinction.

One particular noteworthy innovation is the term/universal life (UL) combo that is hitting the marketplace. These products were created primarily in response to the reserve requirements for level premium term, as well as the pressure to have marketable yet competitive term pricing. Simply put, reserving requirements for UL products are less than term and allow carriers to offer “term-like” products that cost less.

Although these new products are built on a UL chassis, they have many of the same characteristics as term. Just like term, they offer a guaranteed level premium—most for 10, 15, 20 or 30 years. However, because they are universal life, there is some flexibility that term does not offer. In addition, your clients can lock in their mortality cost to age 120!

Here are some of the advantages of these term/UL products that you and your clients will discover:

• As with any UL policy, the premiums can be paid at any time, in any way, and in any amount the policyholder wants, provided enough is paid to maintain the policy in force.

• Guaranteed coverage can be extended for the client’s lifetime.

• Rates for the level premium period and beyond are known from day one.

• Although the product is sold using specific guaranteed periods (e.g., 10, 15, 20 years), the client can actually pick any guarantee period needed and pay the premium to support it. So, if for some reason your client needs the coverage for only 18 years, the premium would be less than for the 20-year guarantee. Complete flexibility.

• A policy can be purchased with a single premium.

• A 1035 exchange is available with the policy.

• Grace periods are typically longer than true term.

So are there disadvantages to these new term/UL products? Only one—complexity. Because these products are basically UL, the policy language is complex and difficult for clients to understand. If not sold correctly, policyowners may actually think they bought term insurance. To add to the confusion, clients will receive annual statements, as they do with UL. To avoid this confusion, explain the product completely at the initial sale. Using carrier specific materials can help.

Let’s take a look at some sales strategies that you can take advantage of with the new term/UL flexibility.

Client: Young parents who have old whole life policies purchased when they were children. The death benefit is simply not enough to fit their current needs.

Jack and Jill have a young family and have recently purchased a new home. They recognize the need for more life insurance. Jack owns a $25,000 whole life policy that his parents purchased for him as a child. The policy now has $5,229 in cash value. Jack is 34 and in a preferred rate classification. You can show him how to leverage that $5,229 into a policy with $350,000 of death benefit and, by using a 1035 exchange for a 20-year term/UL, there will be no additional premiums!

Client: Bob, age 55, whose policy is “under water” with little chance of survival unless he puts in additional premiums.

Before the policy’s cash value is completely exhausted, suggest that with a new term/UL product, the cash value from his “under water” policy may be enough to purchase an equal amount—or even more coverage, with a guaranteed death benefit (dependent on his health classification).

Bob’s current $750,000 policy with a $1,500 annual premium will keep his death benefit in force until age 72, based on current interest and non-guaranteed charges. This is below what was originally projected at age 85 because of fluctuating interest rates. The policy has $38,825 in cash value, but Bob wants to be sure that the policy will stay in force until age 85.

Show Bob that by doing a 1035 exchange with his current policy into a guaranteed 30-year term/UL product and continuing to pay the $1,500 annual premium, he can restore his policy to age 85 and provide a death benefit guaranteed for 30 years. If he decides later that he needs the coverage longer, he can increase the planned premium to an amount that will carry the guarantee for as many years as needed.

So is the term/UL product a game changer? I think so, considering its flexibility and options!