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Eugene Cohen

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Eugene began his insurance industry career in Cleveland, OH, with a company that specialized in disability income protection. In 1981 Cohen founded the Eugene Cohen Insurance Agency, Inc., Skokie, IL, which specializes in DI, life, LTCI, fixed annuities, and impaired risk cases. The agency is a member of LifeMark Partners, NAILBA, the IDIS and is a founding member of The Plus Group. Cohen received the W. Harold Petersen Lifetime Achievement Award from the IDIS and NAILBA’s Douglas Mooers Award for Excellence. Eugene can be reached at Eugene Cohen Insurance Agency, Inc. Telephone: 800-333-4340. Website: www.cohenagency.com. Email: eugene@cohenagency.net.

To COLA Or Un-COLA Your Disability Insurance Quotes

Eugene Cohen and Michael Cohen
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To COLA Or Un-COLA Your Disability Insurance Quotes

An individual disability insurance (IDI) policy has various elements and provisions as part of the base policy. There’s the monthly benefit that would be paid out for a qualifying disability. There’s a waiting period (called an elimination period) that the qualifying disability has to last in order for the insured to qualify for benefits. The longer the elimination period, the lower the cost of the policy. A base IDI policy will usually consist of a triggering disability for benefits to be paid, such as total disability, some type of partial and/or residual disability, and presumptive disability are among the most common. Some policies also have provisions built into the base policy that will allow for a slight increase in the monthly benefit. This is usually called an automatic increase benefit provision but is typically limited in duration and the condition that the insured is not on claim. There are many different provisions that can enhance a policy, but these are usually the common elements we see in most IDI policies. Of course, you should always read the illustration and/or specimen policy to confirm what provisions are built into the policy.
Similar to other insurance products, the policy can be further enhanced by buying additional options that would be added to the base policy. One of these popular options (commonly called riders) would be a Cost of Living Option or COLA. The COLA option is different from other riders or automatic increase benefits, as it has unique properties that can increase the monthly payout from the disability company.
The COLA rider will add cost to the premium, as it allows for the monthly benefit to increase during the course of a qualifying disability claim. The first increase would typically take place after the first year of the claim. Typically, on each anniversary of the claim, the amount of benefit will continue to be increased. The amount of increase will vary based on how the rider is built by the insurance company and selected by the consumer.
The amount of increase can be a fixed percentage or an amount that is based on a consumer inflation index. Regardless of the index that is used to determine the amount of increase, there is usually a cap to the monthly benefit increase. For example, there’s a company that offers an indexed cost of living rider in which the consumer can choose the cap of either three percent or six percent. If the consumer chooses the three percent cap, and then a qualifying claim, the policy’s monthly benefit will be increased on each claim anniversary by the defined consumer price index up to a cap of three percent. The lower cap has become more popular because it is less expensive than the six percent option, and in the past 20 years it’s rare for the index to have been greater than three percent. As with any industry, you may find variations to the index used, the caps used, and whether or not the company will use compounding or simple interest. The general theme though is that there is a method to allow the monthly benefit to increase while on claim via the COLA riders.
Why should an adviser recommend the COLA rider? There is no right answer, as each client is different and may have different budgets, goals, net worth, and other factors that may affect the recommendation. In general, if a client is young and becomes disabled, the claim may last 20 years, 30 years, or even longer. During that time period inflation will have a natural attrition on the real intrinsic value of the monthly benefit. For example, let’s take a dentist who develops the same Parkinson’s condition that Michael J. Fox was diagnosed with at the age of 29 and eventually became more and more disabled. If our example dentist became totally disabled at the age of 34 and has a benefit period to age 65, that can become a 31 year claim. If the dentist bought a $5,000 monthly benefit policy without a COLA rider, then, over time, the intrinsic value of the $5,000 would buy less and less goods and services. If the policy had a COLA rider, then, in theory, the $5,000 would be able to keep up with the defined CPI in the policy, assuming the inflation rate was still minimal during the duration of the claim.
In designing an individual disability policy, it’s important to keep in mind the cost of the policy as well. As advisers, we’d prefer to see the maximum benefit period, shortest elimination period, and all the available riders be put on the policy. Yet, there needs to be a balance between benefits selected, rider design, and the cost of the policy. Given that an inflation rider can dramatically increase the liability for the insurance company, there is a proportional cost for the rider. Therefore, in designing a disability policy, one of the many questions the adviser needs to ask is to COLA or Un-COLA the policy. 

Individual Disability Insurance And Various Increase Options

Eugene Cohen and Michael Cohen
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Individual Disability Insurance And Various Increase Options

Individual disability insurance is one of the coolest products in the insurance world. There are features that you really don’t see in other life and health insurance products. We want to focus on some of the increase options that you will most likely see in many of the products. Of course, each insurance company is different and designs their products differently, so please read the specimen contract to ensure that any of the features mentioned are available for your client.

Automatic Benefit Increase Riders
There may be variations to the actual name of this rider, but in general, if issued with the policy, it will allow your client’s benefit to slowly increase each year for a certain duration. Depending on the company, this rider may not be available at the time of issue due to occupational class and/or age limits. The rider allows the monthly benefit to increase by a certain percentage on the policy anniversary.

For example: A client bought a $5,000 per month benefit with a policy date of June 1, 2020. The next year, the rider would increase the monthly benefit by a certain percentage. If the rider allows for a four percent increase each year, then the $5,000 per month would be increased to $5,200 at the anniversary. The percentage of increase will vary based on the company, but typically we’ve seen this be in the four to five percent range. Typically, this automatic increase will continue for about five years. Again, it can vary based on the company. At the end of the initial automatic period, assuming the client is not on claim and is under a certain age, the client usually is given the option to allow the increases to continue for another set period based on the company’s underwriting requirements. Usually just financial justification is required to renew the rider for another five years. What an awesome feature to a policy! This allows for a client’s monthly benefit amount to increase to thwart possible erosion of the benefit by inflation and helps to keep the benefit up with slight increases of income. Note, the rider usually will not increase benefits when a claim is in progress.

Future Purchase Options
These are options to increase the monthly benefit by larger amounts, but again without having to prove medical insurability. These types of riders are typically available at the time of issue as long as the client fits certain parameters, such as issue age, occupational rate class and applying for a certain percentage of eligible benefit. These riders allow for a much larger amount of monthly benefit to be purchased on certain policy anniversaries. In addition, some companies may allow the client to increase the policy off-anniversary if certain events occur, such as, but not necessarily limited to, a loss of group benefits.

This rider has really evolved into two subsets: The purchased rider and the no cost rider. The purchased rider usually will give the client a set amount that can be applied for at a later policy anniversary. In general there is no medical underwriting, but usually financial underwriting and not being on claim at the time the increase is being requested are required.

For example: An attorney client, age 35, buys a $5,000 per month disability policy with a $5,000 future purchase option. At age 40 the attorney has seen a doubling of income and needs more coverage, but at age 38 he was diagnosed with MS that is hardly noticeable and hasn’t slowed down the attorney’s solo practice. Even though the attorney is most likely uninsurable for disability insurance with traditional insurance companies, the client can still increase his disability benefit via the future purchase option assuming the current income would justify the increase. Depending on the company, the increase can raise the monthly benefit on the current policy, or the company may issue a new policy for the increased amount using the most current disability policy series. The rates would usually be based on the current age at the time the option is being activated. The unused amount of future purchase options will expire at a certain age and be taken off the policy. Companies may or may not issue this rider on their current policy offerings, but as a planner it’s very important to know about this rider when reviewing previous disability policies purchased by your client.

The other increase rider that we see being developed by companies is a rider that typically doesn’t add extra cost to the premium at the time the policy is initially issued. This no cost rider may go by various names, such as benefit update or increase option rider, but they have some similarities. In general, this rider allows the actively at work client to increase the monthly benefit every few years with only financial underwriting. The key is that this is systematic, in that typically the client needs to submit a financial questionnaire and/or more detailed financials whenever the option becomes available. The company will then let the client know how much the policy can be increased if at all. A usual requirement of this type of rider is that certain conditions need to be followed in order to keep the rider active with the policy. If the client doesn’t submit the requested financial information or if the client doesn’t accept a certain percentage of what the company offered, then conditions of the rider may not have been satisfied and the rider would be removed.

For example: The same attorney client. At the third policy anniversary, the company notified the client to submit financials to be evaluated for a possible benefit increase. The client submits their financial information and, due to a large increase in income, is offered to increase the policy by $8,000 per month for a total of $13,000 per month of benefit. If the client accepts a certain amount of the offered increase, the option to increase rider will stay on the policy—assuming the client is still age eligible. If the client decides to not submit the financials or doesn’t accept a certain percentage of the offer, then typically the rider will be removed from the policy as the client didn’t fulfill the contractual requirements to keep it. Similarly, some companies may allow the client to increase the policy off-anniversary if certain events occur such as, but not necessarily limited to, a loss of group benefits.

These riders are essential to the planning and design of individual disability policies. These also give an opportunity for the adviser to have a valid business reason to systematically review and update disability insurance needs with their clients. These riders and benefit options are not only essential for the client but are also some of the additional benefits for the adviser in building a block of disability policies. 

Disability Insurance And Social Distancing

Eugene Cohen and Michael Cohen
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Disability Insurance And Social Distancing

Hopefully, we will never experience again what we all have had to endure the last few months. Our government was forced to shut down segments of our economy for the safety of all of us. The power of a paycheck has never been more important than what we have seen in these unprecedented times. An unpredictable market, segments of businesses diminished to a fraction of what they were in the past, and a light at the end of a tunnel that hopefully will be here sooner than later.

So where does individual disability insurance play a role in today’s atmosphere and tomorrow’s planning? We are still seeing a lot of activity in the disability marketplace. While there are businesses that are struggling to survive, there are many businesses that are still thriving. Many of the owners of these businesses and many professionals who are working every day, have seen that their ability to work as essential. The unpredictability of the equity markets has also made many realize that the ability to work is one of the most important assets someone possesses.

As we all know, the planning process is a never-ending process that requires flexibility and open dialogue. If a client became disabled due to an accident or sickness, what is their ability to maintain their standard of living? Ensuring your clients are up to date on their insurance products is always important, especially during times like these, of course, for clients in which it would be appropriate to have such dialogue.

In the individual disability insurance processing world, we have seen many companies with electronic applications and electronic delivery processes. It’s never been easier to write and submit applications and deliver disability insurance policies in an all-electronic fashion.
In addition, the non-fluid, non-exam issue limits have been increased with many companies, so you don’t have to worry about a paramedical exam being needed for most cases. Of course, please check with an individual company for the requirements needed for the amount being applied.

If you have any clients with disability coverage in force, don’t forget about the future purchase option or automatic increase option with upcoming renewals that may be on their policies. These types of policy riders may give your clients the ability to increase their monthly benefit without medical underwriting. Depending on the company, there may only be financial underwriting required. Many companies have changed the way they notify brokers about important deadlines connected to these riders—turning to electronic communication or to just posting on the company’s website. As an advisor, we would recommend that you also have a system to remind yourself of the future purchase option and any automatic increase option renewal date(s) so you can proactively reach out to your client.

Our clients need us more than ever to support their financial goals and protect themselves and their families from the financial effects that life can deal to any of us. May you, your families, and colleagues stay safe and healthy during these unprecedented times.

Hope Is Not A Strategy, Contracts And Planning Are Strategies

Eugene Cohen and Michael Cohen
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Hope Is Not A Strategy, Contracts And Planning Are Strategies

In the world of planning, we come up against various objections to planning recommendations. We find that, in many instances, the need for the recommendation hasn’t resonated enough with the client to trigger action—the procurement of a plan that usually includes individual disability insurance. This can occur when the client replaces recommended planning and the contracts insurance companies uphold with a hope that the plan will not be needed.

I hope that I will not become disabled. We know the statistics, roughly one out of four working individuals will have a disability that lasts 90 days or longer before they turn 65. “I hope that I’m among the majority” is a strategy that works, assuming you are not one of the unfortunate ones that can’t go back to work.

I hope that if I get disabled, my spouse can go back to work. It’s difficult to predict the future and how a sickness will play out. Most spouses are either already working or, if they are staying home, they are a caregiver or they have been out of the fulltime workplace for a while. It’s unlikely a spouse could take care of their disabled partner and still financially support the family.

I hope that my group disability insurance will take care of me. Most clients do not realize that group disability plans, while better than no disability insurance, many times have very narrow guard rails that are more designed to protect the issuing insurance company. For example, with group disability insurance, the issuing company most likely built in a termination provision that allows the company to cancel the group coverage. In addition, coverage is usually not portable.

Imagine a client with group LTD developing a condition or disease that didn’t cause a disability but would prevent that client from buying individual coverage in the future. For example, a client who recently had a melanoma removed may not be able to buy individual coverage for years. Now imagine if the firm lost their disability coverage or if the client were recruited by another firm and the new firm didn’t have group disability coverage. Hoping that the coverage will stay in place or hoping that every great business opportunity will come with a group disability program is not a strategy. Individually owned disability insurance can’t be taken away during the Guaranteed Renewable period. The client is in control of the existence of the policy, not the insurance company.

In addition, many group LTD plans may have limitations in their definitions or limitations in the benefit periods—in order to protect the issuing company from various types of claims. These definitions may include, but are not limited to, mandatory rehabilitation programs, limited benefits for subjective soft tissue claims, limited benefits for mental/nervous related claims, progressively more restrictive definitions around how a disability is defined as a claim prolongs, integration of various sources of income, reduction of net benefits due to income taxes, and many other limitations. Your client with group LTD needs to review their certificate or policy to confirm which limitations may exist. To hope that a group LTD policy will pay a claim like an individual disability insurance policy is not a strategy. Contracts and planning are strategies. When a client buys a noncancelable guaranteed renewable disability contract, they own that contract and, as long as they pay the premium, they own that policy during that non-cancelable guaranteed renewable period. Individual disability policies typically have broader definitions and less restrictions than group disability contracts.

If your client were in charge of buying parachutes for his or her family, which one would be picked? We would be looking at the most comprehensive, safest options. Price would not be as important as features. Individual disability coverage is that comprehensive parachute. When someone gets disabled, the disability policy becomes that financial parachute that the whole family is now relying on to provide the income that was lost.

It’s interesting to hear why a client who can clearly afford the premiums for disability insurance chooses not to proceed. Usually there is a false sense of confidence that is based on hope. The client hopes they will not be disabled, the client hopes that if they are disabled, they can still produce an income. The client hopes that if they can’t produce an income, their spouse can work. The client hopes that their claim will fall within the possible narrow definitions of a group insurance policy. The client hopes that their savings will get them by before passing away. The client hopes that the house will not be foreclosed or cars repossessed for lack of payments. The list can go on and on as to the reasons a client didn’t follow your recommendation.

The clients who have followed your plan and who have bought sufficient individual disability insurance don’t have to hope, and can be more assured that they have done proper planning in case a disability prevents them from going to work.

March Into DI Sales

Eugene Cohen and Michael Cohen
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March Into DI Sales

We recently had a call from a producer who wanted to discuss a marketing program for the rest of the year. This is a fairly experienced producer who has a nice book of business. His primary goal was to develop a system in which he sends out emails and then waits for email responses or for random people to call him once the email is received. We discussed many different marketing methods and asked him to keep in mind: The easiest, most convenient marketing methods can be some of the least effective marketing campaigns. Typically, the most effective marketing plans require a four-pronged approach using: Research, a simple message, persistency, and, most importantly, the human touch.

Any producer or advisor who has been in the financial service business for more than five years usually has a large enough block of business to use this four-pronged approach to marketing (in addition to obtaining new clients via a variety of methods). We are in a very dynamic industry that has continuous changes in products, underwriting, technology, and processing. These changes bring constant opportunities to meet with existing clients to review their current portfolio and to educate clients, making sure they have the most current products.

There is always a reason to meet with your clients every few years—to make sure their goals and plans are proceeding as projected. While we are in a constantly changing business, what hasn’t changed is that most clients who are working still need a monthly income if they can’t work due to a sickness or recovery from an injury.

Many times the best marketing plans are in your filing cabinet or computer. Do you have a systematic plan that calls for you to personally meet with every one of your clients at least once every few years? If not, you are missing the march to marketing. In today’s world, with consumers being bombarded with impersonal TV and radio ads for insurance, keeping in touch with and in front of your clients is more important than ever.

Understandably, many advisors like to have a “valid business reason” to reach out to a client. Fortunately, you already have “valid business reasons” to reach out to your clients for a quick meeting or lunch. Every financial advisor or insurance producer, regardless of specialty, has dozens of reasons to reach out to an existing client: Discussing financial market changes, new changes on the renewal of a car or homeowners policy, changes in interest rates, worker comp audits, health insurance renewals, and the list goes on. As advisors we can sometimes assume clients understand the products and constant changes that take place in our industry.

When you are with your client, it’s a perfect time to either review their disability insurance or to ensure they even have coverage. What you will most likely find is that a majority of your clients don’t have any disability insurance. When you make time to support your client by sitting down with them to discuss the ever-changing financial and insurance products available, you will build a better, more personal relationship with your client. And you will discover more of their needs, such as disability insurance.

What is your systematic client review process? There are various systems available and any will do as long as you are able to make eye to eye contact with your clients every couple of years. You should have a client management system to keep track of your customers—if not, you can look up dozens of them to implement. Contact spreadsheets are a start, automated emails, even the tried and true one card system can work well versus waiting for the phone to ring. For some of you this is obvious. For many of you this is something that ought to be done, you know it should be done, but it hasn’t. Don’t negotiate with yourself. Instead, start your process today! It’s amazing how many advisors either don’t have a formal process set up or feel that, since they haven’t in the past, then it’s too difficult in the future.

Clients are more likely to do business with firms and advisors who they have worked with in the past. We belong to AAA and enjoy their discounts and service. It’s remarkable how many offers, deals, and opportunities they give us—to engage with them even more. The AARP also does a great job soliciting for opportunities of engagement.

How many times have you offered engagement to your past clients? Have you offered your services to your clients’ children as well? The key to helping more clients protect their income is to ask questions and to make sure your clients have coverage. How many times in the last month have you asked your clients about disability insurance? If the answer is less than a few times, then we are guessing that you, as an advisor, are not comfortable with either the product and/or the process. If you are not comfortable, reach out to an MGA or company that specializes in individual disability insurance and start to get comfortable. Your clients may be depending on it!

Numbers Don’t Lie

Eugene Cohen and Michael Cohen
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Numbers Don’t Lie

The need for individual disability insurance (IDI) is real. IDI is not a luxury item purchase—like an expensive pair of handmade Italian dress shoes or the latest smartphone.
Buying disability insurance is not on most people’s to-do list, but neither are the possible tragic results of not having disability insurance. Some of the horror stories people experienced have been, but not limited to: Going bankrupt; having a home foreclosed due to not being able to pay the mortgage; getting evicted from an office for not being able to afford the lease; or watching a car get repossessed. When someone unexpectedly becomes too sick or too injured to work, and does not have disability insurance, unpleasant consequences can occur.

Let’s look at the numbers. Numbers don’t lie. So, let’s first look at one important number, someone’s income. Typically, this is usually the most important number a lender wants to know when a client applies for a mortgage, a lease, or a loan. If a client is disabled and doesn’t have an income, it would be very challenging to obtain a mortgage, lease or loan.

So, let’s say a client is working and successfully secures a loan, but later becomes sick or injured and can no longer meet the contractual obligations on that loan. Now what? To our knowledge, most loans do not have a provision that would waive the obligation if someone becomes disabled. The mortgage is still due, the car payments are still due, the rent or lease would still be due as well. When a client has disability insurance, the policy can help to provide funds for these obligations that still need to be paid.

We all likely agree that having an emergency plan in case one of our clients, or even ourselves, becomes totally disabled is very important. Yet, it’s perplexing to see so many financial planners or advisors that haven’t addressed the issue, or even worse, have taken a client’s word that there is sufficient protection. Next time a client says that they have a disability plan, go down that path with them. Ask them how much coverage they have in force or to describe the exclusions or the taxability of the benefit, in which case you most likely will see a blank stare as a client tries to come up with an answer or even an understanding of what you are asking. Which adviser are you? One that asks questions and has your client give you the DI policy to review, or one that checks a box and hopes your client really understands the importance of the issues? Could you imagine having a doctor ask you for the diagnosis of a medical condition? Even worse, could you imagine a cancer surgeon who refuses to discuss performing life-saving operations on patients because the surgery is “strenuous” or perhaps not as “interesting” to the surgeon as perhaps another type of surgery. As advisors, it’s important to see the plan and discuss with your client the best way to protect himself in case a disability was to prevent him from working.

As you initiate a conversation about IDI with your client, you may ask questions to help your client see the need. You may ask, “What is the longest number of vacation days you’ve ever taken?” Most clients will say two weeks or possibly slightly longer. When you ask the reason they didn’t continue on vacation, the answer typically is that they had to get back to work.

The statistics are staggering and should give any advisor or client important reasons that disability insurance should be at the forefront of any plan. In addition, the plan and products should be reviewed in detail every few years. Too many clients and unfortunately too many advisors do not take these statistics to heart:

Just over one in four of today’s 20 year-olds will become disabled before they retire. (Disabilitycanhappen.org Council For Disability Awareness)

Approximately 90 percent of disabilities are caused by illnesses, not accidents. (Council for Disability Awareness 2013 Long-Term Disability Claims Review)

The Top five causes of disability claims that last longer than six months (Council for Disability Awareness 2015 Long Term Disability Claims Review):

  • Muscle/bone disorders (28.6 percent)
  • Cancer (15.1 percent)
  • Accidents (10.3 percent)
  • Cardiovascular (8.7 percent)
  • Mental Disorders (8.3 percent)

A 2014 study of consumer bankruptcy filings identified the following as primary reasons (Disabilitycanhappen.org Council For Disability Awareness):

  • Medical bills (26 percent)
  • Lost Job (20 percent)
  • Illness or injury on part of self or family member (15 percent)

The average Social Security Disability Income (SSDI) benefit as of January 2018 was $1,197 per month. (Disabilitycanhappen.org Council For Disability Awareness: Social Security Administration, Monthly Statistical Snapshot, February 2018)

That $1,197 above equates to $14,364 annually – barely above the poverty guideline of $12,140 for a one-person household, and below the guideline of $16,640 for a two-person household. (Disabilitycanhappen.org Council For Disability Awareness: ASPE, Poverty Guidelines 2018)

Only 48 percent of American adults indicate they have enough savings to cover three months of living expenses in the event they’re not earning income. (Disabilitycanhappen.org Council For Disability Awareness: Federal Reserve, Report on the Economic Well-Being of U.S. Households in 2016 (PDF), page 26.)

Numbers don’t lie. The more you talk about disability planning, the more clients will want to have a plan. Most plans involve disability insurance, but even if your client was unable to obtain the insurance due to various medical or financial reasons, at least the planning process took place and you have the opportunity to create alternative plans. How many clients have you discussed IDI with over the years? The training and opportunity is there, you just need to reach out to an IMO agency like ours or a few of the companies that specialize in offering training for disability insurance.

A New Year, A New Resolution: Talk To More Clients About Disability Insurance

Eugene Cohen and Michael Cohen
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A New Year, A New Resolution: Talk To More Clients About Disability Insurance

Happy New Year! Welcome to 2020 and a clean slate of new resolutions. If you are not talking to your clients every week about disability insurance, this is a great time to make it part of your new year planning. To start, you’ll need to make a list of clients who are good candidates for various types of disability insurance. To make it easier for you, we’ve given you a few scenarios that should be on your radar. Remember, everyone who needs to work usually needs some type of disability insurance. So, our number one request for illustrations is for individual disability insurance clients who work full time. The following list was designed to help you recognize opportunities that are sometimes not recognized and should be part of your 2020 planning.

Client: Business owner
Product: Business Overhead Expense Disability Insurance (BOE)
Think small business, usually a professional, such as a dentist, attorney, engineer, physician, architect, CPA, or any small business in which the firm is supported by an individual owner or two. You most likely have these clients in your database. When someone owns a business, they usually will have fixed expenses that they’ve obligated themselves to pay, regardless of whether they have the ability to work or not. The rent or mortgage still needs to be paid, the support staff still need their incomes, business equipment leases still need to be paid, the utilities, business loans, and other monthly obligations still need to be paid. Every business owner should look into BOE insurance. Be resolved to talk to your business owner clients about BOE coverage.

Client: Firms with multiple partners and a business operating agreement
Product: Disability Buy Out
Think about the firms you insure in which you have put in a life insurance policy to help fund a buy/sell agreement. I’m sure you can think of many cases in which you’ve put in life insurance, but didn’t even discuss the disability insurance aspect. Most operating agreements or buy/sell agreements have some type of disability provision…and if not, then there should be a provision to address what will occur if a partner is disabled.

Client: Business owner or individual client
Product: Loan Protection
If you have been selling life insurance for more than a few years, you most likely have been asked for life insurance to cover a loan or mortgage. This is a great entre to discuss disability insurance. Since most clients are more likely to suffer a disability than pass away before the end of a loan period, a plan should be in place in case of a disability. For a business, without some type of disability loan protection, even if the business owner survives, the business may not survive without disability coverage. For the individual who has a mortgage, having disability insurance is a must as well. For many people, full recovery from a disability may never happen and a permanent disability may become reality. If so, how will the mortgage be paid? In addition, most people have many other expenses that still must be paid regardless of whether they work or not.

Client: Dual income, no kids yet
Product: Personal Disability Insurance
These tend to be your younger clients who may be first time home buyers or clients requesting rental insurance or car insurance. You may have talked to them about some life insurance and perhaps they took your advice and bought a policy. Most people don’t realize that the risk of becoming disabled before age 65 is greater than that of passing. If one member of the couple gets disabled, the couple will have two financial pressures: First, the couple will naturally feel stress due to a decrease or total loss of income. The couple was relying on this income to pay their expenses and maintain their lifestyle. Second, due to the disability, many individuals will experience a sudden increase in unanticipated expenses. These include home and car modifications to accommodate the disabled partner, and extra medical bills for expenses not covered by insurance. An individual disability plan on one or both spouses will sometimes resonate better than some other types of insurance that may have been suggested.

This is not an all-inclusive list, as there are Key-Person DI policies, Retirement Security DI products, Guaranteed Standard Issue products, and Surplus Lines products that can fill many different needs. It’s essential to keep disability insurance on the top of your list of products to present.

If it hasn’t happened yet, there will most likely come a day when a client becomes disabled and wants to know the type of disability coverage they have with you. What will be your answer? Work with your manager, MGA, mentor, or just sit down and create a plan to review your book of business for disability insurance opportunities. It could be the best holiday gift you give your clients and their loved ones.

May you and your family have a happy and healthy New Year and a great 2020!

Tis The Season To Make Sure Your Clients Have Disability Insurance

Eugene Cohen and Michael Cohen
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Tis The Season To Make Sure Your Clients Have Disability Insurance

The best time of the year is upon us as we approach the end of the year. While we finish up 2019 and head into 2020, many of us can look back at the year and think about how many clients have followed our recommendation to protect themselves and their families with disability insurance.

We have received great responses to our Broker World disability insurance articles and it’s fantastic that so many of you have the support your clients needed to plan for the possibility of a catastrophic injury or sickness that can cause a prolonged disability.

While the holiday season is a time of joy and happiness for most of us, it can be a time of hardship, both physically and financially, for those individuals and their families who are affected by a disability or unfortunately become disabled.

The holiday season is synonymous with traveling for those who are visiting family and friends, either short distances or long distances, either by car, plane or train. According to the National Safety Council, in December 2018 there were an estimated 48,100 car crashes that were serious enough to be considered a medically consulted injury.* We don’t know how many of those estimated 48,000+ had injuries severe enough to become partially or totally disabled, but we do know the statistic and it’s not an anomaly, and indeed many look to get a car accident lawyer during these times. Anyone involved in an accident like this will know how scary an ordeal it can be as it can often leave people with life-changing injuries – those who find themselves the victims of a car crash may want to consider getting in touch with a car accident attorney Houston for legal assistance.

Year after year a time that is supposed to be so full of happiness can turn tragic in a flash. Usually when there is a car accident, the owner of the car will call their car insurance company or agent and report the damage to the car. Who is your client or the client’s family going to call if your client passes away or becomes disabled due to that accident? Will your client be among the estimated 48,000 that has a serious accident and possibly becomes disabled this holiday season? What will your response be to the question, “So how much disability insurance do we have and how do we file a claim?” Will it be that you will contact a Springfield car accident lawyer to file? Or a similar lawyer?

For some of us the holiday season is a time to catch up with our clients at the end of a busy year and to get ready for the next year. Take some time during your holiday season to examine your book of business and confirm how many of your clients may need disability insurance. How many professionals and business owners do you have as clients-in any capacity?

Regardless of whether you specialize in property and casualty insurance, annuities, life insurance, or overall financial planning, many of your clients depend on you as the person they trust and turn to for all of their insurance advice and needs. Therefore it’s good to have an updated client insurance inventory in your file of the insurance products your clients own.

If you don’t have the inventory, you should talk to your clients about keeping a comprehensive record of their insurance inventory. If you are considered the insurance resource, the go-to person, and your client’s family calls you to find out the coverages, you can either be the resource or have to refer them elsewhere in their time of need.

Not only does the inventory make you more valuable when a client passes away or is unable to give direction due to a severe disability, but it gives you the opportunity to review the current products and identify any gaps in coverage. Regardless, if you have an inventory or not, most clients do not own disability insurance and are exposed to the possible hardship that often occurs without coverage, or enough coverage, to meet fixed expenses.

For those who are already disabled, this holiday season can financially look much different from those who aren’t. Of course much of this will depend on the severity of the disability and the standard of living to which the client is accustomed.

Let’s take a 45 year old radiologist that loses the ability to see clearly due to an eye injury, such as a tennis ball or car accident, or perhaps a disease that affects the eye(s), such as optic neuritis, intracranial eye strokes, retinopathy due to diabetes, or some other condition. Usually, this is a story with two scenarios…one with individual disability insurance and one without.

Every year, doctors and nurses from all over the world attend to thousands of eye injuries. A significant number of these are caused by dangerous work environments and accidents occurring due to negligence in the workplace. Causes of eye injuries can range from excessive straining of the eyes while performing assigned tasks, to flying debris, and even exposure to harmful chemicals or fumes.

With this in mind, if you work in an environment where dangerous goods are stored, it is vital that you have access to an emergency eyewash station and a chemical shower to deal with any incidents that may occur. Put simply, emergency showers and eyewash stations allow you to quickly wash away dangerous chemicals that can come into contact with your face or body while handling hazardous chemicals. You can learn more about the importance of installing these types of safety measures in the workplace by taking a look at this Storemasta Eyewash station guide.

So, will the holiday season be spent in a smaller home or apartment, or in the current home paid for with the monthly individual disability insurance check? Will the holiday feel like holidays of the past, before the disability, or will it feel like a holiday for a family that is struggling to keep their financial independence?

The holiday season can be an expensive time of year; from the presents, to the hosted meals, to traveling, to all of the extra unexpected expenses that always seem to come up. Will the holiday season be one of joy or one of worry and concern for their collective financial future? We hope none of your clients experience the latter scenario and have nothing but joy and happiness this and every holiday season. ?

Reference:
*Medically consulted injury is an injury serious enough that a medical professional was consulted. Based on the current medically consulted injury to death ratio of 114:1 and rounded to the nearest hundred, the estimate of nonfatal medically consulted injuries that will result from crashes during the holiday period is 48,100, with a 90% confidence interval of 42,400 to 54,500.

2018 National Safety Council. All rights reserved https://injuryfacts.nsc.org/motor-vehicle/holidays/christmas-day/

Game Of Inches

Eugene Cohen and Michael Cohen
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Game Of Inches

In today’s world of online quotes and direct to consumer marketing, it’s important to be at the top of your game at all times. When it comes to individual disability insurance, it’s no different.

We support many national organizations and their financial advisors at our agency. In doing so, we need to be sure we focus on the three essential parts of underwriting: Medical, occupational, and financial underwriting. Not only do we review these areas, but we search for clues that may help us identify when a case has possible upgrades and possible pitfalls.

While we can obtain the basics needed for a quote, the “make it or break it” part really comes down to the ability to identify the cases that need extra clarification and those that need to be moved to a non-traditional product.

Cases that cause challenges for those that are not experts in disability insurance are the cases that do not hold up to the expectations of the consumer. The expectations of the consumer need to be shaped by the financial advisor who, in turn,should be given some basic knowledge of the three major underwriting areas.

For example, the occupational rate class is essential to the pricing of an individual disability insurance policy. Depending on the company, the occupational class is usually assigned a number and/or letter, such as 5A, 4A, 3A, 2A, A, B, with 5A being the top class and B being the lowest rate class. Each company has their own version of the rate class system but, in general, we tend to see anywhere from five to 10 different occupational classes or variations of classes. Each class may have different pricing and different policy features or definitions that may be associated with the corresponding class. If the wrong occupational class is used in an illustration, most likely the rates will be incorrect and/or certain policy features may not be available. Some advisors have a difficult time at policy delivery when a policy is issued other than applied, so getting the occupational class correct is essential for any disability marketing team. In addition, there can be other aspects of a case that can allow an upgraded occupational rate class when normally a lower rate class would need to be used. For example, some companies may have business owner upgrades where, if the size of the company, length of ownership, income, and other factors are within certain guidelines, a better rate class and/or more coverage may be offered to the client. If the internal wholesaler doesn’t recognize that the better rate class can be used, then the illustration may be priced too high or not have as much benefit as could have been quoted. If there is competition on the case, then it’s possible the client can be shown the exact same company but with lower premiums and/or more benefits. Our DI marketers train on occupational class underwriting and are constantly looking for programs that can allow better occupational classes and/or more benefits.

Financial underwriting can also be crucial in illustrating and quoting disability insurance. Our DI team looks for how much current coverage an advisor’s client may have in force, but it’s important to take it even further at times. For example, if someone is an owner of an S-corporation, and has employer-paid group DI, the financial underwriting may be different depending on the percentage of ownership. If the client owns less than two percent then the financial underwriting will be similar to that of an employee, but if the client owns more than two percent the financial underwriting will be based on the non-passive owner income underwriting rules. The issue and participation rules for individual disability companies will vary based on existing group coverage and if the group coverage may be taxable or not taxable. If the wrong assumptions are used, then the illustration may be incorrect. In addition, knowing and understanding the unearned income rules are important as well, as unearned income may be treated differently depending on the company. Our disability marketing team is constantly monitoring these dynamic and ever changing financial underwriting issues. Of course, a client needs to consult with their tax advisor on any issues involving taxes.

On the surface, health underwriting appears to be intuitive, as how different can it really be from life underwriting? We constantly have advisors telling our team that the client was preferred best for life underwriting, so there should be no need to be concerned about the DI health underwriting. In the individual disability insurance world, insurance companies can line item certain conditions and exclude them from coverage. Exclusions are not typical for traditional life insurance or long term care insurance, but for disability insurance it’s a very common occurrence. It’s important to recognize the conditions that can cause these exclusions to occur, such as mental/nervous conditions, prior health issues that were already resolved, chronic health issues, and muscular skeletal issues.

In summary, when quoting disability insurance, we’d recommend that you use a resource that understands the nuances of disability underwriting. In a game of inches, you need to get the first down in order to score.

DI Forum—September 2019

Eugene Cohen, Raymond J. Phillips, Jr., CLU, LTCP, Jack B. Schmitz, CLU, ChFC, CASL, Thomas R. Petersen and Kenneth A. Bloch, CLU
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DI Forum—September 2019

A Panel Of DI Experts Looks At The Disability Income Market And What Can Be Done To Increase Agent Involvement In DI Protection Solutions

Q.What are your assessments of the individual, group, business, and excess disability markets today?

Cohen
There are very few companies that write disability income protection. And there are very few advisors who offer it.

So, if there are very few advisors who offer it and the product is needed by many people, it’s a great way to grow your book of business. Wouldn’t you agree?

The products in the individual market are so versatile. They cover so many different needs. And as I always say, “Need motivates action.” There are business disability products to fund a buy/sell agreement. There are disability products to fund business loans—if an individual is disabled and can’t pay a particular loan. There are key employee policies to help an individual cover the needs of the business when an employee is disabled.

And the limits of individual coverage that the individual companies are writing today are high. When I started in the business the amount of coverage I could offer a client was much more limited. The limits were low. The underwriting was very strict. And the products were not as creative as they are today. Yes, my assessment of the individual disability market today is that it is exciting.

Group disability coverage (also known as Group LTD) for many individuals is important. It’s great when a company can offer group coverage. Group LTD insurance is good for people who don’t have disability insurance. It’s better than nothing. It’s better to have something than to not have a policy.

But I want you to understand that group LTD coverage can be limited for individuals who are making a high income. We can run into something we call “reverse discrimination.” These higher income earners are discriminated against because a small portion of their income is covered with that group LTD policy.

Let’s take a typical group LTD policy…it insures a percentage of a person’s income, let’s say 60 percent, up to a limit of say $10,000 per month. Let’s take an individual making $300,000 a year. That person can have a particular problem. They earn $25,000 per month. But the individual is only getting $10,000 per month in benefits with their group LTD plan. With the group LTD plan alone, this person is insuring 40 percent of their income. Well, they need more coverage. So, let’s take an individual disability insurance policy and layer it on top of that group LTD coverage.

And let’s have that person self-pay their individual disability policy premiums so their benefits may be tax free. (Just a reminder, when the employer pays a group LTD policyholder’s premium, the benefits may be taxed.)

There are often other limitations with group LTD coverage. Many of the group LTD policies are only covering mental and nervous disorders for a limited amount of time. For example, some of the group LTD policies only cover mental and nervous disorders for two years unless you’re in a hospital.

Also, some group LTD plans may not cover bonuses and excess income an individual may receive. And the definitions of a “disability” in group LTD policies may not be as comprehensive as the definitions in individual policies. Also, many group LTD policies may not be portable if you leave your job.

Both group LTD products and individual disability insurance products are important in protecting income. When a client tells an advisor, “Oh I don’t need individual disability insurance, I have group LTD coverage,” remember that this is not necessarily an objection. If the client has group LTD coverage, this person likely understands the need. And that is often the perfect start to a conversation regarding the need for individual disability insurance as well!

Phillips
Without looking at any statistics from LIMRA, or other authority, and only from my little corner of the world, my view is that the group LTD market is recognized and stable. The individual, business and excess markets are not overly recognized and are underpenetrated.

Group LTD (and short term DI, STD) is a product that is widely sold in the group benefits realm. It’s an offering that many employers recognize as an offering to their employees to enhance their competitive stance via an overall benefit package (I’m not sure that many understand the underlying definitions very often however!). While many employees may not know exactly what it is, they know they have “DI at work.”

Other DI offerings seem ignored by consumers and employers. Sadly, we’ve run into many, many instances where company group reps themselves don’t know about, or don’t seem to care about, their own carrier’s non-group offerings. So much for a synergistic, strategic relationship with a company rep in this arena!

However, that lack of recognition begets tremendous opportunities for planners, advisors and agents to enhance their practices and prospect for new clients. The disability income market is staid, and historic…and yet still offers, effectively, a ground floor opportunity. Especially in the lesser penetrated industries and markets. Doctors, dentists, even attorneys, to a great extent recognize and embrace the consideration of income protection relatively speaking. Think of all the other industries out there!

Schmitz
Underpenetrated due to lack of communication, marketing, and incentive.

Petersen
The specialty and high-limit DI market is strong, but we have seen a relative plateau in IDI business and a greater focus of DI advisors on the burgeoning GSI sector of group DI, especially among physician groups and law firms. Employers get tired of wrestling with medical insurance and see disability plans as great group benefits.

The business disability markets continue to be strong as there is always a business deal taking place.

Bloch
The individual disability income marketplace remains on a steady path. There is a fantastic opportunity, however, for carriers to re-energize the marketplace with exciting and creative solutions. The challenge is to create a product and premium structure that the consumer will understand and want to purchase. The group LTD marketplace is becoming more of a commodity product with a “race to zero” mentality. There is limited interest in provision quality today perhaps due the medical care cost issue that has become so time consuming and expensive. The excess disability markets are exploding with new ideas, coverages, and new premium. Product creativity and underwriting enhancements have provided unique solutions for the business and high-income markets.

Q.What needs to change to get producers who shy away from selling DI to embrace these markets?

Cohen
I believe the saying, “Knowledge is power.” The problem that we have in the industry is that we are often dealing with advisors who haven’t specialized in disability income protection. They don’t know a lot about it, so therefore they shy away from it.

Most folks will shy away from something to sell if they don’t understand it. He or she doesn’t want to present it because they won’t be able to handle the questions the clients would ask.

Many advisors have worked very hard to earn their clients’ confidence. Often advisors don’t want to jeopardize that confidence by offering a product that the advisor knows nothing about.

So, my suggestion is that we have to educate the advisors. First of all they have to understand the need for disability income protection. It’s very simple. Many times advisors just want to insure the golden eggs. We have to insure the goose that lays those golden eggs.

The insured’s greatest asset, many times, is their ability to earn an income. If you take an individual who is 35 years old, who’s earning $100,000 per year through age 65, that future income is worth $3,000,000. That’s if he or she doesn’t have any raises, bonuses, or any additional compensation. So that could be their most valuable asset. All of the insured’s hopes and dreams are based on that asset—future income.

Why doesn’t an advisor talk about business overhead expense for a small business or a small professional person? The advisor may not even know it’s available. So, naturally, they’re not going to bring it up.

How about an individual who funds a buy/sell agreement for life insurance and their advisor never brings up the fact that there is a policy for disability that will help fund that buy/sell agreement if one of the owners has a serious disability and can’t work for a long period of time?

So, this is our job. Our job as a brokerage agency is to educate and to help the advisor. I hear many times an advisor say to me, “This client got a million dollars of life insurance, best class. But they’re putting a rider on my client’s disability policy that’s excluding coverage on his back. And my client says he’s only been going to the chiropractor for preventive adjustments.”

Well there are two points that need to be made regarding this scenario. First of all, with life insurance, a bad back isn’t generally going to affect an individual’s life expectancy. So, the client may get best class.

But a bad back could affect a client’s ability to work and earn an income. The result—the client could be given best class with his life insurance and a back rider on his disability policy.

The second point I’m going to make is going to delve more closely into the back rider itself. In our example the client said he had only been going to the chiropractor for preventive adjustments. Well, that may be the client’s perception. But with disability insurance underwriting, underwriters are almost always going to ask for an Attending Physician’s Statement (APS) regarding an applicant’s back treatment. And in this example, the APS said the client was receiving more than just preventative adjustments.

Here’s another example of a rider that can come up on an individual disability insurance policy. If an individual is going for counseling, or taking anxiety and/or depression medication, there’s a good chance that the individual will have a rider on their policy excluding mental and nervous disorders.

We have to get the advisor to understand the underwriting of disability insurance. It’s completely different many times than life insurance underwriting. We manage the advisor’s expectations, so they can manage their client’s expectations. We always do our best to prepare the advisor. It goes back to giving the advisor the knowledge he or she needs to feel confident providing their clients with disability income protection insurance.

Phillips
One stumbling block is the processing and underwriting of DI business. There’s nothing worse than preaching, prodding, pulling and cajoling a non-DI oriented planner for months and years on end about the power and the glory of income protection planning only to have them submit their first case and be slogged through the mud and dreck that is the processing and underwriting of DI business. Often it creates a one-and-done dynamic.

In this era of ubiquitous preventative medicine, often cumbersome underwriting isn’t something we experience for those who are unhealthy. Tests, procedures and exams are done that perhaps weren’t even here even just a few years ago. Those need to be reviewed and scrutinized by an underwriter, which can make for a lengthy process.

In addition to laborious underwriting itself, the application process has been primitive. Lengthy paper applications. Uncomfortable tax returns. Something that many planners have gotten “un-used” to in their primary practice’s focus.

The good news is that I think the carriers have recognized this—at least the processing aspect—and electronic applications, e-policy delivery, etc., have begun to work their way into the market. That evolution will not stop.

Likewise, seeing the ever-expanding offerings of “accelerated underwriting” on the life insurance side, it’s only a matter of time before such initiatives bleed over to the disability insurance market. I often say to my staff and our constituents, “We are at the beginning of the end of processing and underwriting as we’ve known it.”

Second, I think carriers and agencies like mine (BGAs, MGAs, whatever you want to call us) need to do a better job of spreading the word of this market and the opportunities herein. We need to bludgeon the market with the message.

I’m a humble member of the DI marketing group, The Plus Group, with some of the greatest DI minds and marketing minds in the nation. Each year we collectively rally around the concept of “DI Day,” usually in May to jive with Disability Income Awareness Month (DIAM). Tens of agencies around the country have meetings solely focusing on the abstract and the concrete aspects of income protection, bringing in motivational speakers, company reps, and even consumers who’ve experienced disability income up close and personal.

We’ve had tremendous success in not limiting our efforts to a day, but invoking a “DI Year” concept. Weekly something is sent, posted or otherwise on DI. It is an endlessly evolving educational process. Ours is the notion, “If we build it, they will—eventually—come,” so to speak.

I think with continued educational offerings from those who are in a position to do so, along with the continued technological enhancements to processing and underwriting, we are on the cusp of new players and producers embracing this important insurance. It should be the bulwark of every financial and insurance plan.

Schmitz
Underwriting. Although Guarantee Standard Issue (GSI) and Simplified Issue programs are helping, we could use a more automated process for gathering health information. (Where is that medical ID-card we heard about years ago?) In the meantime, we can make it easier by streamlining the process. With broker training we can get brokers to ask a few important questions:

  • When were you last hospitalized, and why?
  • What prescription drugs are you currently taking?
  • When did you last see a doctor, and why?
  • What does last year’s tax return or W2 show?

Producers who shy away from selling DI should not be able to call themselves financial advisors. If they do not want to sell DI, they should partner with a DI specialist.

Scalability. Easy and accessible e-applications, or outsourcing the application process, like we have done with DINGO.

Petersen
Greater education of the general public, but more important, greater education of life and health insurance agents. General agents and insurance carriers need to take a greater role and responsibility in educating insurance advisors about the importance of DI and how to better market their programs. This is not a new problem or issue. What many carriers and GAs consider education is frequently product education rather than sales education. Yes you need to know your products, but producers are missing many fundamentals of the sales process.

Bloch
Many producers shy away from discussing disability income because they lack the appropriate training and do not understand the risk or the process. Training is the key. I would recommend that the producer partner with a DI expert to gain disability expertise.

Q.What are some tips for agents to overcome objections to buying income replacement protection?

Cohen
When offering individual disability insurance to a client, there are four basic objections an agent may encounter. No need, no hurry, no confidence, and no money. The agent wants to eliminate objections before they become objections.

First you must uncover the need. How do you do that? You ask questions.

The advisor can ask the client, “How important is your earned income?” About nine out of ten times the client will agree that his or her most important asset is their ability to earn an income.

When the client understands and agrees that their ability to earn an income is their most valuable asset, then it becomes very easy. You must get your client to understand they need the policy even before you start your presentation.

To further point out the “need,” I have the client picture a bridge made up of all of his or her financial obligations—the mortgage or rent, car payments, car insurance, kid’s bills, utilities, health insurance, groceries, cell phone bills, etc. And then I ask them to picture the only thing holding up that bridge is their paycheck. I ask the client, “If the paycheck is gone, what particular problems will you have?”

I may also ask, “If you were out of work because of a sickness or accident for three or four years without a paycheck, without an income, without any earned income, would you have an income problem?” And naturally they will say yes. Then I feel I have overcome the no need objection. I won’t go forward with the presentation unless they understand they need the product.

The next objection is, no hurry. I want to eliminate that. But I know one thing. Need motivates action. If someone needs something, they’re going to act very quickly. Years ago, when I was in my early 20s, my friend asked me to stand up at his wedding. Naturally, I said yes. They said everybody was going to be wearing a tuxedo and that I had to go down and get measured for a tux.

Guess where I was within days? Need motivated action. I was in that tux shop getting fitted in that tuxedo.

If your television goes out and there’s an important ball game you want to watch, what happens? You’re getting that TV fixed or you may even buy a new one immediately. It’s amazing, when we need something, how fast we’re going to act.

Need always motivates action. You have to remember that. If the client knows they need to protect their income, they’re going to be in a hurry to get the policy. The no hurry objection won’t come up.

The third objection is, no confidence. I believe you really have to know your product and you have to be prepared. So, before you go out on that appointment, you’re going to go through that illustration. The illustration is going to help you understand the product.

And you’re not going to prepare by going through the illustration just once or twice. You’re going to know that illustration until you could just shut your eyes and see it. I study the illustration. I practice my presentation. I know where I’m going to go in the appointment. If you know and understand the illustration, you’re going to instill confidence in your client.

So, again, you have the need objection overcome, the client is going to act if they need it—which is going to destroy the no hurry objection, and If you know your material you’re not going to have any problem instilling confidence.

The last objection is, no money. It’s interesting. When someone needs something they’re always going to find the money to purchase it. The no money objection will generally come up toward the end of the presentation.

Imagine, you’ve already gone over all the benefits in your presentation with your client, reading right from the illustration. At this point you will summarize the benefits again very quickly, and say to the individual, “If we were to deduct x amount of dollars from your checking account every month for all of these benefits, would that create a financial problem?”

Now you know what the individual is going to say—either yes or no. If they say no, you’ve overcome the objection and then you proceed to fill out the application. If they say yes, my response has always been, “I don’t want you to buy this policy.” I don’t argue with people. I don’t say, “Buy this…sacrifice to buy the policy.”

The client is going to tell me if they can afford the policy. And if premium is an issue, I say, “I didn’t come here to create a financial problem, I came here to solve one. So, if you leave here very uncomfortable, I haven’t really done a good job. So here’s what I want you to do. I want you to think about this. Let’s presume we started off with half the monthly benefit. So, we would be deducting x amount of dollars, which is approximately half the premium for half of the benefits. Would that work for you?” If money is still an objection, reach out to the client next year.

I believe you overcome objections before you get objections. And that’s the way I’ve been handling them. I don’t get a lot of objections when I present a policy.

Phillips
As best as I can tell, there are three major objections to income replacement coverage and they’ve been there forever. I won’t get disabled. I have it at work. I can’t afford it.

I won’t get disabled. Well, let’s hope the client doesn’t. But according to the Council on Disability Awareness website (bookmark that page people!), a 20 year old has a One in four chance of a disability before they retire. Now maybe it’s not a career ending disability, but even a disability of a few months can blow out savings and impact a lifestyle. Are chances better or worse of your house burning down? Anecdotally, there’s never been a house fire in my neighborhood, but I’ve got two neighbors on my block alone who’ve been out of work for months now, one involved in a serious auto accident, the other ravaged by cancer.

I have it at work. Great!! Now what is it? How much? What does it cover? Sadly, if you pose that question to most clients they won’t know and the conscientious planner should ask for the client’s benefit booklet to make sure they aren’t short—and many higher income earners are. Most often group LTD benefits are taxable upon receipt and have a monthly maximum. Even a robust plan might leave a mid- to high-level earner with a small percentage of normal take-home pay if they get disabled. Tough to maintain a high income lifestyle when disabled as it is, let alone with a small percentage of pre-disability income.

We’ve also worked with a number of advisors whose clients have described, “I have it at work,” only to have reviewed their coverages and find out their work plan is a short-term disability plan. One that’s built for coverage of just a few months.

I can’t afford it. Many times the client can afford proper coverage, they just don’t want to afford it. This is where a holistic planner has a tremendous advantage, most often knowing the incomes and assets of the client inherently. And, even if one isn’t, some probing questions can give general insight into how much the burden of the DI premium will really be.

It’s important to point out, too, what it really protects. I think subliminally we send the wrong message as an industry to proposed insureds. A 40-year-old client sees a $3,000 premium, let’s say, and $5,000 monthly benefit. Well, to pay $3,000 to get $5,000 doesn’t sound like that great of a deal! But if we help that client understand that it’s $3,000 per year for $60,000 per year of DI benefits with a potential in this case for well over $1.5 million of total payout in a worst case scenario aspect (early disability)—that might carry more of an impact.

All that said, all the gurus, commentators and articles I’ve read say that the upward percentage of gross income a client will pay for a disability income policy is two percent. When running into a situation where an optimum DI plan exceeds that two percent number, consider tailor-making a plan that hovers around that mark. Longer elimination period. Shorter benefit period. Sacrificing policy riders. All can be effective ways to assure the client some protection. In the income replacement market, something truly is better than nothing and a plan that’s inforce at any level can soften the damage to a client’s lifestyle because of an extended sickness or accident.

Schmitz
Ask questions. What is your backup plan for partially surviving an accident or illness that would’ve killed you 20 years ago, but with modern medical technology, you can now survive with a disability? Listen. Most people that do not have DI were never asked.

Petersen
Disability insurance is the most important financial safeguard an income earner can possess. If you were to become disabled and lose your income, how would you pay bills, kids’ school tuition, all other insurance premiums, mortgage, car loans, groceries, etc.? Even medical bills can be paid, provided there is a source of cash flow! Medical insurance does nothing for your living expenses.

Bloch
At our last three DI Days, speakers have discussed their disability claims experience. All have been different and range from a serious car accident, Achilles tendon rupture and subsequent infections, to a physician with shoulder issues. The discussions are far reaching and include financial, family, personal and other considerations. Our producers hear first-hand experience to better understand the personal and business struggles when a disability moment strikes. This experience also allows them to be more comfortable talking about income protection coverage and the importance of a monthly check to replace lost income. By discussing these claims stories with potential prospects, they can overcome many objections. Not all claims experiences were handled positively by some carriers. As a result, we created a Claims Concierge Service to help our policyholders with the claims process.

Q.Many agents deal with high net worth individuals—what advice can you offer to increase sales in the individual and high-income markets?

Phillips
High net worth clients can be dicey to deal with from an income planning standpoint. Fundamentally, we can provide jumbo DI benefits via specialty markets. No issues or problems there.

However, high net worth clients might end up “outrunning the coverage of disability income protection” due to the nature of their business. Disability income insurance is built to “protect your paycheck” to coin the old DIAM slogan. Many high net worth individuals derive a high percentage of their income in passive income vehicles—rents, dividends, etc. Those passive vehicles will continue to generate income regardless of the clients’ health and involvement. Too high of a percentage of such income will lead to insurability issues.

One could argue that a critical illness policy could be offered to such individuals to address certain morbidity exposures. Disability income’s cousin, critical illness, offers a lump sum payout due to diagnosis of many dread diseases, heart attack, stroke, etc. It doesn’t have an earned/passive income criteria to get underwritten.

Schmitz
High earners are the market in CA. Focus on business owners and those who earn over $80,000. In CA, SDI pays up to $5,425 per month. It can be difficult to motivate lower earners when they have this government benefit. Fortunately, there are plenty of high earners out there. When they are married and have children they are the most motivated to protect their earned income, which provides for their family and maintains their lifestyle.

Petersen
Stress that those with higher incomes have more to lose and covering 40 or 50 or 60 percent of their income is not going to provide enough capital to cover the usual expenses of their affluent lifestyles. Those with higher incomes are not sufficiently covered by one, or even sometimes two, layers of DI. High-limit, excess DI is critical for high-net-worth clientele. The purpose of insurance is to keep what you have, not try and liquidate assets to pay for living expenses following a disability.

Bloch
The high-income market is the perfect market to discuss cash flow and tax liabilities. Many group LTD plans do not cover total income either because the stated monthly maximum is low or the plan covers salary only. To add insult to injury, many plans are employer paid and hence any benefits received are taxable. In the situation of high-income individuals, we provide a Group LTD Insurance Benefit and Tax Analysis identifying the net monthly income loss as well as benefit, tax, and health care premium solutions.

Q.What tips can you offer to ease entry into the business DI market?

Cohen
Tip #1: You should know the business products that are available. Companies have designed many different products for business owners. Below are short highlights of some of the business products out there.

Business Overhead Expense (BOE): You may be working with a business owner who has seven or eight employees and the owner is the main thrust of the business. Without him or her, the business isn’t going to function. In this case, you’d talk about a business overhead expense policy.

An overhead expense insurance policy helps insure the business owner’s business expenses if a disability prevents them from working. It can keep the business afloat. And the list of expenses that are covered is quite extensive.

Disability Buy/Sell (also known as Disability Buy-Out Insurance): You may have sold an owner a life insurance policy to fund their buy/sell agreement. Well, you want to ask them, “How are you going to fund your buy/sell agreement for a disability?” Because disability buy-out insurance helps provide funds needed to purchase a totally disabled business owner’s interest. So, you’re using the insurance company —rather than you acting as the insurance company. That product is extremely important. Why don’t more business owners have it? Simple. Because they just don’t know about it. And why don’t they know about it? Because many advisors aren’t bringing it up.

Key Employee Replacement: There may be a situation where you go into an owner’s business and you uncover that there is a key employee. This key employee could even be the owner if he or she doesn’t own more than 50 percent of the business. (There are additional criteria that defines a key employee that you will need to know as well.)

The purpose of a Key Person Replacement insurance policy is to help protect the business from the total disability of an employee who is extremely important to its success. This coverage helps minimize the disruption to a business if it loses a key person. Benefits are paid to the business and can be used as needed to help with new hiring costs, staffing needs and replacing revenue.

Business Loan Protection: When talking to a business owner, he or she may say, “I have a loan. We purchased more equipment.” Or perhaps the owner reveals they’ve purchased another business. Your response is, “How do you fund that loan if you’re disabled? Because I have a product that will help you pay that loan, per underwriting guidelines.”

Tip #2: It’s important to work with an agency like ours that trains, teaches, and helps you get familiar with the products.

Tip #3: So, how do you bring up business disability products to a business owner? You ask questions. Asking questions uncovers the need.

You can ask a small business owner to tell you the longest vacation they’ve ever taken. They may say two or three weeks. Ask them why they don’t take longer. They’ll tell you. They can’t be gone longer. They have to watch their business. They have to make sure everything is done properly.

Tip #4: Where do you get the names? Where do you get the business people? You get clients through referrals. One business owner can refer you to another business owner. Also, look at your book of business. You know who is a business owner.

Cold calling works. A lot of people aren’t calling business owners about disability income protection. You can buy a list of business owners and call them on the phone. Google the business beforehand to get an idea of how many employees the company has. You may have to make several calls before you get one appointment.

Tip #5: What are the types of businesses to seek out when calling about business disability insurance? These business products are needed by all kinds of different small businesses—law firms, medical practices, architectural firms, accounting firms, engineering firms, small manufacturing companies. We have products for the blue-collar business market and white-collar businesses.

Tip #6: So, what do you say to the business owner? Whether you’re talking to a longtime client or to a business owner on a cold call, you say you’d like to make an appointment to go over disability income protection with them.

During the cold call you tell the business owner that you work in the business market with business owners and you work in the area of disability income protection. You let them know that you have a policy that will provide them with an income if they can’t work due to accident or illness.

Business owners have to protect their investment in that business. If that business goes under, employees can get another job. The owner? Well, he or she has a lot more to lose.

Most owners aren’t working 40 hours per week. It’s more like 60 hours per week. Plus, they never take long periods of time off. Without disability income protection, even a short time away from work due to a disability could be devastating to the life of a business.

So, a business owner’s need for disability income protection is great. Business disability protection is going to protect their standard of living. It’s going to protect their investment.

Tip #7: Remember, the owner may have a group LTD policy for his employees. You want to investigate that group LTD policy because that policy may only cover a small portion of the business owner’s income. So, naturally, we’d have to put another policy on top the group LTD policy to protect the owner.

Phillips
The obvious easy strategy is to bring up the concept to any business owners or group benefit relationships one might have. Have group LTD on an account? Look to see where the max benefits of the group LTD plan leave higher income earners short.

If an advisor works in planning for those who own their own business, simply ask if they have benefits at the workplace.

In addition, one of the adages I adhere to is, “You are what you market yourself as.” So a tip to get into the business market is to market yourself as someone who works in the Business DI Market! This might involve networking with benefits agencies, articles in local publications and websites, or even speaking to business organizations or professional insurance and financial planning associations. If you are seen in your market as an authority—if you bring up the concept to those in your sphere of influence, eventually you will be sought out as someone who can implement a strategy for a sound business DI plan (or even personal DI plan).

Schmitz
If you are already a financial, insurance, or benefits advisor, it is imperative to inform your clients about the existence of products that can help them manage the risk to their portfolios which may include business assets. Contact a DI BGA or DI specialist and have them provide you with training on business products. Start with Business Overhead Expense (BOE) to keep the business running, Disability Buy/Sell to buy out your disabled business partner, Loan Indemnification to pay the bank, and Key Person to pay the business when it loses a key person due to a disability.

Petersen
Use IDI sales as door openers. Once you have earned the trust of your personal DI clients, those that own businesses will hopefully be more open to seeing the importance of also protecting their businesses with buy/sell, key person, BOE and loan indemnification insurance. You have successfully protected their families, now ask them for the chance to equally protect their businesses.

Bloch
Many producers are looking for more daytime activity and the business marketplace is the perfect place to start. The DI marketplace needs more producers to discuss disability insurance and cash flow with business owners. The easy way to gain entry is with guarantee issue coverage. This can be through the implementation of a group LTD plan, which only requires two or more employees. In addition, there are specially designed guarantee issue products to supercharge group LTD plans. Business Overhead Expense coverage is also a very easy topic to discuss as well. From this starting point, it will be a normal progression to implement high quality individual protection.

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