Michael Cohen

Of course we are biased, as we are a disability centric MGA/wholesaler, so we feel everyone should be presenting individual disability insurance every day. But why would we be so emphatic about disability insurance and why should you be too?

We all sell income replacement: Life insurance is an income replacement product. Of course there are many uses for life insurance in business and estate planning, but the majority of applications many of us see are very simply term insurance. Life insurance is a wonderful concept, someone works and provides an income to their family. That person ends up passing on way too early, and the spouse or family that relied on that income can be left in a lurch. When we hear about someone passing on with dependent children, we always say to ourselves, “Boy, I hope they had life insurance.”

When completing an application for life insurance, the company needs to know the person’s income… Why is this? If the insurance is for income replacement, the underwriter will use a multiple of income to determine how much coverage can be issued to replace the income.

Life insurance is different, as it’s easier to sell
We occasionally will hear this from some producers, “Life insurance is easier because everyone knows they are going to die.” In actuality, everyone also gets disabled before passing on. We just don’t know how long that disability will last. It could be a few minutes, could be a few hours, a few days, a few months, a few years or decades. Disability planning and the underlying insurance should be just as easy of a conversation.

Disability is a must conversation
Regardless of your main product, the conversation about a client’s game plan if they can’t work is a must. Many clients will spend more time planning a vacation or wedding than they do planning for a possible personal tragedy. The conversation is essentially, “Tell me what are your plans if you could no longer work due to an accident or chronic illness?” From there, listen and take notes. Regardless of where the conversation leads, every sale starts with a conversation. Everyone actually has a plan, whether they know it or not. If they bought insurance to cover their risk, good for them. If they hadn’t even thought about it or chose to roll the dice and go without insurance, they are essentially self-insuring the risk. Regardless of the outcome, having this conversation is healthy for your clients and even more healthy for you and your practice.

Disability insurance is an everyday product
It’s important for you to make this disability planning an everyday conversation and everyday product you quote. Income planning is the cornerstone of any financial plan, whether formally or informally planned out. You can have some fun with the planning as well. While the conversation is definitely serious in nature and a must to have, it can also be approached in many different ways. One of our favorites goes like this: “If you couldn’t work due to an accident or illness, and had to be at home to recover, you’re going to need a few things: You’ll need a roof over your head, so let’s cover the mortgage or rent. You’ll need your electricity, gas, water, so let’s cover the utilities. You’ll want to watch TV, so let’s cover your cable and/or internet. You’ll want to eat and order in some pizza, so we’ll need some money for food. So, at a minimum, we’ll need to cover “x” amount so that you can at least hang out at home, watch football, order pizza and be able to wash your hands and brush your teeth.” If you do that exercise with most people, you’ll notice that the amount of coverage needed is typically about $3,000 to $6,000 per month at a minimum. Of course, most clients have more fixed expenses, such as the cost of cars, insurance, clothes, and childcare costs are just among the few additional fixed expenses that clients need to cover. In addition, many producers just ask us to run the maximum someone can obtain based on their income.

While producers may have varying opinions regarding how to work with clients to determine the amount of coverage needed, we would probably all agree that having the conversation needs to be a daily occurrence.

How will you make disability insurance a daily conversation in your practice?

October is here which means World Chicken Day is here on the second Thursday of October, October 12 this year. This reminds us of the KFC or Kentucky Fried Chicken story. You can look it up, but in general, the KFC marketing name evolved out of the Kentucky Fried Chicken marketing department. This leads us to the name that many of us refer to when describing the product of disability insurance.

When you mention the word “disability” what springs into your mind? For many, it’s a wheelchair, as that has become the sign for handicapped or disabled parking. In almost every parking lot in America, there are parking spots reserved for those who are considered disabled. Most likely, you know of or have seen someone who needs to utilize handicapped spaces. In addition, you may have a preconceived notion and visual image of what it means for someone to be disabled enough to have a placard.

To many insurance producers, the name Disability Insurance is a misnomer, as the insurance isn’t designed to be medical insurance but to help replace a portion of someone’s income if they become disabled. This is why it’s important, at the very least, to add the “income” part to Disability Income Insurance. Understanding the psychology of words is essential for people’s interpretation and understanding of the planning concepts and insurance products you are recommending.

Some in our industry recommend describing disability income insurance differently all together, as they feel that name conjures up thoughts of wheelchairs, crutches or individuals who have some type of malady that can be visibly seen or heard. While these images may reflect someone who may perhaps qualify for a disability insurance claim, the insurance is designed to replace a portion of income due to these types of conditions. Income replacement is the focus. Perhaps a name such as “insurance to replace your income if you can’t work due to an accident or extended illness” would be a better description, but that name is obviously too long.

Disability income insurance is the industry product name, so we need to give better descriptors to our clients. Some producers will just use the industry name of the product when describing the insurance, with the assumption that the consumer will understand the concept. Others will ask questions to assist the client’s understanding of the product. For example, “What is the longest vacation you’ve ever taken?” Most people will say about two weeks, with the producer’s next question being, “Why only two weeks?” The typical answer is, “We had to get back to work.” For most people, they need to get back to work in order to make sure an income is still coming into their household.

One of the biggest fears that people have in retirement is outliving their savings and not having enough income available to them in order to maintain their standard of living. These are typically individuals who are on a fixed income.

If someone can’t work due to being injured in an accident or having to try to recover from a sickness, they have suddenly become your fixed income clients in that they need to live off their assets. An insurance policy that pays a monthly income to a client who can’t work allows the client to have outside cashflow and can allow the preservation of capital and other assets.

Remember, there are essentially two different timelines of injuries or sickness that cause a loss of work. There are the sudden injuries or illnesses that cause one not to be able to work, such as a major car accident or severe stroke. Hopefully that person can get better and eventually get back to work in some capacity.

The other timeline usually involves a longer ramp up before someone is unable to work at all due to their illness. A good example of this would be someone who develops MS, ALS, cancer and many other diseases that have deteriorating properties that eventually can prevent one from having the physical and/or mental ability to work. You noticed that in these descriptions, the word “disabled’ was never used. It was actually challenging not to use the word disabled, as it’s become so much part of our insurance lexicon. In actuality, it’s the lack of ability from an injury or sickness that prevents one from being able to work which causes the financial hardship that planners wish to prevent.

So, remember, regardless of what you call October 9, how you describe disability income insurance to your clients is of daily importance.

2009 Honoree International DI Society
W. Harold Petersen Lifetime Achievement Award

2015 Honoree of NAILBA’s
Douglas Mooers Award for Excellence

With the help of Victor Cohen, this is part of our ongoing series with Eugene Cohen, founder of the Eugene Cohen Insurance Agency, Inc., 2009 Honoree of the International DI Society’s W. Harold Petersen Lifetime Achievement Award and 2015 Honoree of NAILBA’s Douglas Mooers Award for Excellence.

From time to time we will feature an interview with Eugene, who has dedicated almost 60 years of his life to learning, teaching, and supporting brokers in the agency’s quest to help consumers protect their income from the tragic effects of a disability.

Disability insurance (DI) is one of those products that can change the trajectory of an individual and a family’s life and is crucial for every financial planner and insurance professional to learn about and offer to clients.

Victor: Eugene, I know that producers often ask you for suggestions on how they can increase their disability insurance (DI) business through prospecting. So, that’s what we’re going to focus on in our discussion today.

Eugene: One of my favorite topics.

Victor: Let’s first start with the producer who has been in the industry a long time but hasn’t really focused on DI. What do you recommend?

Eugene: I say, look at your book of business. You have so many clients who don’t know they should insure their income which, in most cases, is their greatest asset. It’s not unusual to find that no one has talked to them. Income planning, whether post-retirement planning or while working, will peak a client’s interest.

Victor: Are there certain types of clients that the long-time producer should perhaps first reach out to in their book of business?

Eugene: Higher income earning professionals often make great DI clients because they have so much to protect. Physicians, attorneys, small business owners, real estate professionals, CPAs, engineers, consultants, the list is endless.

Victor: What about clients with more blue-collar jobs, like plumbers, electricians, mechanics?

Eugene: They can also be excellent DI clients—especially if they own their own business. Business owners in general make great DI clients because they understand how hard it was to build the business and how easily it can come undone due to an extended disability
In addition, if the advisor has funded a buy-sell agreement with life insurance, there is often the need for the client to have a disability buyout policy. There’s also a DI policy to cover business expenses.

Victor: Let’s now look at the new producer. When you started your career, you focused on DI. I’m curious, what made you want to specialize in disability insurance when others in the business chose other areas of focus?

Eugene: I chose to focus on individual disability income protection rather than other products because everyone has an income they need to protect. Once you meet someone who became disabled and needs to use a policy, then it sticks in one’s head. Then the more we talked about it, the more we realized that very few individuals are ever approached about DI. It’s really surprising!

You know what’s amazing? I don’t think the need for our product has changed since I started offering it decades ago. Our job is still to make sure that the client is aware of all these wonderful disability insurance products that have been designed to protect the individual and their family from financial ruin.

Victor: What do you suggest new producers do first? They don’t, of course, have the luxury of looking for DI clients through their book of business—because they don’t have a book of business.

Eugene: I suggest new producers and any producer new to DI—first learn the DI products. There are agencies like ours and others that offer training.

Then choose an occupation to target. For example, any of the occupations I already mentioned are fantastic. But you could also focus on car dealership managers, even florist shop owners, or restaurant owners. There are so many individuals who need DI.

Victor: Where do new producers find clients to meet with?

Eugene: When I started in this business I had no choice but to use the phone—make cold calls. My manager told me to first talk to my friends and family about DI. But they were not very good prospects. So, I had to use the phone.

Fortunately, I learned from an early age in this business that talking to people is the secret. If a producer calls and talks to enough people they will pick up appointments. Things will happen.

Victor: Do you remember what you would say on the phone when making cold calls?

Eugene: It’s burned into my brain like it was just yesterday. I’d get the business owner on the phone and say, “Hi, my name is Eugene Cohen and I specialize in offering disability income protection, which is a policy designed to provide an income if you were to ever get sick or hurt and your earning stopped. Let me ask you a question, do you have something like that?” They’re going to answer either yes or no.

If they answer no, I merely would say, “I would like to stop by and introduce you to this concept of insuring your income from sickness or accident. Is Wednesday at 3:00pm or Thursday at 4:00pm good for you?”

I may have to talk to five or six or seven people before someone says, “Fine, come on out.” The more people I would talk to, the more appointments I would pick up.

Victor: What if the person on the phone says they think they have something like you are describing?

Eugene: Then I would say, “Is it group disability insurance or individual?” If they answered, “Group,” I would congratulate them on having disability income protection and I would ask if I could review their group policy because they may need additional coverage.

Victor: What if they say they have individual disability insurance?

Eugene: Then I would ask them when they last had it reviewed. Because, over time, as a DI policyholder’s income increases, often the client doesn’t increase their monthly benefit—eventually making them under insured.

Victor: What if they say they have a DI policy that was recently reviewed?

Eugene: Then I would thank them for their time and call the next person on my list.

Victor: And where did you get the numbers to call?

Eugene: When I first started I would go to the Cleveland Public Library and go through business directories with business phone numbers, focusing on professional people and business owners. I’d write down the names and numbers of individuals to call in surrounding small towns I was planning to soon visit.

But producers have it so much easier now. All you have to do is Google an occupation you want to focus on calling, type in the city where you’ll be working, and there’s your list of numbers to call.

Victor: Why do you think some producers have a hard time making cold calls?

Eugene: Two reasons. They don’t like rejection and they think it’s too hard. I feel rejection is just part of it. You’re not going to have everyone say yes. But you are definitely not going to have anyone say yes if you don’t call.

If every producer says they don’t make cold calls, that’s great…for the producer who is making them.

Victor: What do you think about sending out email blasts as a way of connecting with prospective clients?

Eugene: I never read emails from people I don’t know. Do you? You have to talk to people. There is no way around it. You have to help them see the need. Need motivates action. And how do you help individuals see the need? You ask questions.

Victor: What are some of the questions you suggest asking?

Eugene: I would ask, “How important is your income to you?” While the answer may seem obvious, the question often helps the client see how much of their life depends upon income. It’s hard to do anything without income.

You can also ask, “What’s the longest vacation you’ve ever taken?” The client will often answer, “One, two or three weeks.” Then, ask them, “Why not longer?” Naturally, they will almost always answer, “I have to work.” Then you can say, “Well, what would you do if you had a disability and you couldn’t work for five years, ten years, maybe until age 65? What would you do? There are policies that will pay a portion of your income for a period of time.”

Another question to ask: “How long has it taken for you to accumulate the assets you have?” They may say, “Ten or fifteen years.” Then ask, “If you were disabled and your income stopped, how long would it take for your assets to disappear?” A disability income protection policy can help protect a portion of your assets if you’re ever disabled due to an illness or accident.

Victor: Unfortunately, we are going to have to wrap things up here. Any final thoughts before we talk again?

Eugene: Referrals can also be very helpful, of course. And a great way for any producer to learn about DI is to ensure that their own income is protected with a DI policy.

Victor: Eugene, as always, thank you for this opportunity to once again talk DI with you. You have so many invaluable insights from all your years of success in the business, I could literally go on talking with you forever. Thank you, again.

Eugene: Thank you, Victor. Always great talking with you.

It’s not often that we have such an iconic symbol who so overtly shows the need for our insurance products than the story of Christopher Reeve. For those who don’t know this story, Christopher Reeve starred as the main character in the Superman movies that came out in 1978, 1980, 1983, and 1987. Standing at 6’4”, his frame fit the part perfectly. Many don’t realize that he went on an intense upper body, power workout program to make his physique even more like Superman. He was 26 when the 1978 movie, Superman, ended up being nominated for three Academy Awards. The movie, and this 26-year-old heart throb, were the talk of Hollywood and the country at the time.

As his stardom grew so did his love of horses and competitive riding, which led to that fateful afternoon in Virginia when, on May 27, 1995, Christopher suffered a tragic equestrian accident leaving him paralyzed from the neck down. He went on to become a great advocate for the disabled until his death in October 2004. The contrasting story of his life, from stardom to disabled advocate, reminds us every day of the importance of what we all do for our clients. From disability insurance, life insurance, and long term care insurance, important lessons can be learned from this man of steel.

We hear stories all the time of those who have become totally disabled due to accidents, illnesses, viruses, etc., that in many cases were no fault of the individual—they just happened. We’ve all had incidents happen to us that make us go back in time and self-analyze what we could have done differently to have prevented the situation.

If we could just go back and do it over again, what would we have done differently? We are sure that Christopher Reeve played back that fateful day over and over again in his mind of what he could have done differently. On March 27, 1995, he walked on stage of the 67th Academy Awards with Susan Sarandon to present the best supporting actress award. This was exactly two months before his life would change forever. If only an audition came up two months later, or a speaking engagement, or charity event that would have stopped him from competing in that fateful competition, he could have been with us today.

This brings us back to our clients and what we do every day. If you knew that your client was going to become totally disabled in two months, what would you do differently as a planner? Our clients are the superheroes of their families and communities. They are revered as mothers, fathers, spouses, and leaders in their community. Many of them carry the weight of the world on their shoulders by being the main source of income for their families and/or businesses. Many of these businesses contribute to the community by not only being of service, but also by being an employer as well. How have we planned for their families and businesses that are so reliant on our own superheroes being able to work every day and create the incomes that are so important to so many?

We all know someone who has been in an accident or who has had an illness that may have affected them for a few days, maybe a few weeks, and maybe even worse. We just don’t know what tomorrow is going to bring. We can’t go back in time and apply for disability insurance. Your clients need your assistance, they need your wisdom, they need your skills in planning and your knowledge of why disability insurance is needed.

You don’t even need to sell the product yourself, as there are plenty of MGAs like ours that know producers who specialize in disability insurance. You need to recognize that the planning conversation needs to occur. Of course, if you hold the proper state license, we encourage you to work with the client yourself and understand the sale process. An MGA like ours may have someone that only works on disability insurance every day and can be of assistance in guiding you through the process.

Let’s not have any regrets in how we assist our clients every day. It’s important to bring awareness and make sure you’ve talked to your clients about individual disability insurance. For your business owners, it’s also important to discuss business overhead expense (BOE) and disability buyout coverage (DBO). Let’s not have the “I should have talked to my client two months earlier” type of guilt. Our industry provides some of the greatest support mechanisms available in the country, as long as they are properly used. Review your client list today to make sure that your clients have been made aware of disability insurance.

Free Stock photos by Vecteezy

With the help of Victor Cohen, this is part of our ongoing series with Eugene Cohen, founder of the Eugene Cohen Insurance Agency, Inc., 2009 Honoree International DI Society W. Harold Petersen Lifetime Achievement Award, 2015 Honoree of NAILBA’s Douglas Mooers Award for Excellence.

From time to time, we will feature an interview with Eugene, who has dedicated over 60 years of his life to learning, teaching, and supporting brokers in the agency’s quest to help consumers protect their income from the tragic effects of a disability.

Disability insurance (DI) is one of those products that can change the trajectory of an individual and a family’s life and is crucial for every financial planner and insurance professional to learn about and offer to clients.

Victor: I know you are very passionate about owners of small and medium-sized businesses needing disability business products. It’s an area of disability insurance that often goes overlooked. Can you tell us more?

Eugene: Yes, business owners definitely have unique DI needs that non-business owners do not have. But like most clients, a business owner needs an individual disability income protection policy.

Let’s suppose a small business owner has an individual disability insurance policy with a $10,000 monthly benefit and a 90-day elimination period. If disabled, they will receive a monthly benefit payment at the end of the fourth month—let’s say until age 65.

But let’s say our client is a disabled small business owner. They have a lease and other business expenses like salaries for their three employees, utilities, phone bills, and other business expenses.

If this small business owner has a qualifying disability, let’s say they will receive a benefit from their individual disability insurance policy to cover their non-cancelable living expenses…but what about those noncancelable business expenses? Remember, disabled or not, the bills to keep the office running are still coming in. Where is the money for that? A small business owner’s business expenses could be $20,000 per month.

This business owner needs a disability business overhead expense (BOE) policy. It helps protect their business by paying many of those qualified business expenses. While the business owner may not be working, the BOE policy will be.

Imagine a business owner who is totally disabled and their doctor says, “You should be able to go back to work in one year.” Without a business overhead expense policy there may not be anything to go back to. The business could be gone.

Victor: How do you suggest the producer help their client who is a small business owner see the need for business overhead expense insurance?

Eugene: Just like with all DI products, the best way for a producer to help a client uncover the need is by asking questions.

Ask the business owner client, “If you were disabled for more than one month and your disability lasted at least a year, would you have a problem keeping your business open and running? Because there is a policy available that will cover many of your qualified business expenses. The benefit period could be 12 monthly payments, 24 monthly payments or 30 monthly payments.” Each company may have their own qualifications and limitations when considering eligible BOE candidates.

Victor: It feels like this is a must-have DI policy for owners of small and medium-sized businesses.

Eugene: The need is there. All the producer needs to do is ask questions. For example, let’s say the producer asks their client if they have a business partner and it turns out they do. Each client owns 50 percent of the business with each sharing 50 percent of the business expenses.

Now the producer can suggest talking to the other partner about picking up a BOE policy too. With each owner responsible for perhaps $10,000 per month in business expenses, if one of the owners is disabled, it does not have to be a tremendous financial burden on the partner still working. The disabled partner’s share of qualified expenses would be paid by the BOE policy.

I believe that need motivates action. When the client understands the need for a particular product, they want to act. In the examples just mentioned, the clients would certainly understand that it would be to their advantage to protect their individual DI policies and not be financially burdened by business expenses if they were disabled for a short time.

The most important thing is that your client is aware of this type of insurance so they can make an intelligent decision if this is something they need.

Victor: How does the BOE policy pay and what is the target market?

Eugene: These types of policies will reimburse the policyowner for the business expenses that qualify per the policy. The premiums are deductible as a necessary business expense. Generally speaking, the target market is clients who are 35 to 55 years old who own small to medium-sized businesses.

Victor: BOE protection really seems to be just the tip of the iceberg when it comes to DI products available to the business owner.

Eugene: Business owners are an exciting market. They have so many needs. For example: The advisor has a meeting with their client, looks over their buy and sell agreement and says to the client, “If one of you were to die, we have to make sure there are dollars to buy out the other partner.” The partners are in agreement. They need that. And they purchase a policy to fund the buy and sell agreement that would pay upon the death of one of the owners.

Now, what happens if instead of passing away, one of the owners has a serious disability? What if they have a serious illness or get in a serious accident that disables them for more than a year?

This is why it is important for the owners to each have a disability buyout (DBO) policy. It provides the funds needed to purchase a totally disabled business owner’s interest in their business.

Victor: Can you give an example of how a DBO policy may pay?

Eugene: The policy helps to provide the funds needed to execute the buyout agreement in case there’s a serious disability. Let’s say you have two owners who are each 50 percent owners of a business worth $2,000,000. If one of the partners had a qualifying disability, per the agreement and the policy, then, after the elimination period, the insurance company would pay the policyowner the funds. This could allow the policyowner to have the funds needed to fulfill the agreement. That’s a simple example of how the policy works. Each company has its own qualifications, minimums and maximum benefit amounts.

How do you uncover the need for DBO? You ask questions. “How are you going to fund your buy and sell agreement for disability if one of you is totally disabled and can’t work in the business anymore? Are you going to use business revenue? Is the remaining partner going to take out a loan? If it’s a corporation, are you going to sell shares of the business for capital?”

Victor: Can you please also talk a little about disability loan protection for the business owner client?

Eugene: If your business owner client has an existing or upcoming business-related loan or loans they are planning to take out, business loan protection can possibly help a business owner continue to pay their business-related loan(s) if they become totally disabled and can’t work.

To uncover the need, ask the owner of a small or medium-size business if they have any outstanding loans related to the business. And if they do, then explore with DI companies if the client has an insurable qualified loan.

Finally, the small or medium-sized business owner may have a key person who is extremely important to the operation. If that key employee were to become disabled, naturally it could cause hardship to a business.

So, the corporation or business may want to own a policy on that key employee. The policy could pay a lump sum or a combination of monthly payments and a lump sum payment if that employee were disabled. The elimination and waiting periods and issue limits may vary.

A key person disability policy can be a very important policy to help a business get through a challenging time when losing a key employee due to a total disability.

Victor: Thank you, Eugene, for talking about disability insurance business products. I know there is so much more you could share. Looking forward to us doing this again soon. Can’t thank you enough.

Eugene: Thank you, Victor. It’s always great talking DI with you!

If you haven’t heard of ChatGPT, you most likely will sooner rather than later. This new artificial intelligence was developed by OpenAI with heavy investments by Microsoft and others. ChatGPT is part of the new wave of search engine technology that combines traditional internet searches with AI to create a more conversational response.

We were curious about the answers that ChatGPT would give a consumer that engages in the platform. So we asked ChatGPT, “Should I buy disability insurance?”

The answer that ChatGPT gave was very interesting and confirmed many of the reasons we’ve been espousing throughout our careers. But, then again, the AI part of the system can pull out reasons that would need more commentary as well. Let’s look at the answer to the question:

“Whether you should buy disability insurance depends on your personal situation and priorities. Here are some factors to consider when making this decision:

1. Your Income: If your income is the primary source of support for yourself and/or your family, then disability insurance can be an important consideration to ensure you have a financial safety net in case of a disability.
2. Your Job: If you have a high-risk job or work in a profession that involves physical labor or mental stress, then disability insurance can be particularly important.
3. Your Savings: If you have substantial savings that can cover your expenses for an extended period in case of a disability, then you may not need disability insurance as urgently.
4. Your Dependents: If you have dependents who rely on you for financial support, then disability insurance can be essential to ensure they are taken care of if you become disabled and unable to work.
5. Your Health: If you have pre-existing medical conditions or a family history of disabilities, then disability insurance can be particularly important.
6. Your Lifestyle: If you have a high standard of living or are accustomed to certain luxuries, then disability insurance can be important to ensure that you can maintain your lifestyle in case of a disability.
7. Your Employer: If your employer offers disability insurance as part of your benefits package, then you may want to consider taking advantage of this option.

Overall, disability insurance can provide financial protection and peace of mind in case of a disability. It’s a good idea to assess your personal situation and priorities and consult with a financial advisor or insurance agent to determine if disability insurance is right for you.”

Let’s go through the answers:

1. The system pulled in the concept of a financial safety net. This is so true and should be the primary focus in discussing why disability insurance should be so important to every client.
2. Type of job: While we would agree on the surface that certain jobs may give one concern, it should never be the primary determinate if one needs disability insurance. Diseases such as cancer, heart disease, autoimmune disorders, diabetes, MS, and the thousands of conditions in the Merck Medical Manual do not know what someone does for a living. So, this one would require some additional commentary.
3. Regardless of someone’s savings, what tends to happen when someone is disabled is that they start to use their most liquid savings first and then have to start liquidating the more illiquid assets. When assets designated for the long term all of a sudden must be liquidated, it’s possible that the liquidation would be at fire sale prices. The loss, in theory, could be much greater than the cost of a disability policy. Also, typically, one works hard to build savings. Often years of an individual’s career goes into establishing even moderate savings. Most individuals save to ensure they enjoy a comfortable retirement down the road. Many individuals also diligently save to accumulate assets to pass on to their children and others. Because no one knows today how serious a future total disability could be or how long a disability could last, having an individual disability insurance policy could be the difference between preserving some, if not all, of one’s liquid and non-liquid assets and seeing those assets vanish due to a disability.
4. Dependents are one of the biggest reasons that clients obtain disability insurance in addition to the other products that we recommend. We couldn’t agree more.
5. Health concerns: The AI system didn’t realize that while your client’s money pays the premium, it’s someone’s good health that allows them to obtain a policy. If someone waits for a medical condition to occur, the disability insurance company could exclude the condition from coverage or not allow a policy to even be issued.
6. Lifestyle: This one we would disagree with, as it doesn’t matter how luxurious one’s lifestyle while discussing disability insurance. Anyone who works needs to protect their income from a disability that can prevent them from working. With that being said, we do find that there tends to be a correlation between a client’s income and their willingness to buy the coverage.
7. Employer coverage can be a whole topic in itself. If a company offers group insurance, the coverage is usually mandatory and not voluntary. We think Group STD (short-term disability) and Group LTD (long-term disability) coverage is a great start, but it is often not enough. The AI system definitely glossed over the need for many clients to layer an individual disability insurance policy on top of their employer provided group DI coverage. Often the quality of group coverage can be suspect at times and group coverage is rarely portable if someone changes jobs.

We are very pleased to see that the AI system recommends that an individual consult with their financial advisor or insurance agent to determine if disability insurance is right for them. Will you be ready for the conversation with your client when they come asking for advice? Be sure to talk to your MGA or other resources about individual disability insurance.

2009 Honoree International DI Society
W. Harold Petersen Lifetime Achievement Award

2015 Honoree of NAILBA’s
Douglas Mooers Award for Excellence

With the help of Victor Cohen, this is part of our ongoing series with Eugene Cohen, founder of the Eugene Cohen Insurance Agency, Inc 2009 Honoree International DI Society W. Harold Petersen Lifetime Achievement Award, 2015 Honoree of NAILBA’s Douglas Mooer Award for Excellence.

From time to time, we will feature an interview with Eugene, who has dedicated over 60 years of his life to learning, teaching, and supporting brokers in the agency’s quest to help consumers protect their incomes from the tragic effects of a disability.

Disability insurance (DI) is one of those products that can change the trajectory of an individual and a family’s life and is crucial for every financial planner and insurance professional to learn about and offer to clients.

Victor: Great talking about individual disability insurance (DI) with you again, Eugene. Very appreciated.

Eugene: Thank you, Victor. I always look forward to our conversations.

Victor: As do I. And our discussion today is especially timely.

Eugene: That’s right. Because May is Disability Insurance Awareness Month. Really, every month of the year—not just in May—producers need to be aware of the important role disability insurance plays in protecting a client’s most valuable asset—their ability to earn an income.

Victor: So, I know this is a big question. But let’s just dive in! What do producers need to be aware of when it comes to disability insurance?

Eugene: Well, first of all, just like one shoe doesn’t fit every foot, the same can be said perhaps about disability insurance companies. It really helps if producers are aware of this.
For example, some DI companies have products designed to be most attractive to the white-collar market. Doctors, lawyers, accountants, engineers, etc.

Other DI companies may seek out individuals who have more blue/grey collar type occupations. These are those occupations that involve a lot of manual duties—electricians, plumbers, carpenters, hair stylists, machinists, mechanics, truck drivers, etc.

It’s the advisor’s responsibility to know which DI companies may serve their DI clients’ needs best.

Victor: How would a producer who is new or does very little DI business know what DI company or companies may best serve their client’s occupation type?

Eugene: The more an advisor becomes familiar with the different DI products out there, the more evident it becomes. Working with an MGA, similar to our agency, can often be an excellent resource.

Victor: What else do producers need to be aware of regarding DI insurance?

Eugene: The producer needs to be aware that when a high-earning professional client has group long term disability (LTD) insurance through their employer—that client may often have an important need to add an individual disability insurance policy on top of that group LTD.

Victor: I have often heard you say, group LTD is a great start. But it often isn’t enough.

Eugene: That’s right. You will find that high income executives and professionals like doctors, attorneys, engineers, etc., may have group long term disability insurance. But the group LTD typically often only covers a portion of the client’s annual income.

For example, an executive earning $300,000 per year, which is $25,000 per month, may think they are adequately covered by just their employer paid group LTD.

But let’s say the client’s group LTD policy pays perhaps a monthly benefit of 60 percent of the client’s monthly income, up to a maximum monthly cap of $10,000. And in this example, premiums are being paid by the employer with no gross-up, which means the benefits may be taxable at time of claim.

For this client, their after-tax net monthly benefit could perhaps be much lower than the $10,000 they were expecting. It’s possible for a client’s joint tax backet, plus possible state taxes, to be well over 30 to 40 percent. If the producer made the client aware of their group LTD shortcoming, the client would most likely need to add coverage with an individual disability insurance policy. Of course they would need to qualify for the additional coverage, based on health history and the issue and participation limits of the individual disability insurance companies being considered.

Victor: What else is important for a producer to be aware of when it comes to DI?

Eugene: Usually, if you have three clients working for the same employer, the clients may qualify for a “multi-life” discount if they all apply for DI and take their policies.
Something else to be aware of—many DI companies have “simplified underwriting” where labs and an exam may not be required in underwriting—based on the client’s age at application time and the monthly benefit amount they are applying for.

Here’s something else to be aware of—business owners are fantastic DI clients. Many DI companies offer incentives to business owners with discounts typically ranging from 10 to 15 percent, depending on the DI company.

And there are excellent DI products specifically for business owners. Like business overhead expense protection. If the owner has a qualified disability, the policy pays eligible qualified business expenses like the monthly lease, perhaps employee salaries and other monthly business expenses. Typically, this is an expense reimbursement policy.

Talking about business owners, if the advisor has two or more clients who are business owners of the same company, those clients may already have a buy-sell agreement funded with life insurance. The advisor needs to be aware that there is also a disability buyout policy that can fund a buy-sell agreement if an owner is totally disabled and unable to work.

Victor: There is also a lot to be aware of when a producer has a physician client, correct?

Eugene: Definitely. Producers should be aware that the medical resident and medical fellow market is very competitive. Many companies offer comprehensive DI policies with substantial discounts to these clients.

There are options on the policies to increase coverage at a later date with no medical underwriting, just financial underwriting only. This is great after the client finishes their medical training and starts their first job where their income can rapidly increase.

Victor: Speaking a little more about doctors, what should producers and their physician clients be aware of when it comes to “medical specialty language” in a DI policy?

Eugene: A producer with a physician client who is a surgeon, a dermatologist, or really a doctor with any medical specialty, producers need to be aware that there are some DI companies that offer policies that have “medical specialty language.”

If totally disabled, this important language may provide more flexibility for the physician client if they can’t perform the duties of that specialty, but can still work in a different career or different field of medicine.

For example, take an orthopedic surgeon who gets in a skiing accident and permanently injures their left hand, making them unable to go back to work as a surgeon because they can no longer perform surgery.

Thanks to “medical specialty language” in a DI policy, perhaps that surgeon decides to work in a different medical specialty that does not require use of both hands. They could earn income from that new medical occupation while still collecting their full disability benefit—because they are disabled and unable to work (per the policy’s definition of total disability) in their medical specialty. Of course, each claim can have its own set of circumstances and would need to be approved by the insurance company paying the claim.

Victor: Thank you, Eugene, for another great DI conversation. Do you have any final thoughts as we wrap up this discussion?

Eugene: It’s obviously better for your client to be aware of income protection insurance before becoming disabled rather than after.

Imagine your client’s spouse calls and says, “My partner has had a stroke and will be permanently disabled for an indefinite amount of time. I know there is some kind of policy that pays. Do we have that?”

The conversation will continue one of the following three ways, with you, the advisor, replying:

Response number one: “We never talked about it. They do not have that type of policy.”

Response number two: “Your partner and I went over that DI product thoroughly and they signed a form I have in my files confirming that they did not want it.”

Response number three: “Your partner has a DI policy. The policy is active. Let’s see if they have a qualifying claim.”

April is such a great time of year for any sports enthusiast. Baseball season starts in earnest in April, which always reminds us of summer sports and sports related injuries. As planners, advisors, and any producer who recommends insurance products, disability insurance should be a product on the top of the list for your working clients.

As you’ve heard us say time and time again, Need Motivates Action. The need for income and cash flow is constant. Every one of your clients needs some type of cash flow to make sure they can pay their bills. The majority of your clients are working so that they can maintain their standard of living in the style they enjoy and put money away for savings.

We all know that most of your clientele are working every day because they enjoy the chosen occupation that they engage in for most of the hours in their week. Most of your clients would identify with an occupation they feel they have mastered, enjoy, and plan on continuing to focus their energy on.

Playing adult sports can be a great way to stay connected with friends and peers. From soccer, to hockey, to tennis, pickleball and golf, there’s a sport for everyone to participate in. According to injuryfacts.ncs.org,* there were three million plus sports and recreational equipment emergency room visits in 2021. Over a million of those visits were by individuals over age 25, and well over 200,000 of those emergency rooms visits were by individuals over age 65! We are sure you’ve known friends, loved ones, or even yourself who could have been part of the statistics in any given year.

While the majority of those who were injured in the 2021 statistics were released from the emergency room the same day, over 400,000* had to be admitted or died from their injuries. This was a much larger number than probably anyone would have expected. If you broke that down to a daily number, then more than 1,000 individuals, on average, per day were injured so severely that they needed to be admitted to the hospital and/or passed from their injuries.

The need for disability insurance has never been greater. While thoughts and prayers are always appreciated, you know there’s more of an issue when the Sunday donations are dedicated to a particular family. Or when you see that email about a new GoFundMe page for a neighbor or someone whose name you recognize.

As leaders in our community, it impacts everyone to see a family trying to deal with an injury or sickness of the primary income earner. Disability insurance is the product that protects so much for those that need it during an extended injury and sickness. It protects more than just one’s monetary possessions. It protects so many non monetary parts of our lives we sometimes don’t even think about.

Disability insurance can protect one’s dignity as a provider to their family. It can protect against the possible scarring humiliation a child or family member may face when a GoFundMe page needs to be distributed around the community. It can protect the advisor, who clients rely on to obtain proper financial advice. Disability insurance can protect the ones we love in so many additional ways than we normally even think about.

So the next time you gear up for your favorite summer sport, keep in mind how important disability insurance can be—for so many reasons that touch us both financially and emotionally.

*https://injuryfacts.nsc.org/home-and-community/safety-topics/sports-and-recreational-injuries/.

It’s that time of year again, March Madness! Oh yeah, let’s get those brackets out and see how we did this year. Which team will be the Cinderella story? What will be the biggest surprise that no one could have ever imagined? For sports fans, you see college basketball at its finest, while for a disability MGA, we see so many analogies that illustrate the need for disability insurance.

Making sure that a client has disability insurance is one of the cornerstones of planning for advisors supporting clients who are working every day. The need is obvious, right? If a client couldn’t work due to an injury or sickness, how would they maintain their standard of living? What asset group will be drained during the length of the accident or sickness and will it ever be replaced? Yet, we all know there are clients who still haven’t protected a stream of income if a qualifying disability were to occur. We know the statistics say that there’s a greater chance of becoming disabled than passing away during a person’s average working years.

Let’s get back to basketball and March Madness! There are 64 teams in the tournament. We know there’s only going to be one winner. There’s a one in 64 chance of winning the NCAA classic tournament. That’s about a 1.5 percent chance of winning the big dance. Think about that. If you had to write down 64 names of clients and knew one of them would have such a significant disability, that it would last much longer than 90 days, perhaps indefinitely, how would you plan for that client? So if you knew that one of those names may end up becoming part of the disability statistics, how would you absorb that information into your planning sessions?

One of the best weekends in college basketball is when the final four is played, concluding with the dramatic championship showdown game. If you could pick all four teams that make it to the final four, you’d be a bracket legend in your office pool and could make a fortune at the sportsbook. The odds of a team making it out of their region to enter the final four is one out of 16. So that’s a 6.4 percent chance of making it to the final four. Let’s go back to our analogy of 64 names of clients in your brackets. Now you have to plan for any four of your clients having a disability that would last more than 90 days and perhaps years, if not indefinitely. How does that change the seriousness of this planning issue for you?

The Elite Eight is always a fascinating group of teams. Usually there’s a Cinderella story that becomes the nation’s darling. The small school underdog that no one would fathom to advance so far in the tournament. Only a few lucky ones had the insight to include the team(s) in their brackets. We know that two out of the 16 teams in the region will make the Elite Eight, so that’s a one in eight chance. If you could only pick all 8 teams that would make this elite group, that would be even more impressive. So imagine if you had to plan for any eight of your 64 clients to have a disability that will last 90 days or longer and perhaps years, if not indefinitely. How would this elevate the need for all your clients to have disability insurance or a disability plan in place? Also, let’s think about those Cinderella stories. These are scenarios that would have been very unlikely to occur based on the experts’ analysis, but here they are, proving that the unlikely can still occur. When we talk about someone becoming disabled for the rest of their life and unable to go back to work, we know it happens…so how do we plan for it?

The Sweet Sixteen is just classic college basketball. The double digit seeded underdog taking down a team from one of the major conferences. The buzzer beater shots that leap teams into the next round while all the teammates charge the floor. The slow pressure building of a team having to make last minute free throws just to keep an underdog team at bay. The thrill that any college athlete must feel just to make it to the tournament, let alone the field of 16 must be just amazing. Good for them, as it’s that kind of feeling that will stay with them forever and we are so happy for each and every one of them. So four out of 16 teams in the region will get to this stage. So that’s one out of four that will be locked in the history books as a team that made it to the Sweet Sixteen. Now imagine those 64 clients on your list and you have to plan for 16 of them to have a possible disability that would last longer than 90 days, perhaps even years, if not indefinitely. We are guessing that you’d make sure every single client has a plan in case a disability occurs.

It’s sobering to think that one in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach normal retirement age.¹

But you say, “I have over 64 clients and none of them have become disabled, so how do you explain that fact?” The statistics are based on the whole country, not just a finite number of clients. Even though statistics can cover a large swath of people, the importance of planning still rises to the top. Hopefully you never see any client have a major disability, but how many clients having a major disability would be enough to make this planning the top of your list?
So when you are rooting for your favorite team, remember the “client” bracket as well and let March Madness serve as a reminder that you can be the champion of disability insurance to your clients!

Reference:

1. Social Security Administration, Disability and Death Probability Tables for Insured Workers Born in 1999 https://www.ssa.gov/oact/NOTES/ran6/an2020-6.pdf, Table A.

2009 Honoree International DI Society
W. Harold Petersen Lifetime Achievement Award

2015 Honoree of NAILBA’s
Douglas Mooers Award for Excellence

With the help of Victor Cohen, this is part of our ongoing series with Eugene Cohen, founder of the Eugene Cohen Insurance Agency, Inc. From time to time, we will feature an interview with Eugene, who has dedicated almost 60 years of his life to learning, teaching, and supporting brokers in the agency’s quest to help consumers protect their income from the tragic effects of a disability.

Disability insurance (DI) is one of those products that can change the trajectory of an individual and a family’s life and is crucial for every financial planner and insurance professional to learn about and offer to clients.

Victor: Thank you again for the opportunity to talk DI with you, Eugene. Very much appreciated.

Eugene: Thank you, Victor.

Victor: We have had many conversations about disability insurance now and I am always struck by your sincere, heart-felt passion about the importance of DI. Where does that come from? That passion?

Eugene: I started in the business as a life and health agent years ago and quickly decided to specialize in disability income protection because I saw the importance of income.
When you buy or lease a car, they want to know your income. When you buy a home and try to obtain a mortgage, they want to know your income. To obtain a credit card, they want to know your income.

I immediately saw the importance of income and protecting it. Having a sickness or accident can change a person’s financial picture. Protecting existing assets is extremely important, wouldn’t you say?

Victor: Absolutely.

Eugene: When I examined a prospective client’s assets, it became clear to them, and to me, that their future income could be the most valuable asset this individual has—more valuable than their home or automobile.

For example, let’s look at a 35-year-old client earning $100,000 per year. By the time that individual is 65, their potential earnings would be at a minimum, $3,000,000.

Victor: And that’s without any salary increases over the years.

Eugene: That’s right. So, this client is like a money machine producing at least $100,000 per year. We need to protect that income.

Victor: I have heard you describe a picture you once saw in a trade magazine, illustrating the importance of income.

Eugene: Yes, when I started in the business I saw that picture. As you know, they say “a picture is worth a thousand words.” It was a picture of a bridge being held up, supported, by a paycheck.

Across the length of the bridge were written the noncancelable financial obligations that most individuals have in life: Food, clothing, shelter, utilities. And off to the side of the bridge was a sentence that read, “What happens if the paycheck disappears because of a long term disability caused by a sickness or accident?”

And these three things were listed: 1) The client’s emergency fund would disappear; 2) Money saved for retirement would vanish; and, 3) If they were a homeowner and had a mortgage, they may be facing foreclosure.

Without income, the bridge collapses. Disability protection is like a parachute. It is better to have it and not need it than to need it and not have it.

Victor: I have also heard you describe a DI policy as a “silent partner.”

Eugene: When you get a DI policy, it’s like hiring this policy to work for you—when you can’t work for a long period of time due to a qualifying serious accident or illness. So, yes, in many ways this policy is like having a silent partner.

Victor: You have talked with us in the past about how important it is for an advisor to help their client see the need for DI coverage.

Eugene: All through my career I have noticed that need motivates action. When the prospect understands the need for this very important policy, they are interested in applying for it.
And how do you help the client see the need to protect their income?

Victor: By asking questions.

Eugene: That’s right. I have asked many prospective clients throughout my career, “What is the longest vacation you have ever taken?” Their answer is usually one to three weeks.
Then I would ask, “If you had a serious illness or accident that disabled you for three, four, or five years, would you have an income problem? What if you could never work again?” The answer was yes, there would be an income problem.

When I got my first DI policy in my early 20s, I asked myself, could I pay my bills if my income stopped because of a disability? The answer was no. I could only handle it for a short period of time. And I certainly wanted to protect my savings. In my mind I have always felt that disability income protection insurance was designed to be an asset protector.

Victor: So, once the client sees the need for DI coverage and wants to apply for a DI policy, how does the advisor help the client determine the appropriate benefit amount, elimination period, and benefit period to apply for?

Eugene: When it comes to determining a monthly benefit amount to apply for, first, help the client list their most important noncancelable monthly financial obligations. I’ve done that when determining the monthly benefit I have needed on my own DI policies.

Victor: You mean expenses such as mortgage or rent, utilities, car payments…
Eugene: …and monthly expenses for groceries, premiums for homeowners insurance, car insurance, and health insurance, etc.

Victor: And how do you determine the elimination period a client would want on their policy?

Eugene: The elimination period, also sometimes called a “waiting period,” is how long the policyholder would have to wait before receiving a benefit from a qualifying disability.
I chose a 90-day elimination period for my DI coverage, which is the elimination period most clients tend to choose.

Victor: The longer the elimination period, generally, the lower the premium, correct?

Eugene: All things being equal, that’s right.

Victor: Finally, how do you determine the appropriate benefit period for a client?

Eugene: Most clients tend to apply for a benefit period to age 65 or age 67.

Of course, if premium cost is an issue due to the client’s income…or if the DI company will not offer a long benefit period due to a client’s health history and/or occupation, it is completely understandable why a client would apply for a shorter benefit period.

However, for the client who is eligible for a long benefit period…while a two-year, five-year, or ten-year benefit period would likely be helpful if the client had a qualifying disability, what would happen if the client experienced a career ending qualifying disability at an early age? I always say, “Why would you only want to insure the first ten minutes of a fire?”

With my own DI policies, I always wanted to be covered to age 65. I have never had a crystal ball. I couldn’t determine the length of time I would have a disability.

Victor: I’m just curious, do you remember how you felt when you got your very first DI policy?

Eugene: I felt so relieved knowing that some of my important bills would be paid if I were to have a severe disability. I was very fortunate I never collected any benefits on the policy. I bought peace of mind.

Victor: Eugene, this has been another excellent conversation. I can’t thank you enough. Unfortunately, we have to wrap things up. Do you have any final thoughts that you would like to share?

Eugene: I have found, in offering disability income protection for almost 60 years, a client’s need for DI is as strong today as it was the day I started in the business.

Just like I asked myself questions many years ago when considering DI for myself, when advisors ask their clients questions to help their clients uncover the need, the advisors’ DI business will soar.

During my entire career I have always based the DI conversation around need. Need will motivate action.