Michael Cohen

The month of May is Disability Insurance Awareness Month and it is a great time to reach out to new, old and prospective clients about their disability insurance planning.  It’s also a time to review your personal planning.  What’s your plan?  How are you going to protect your paycheck and your client’s paycheck this month?  

Take Inventory
When was the last time you did a disability insurance inventory for all your clients?   Reaching out and making sure you know the coverage they have is important  Peoples lives are constantly changing and making sure their coverage is up to date is important. What you’ll find is that most of your clients do not own disability insurance. This gives you a great opportunity to discuss their plan if their paycheck stops. What is their paycheck protection program if a sickness or injury keeps them out of work for an extended period of time?   Recently, we were talking to a dentist who was talking about his personal claim.  He said he bought some coverage in his 40s, but it wasn’t until a different agent asked to review his coverage years later that he felt under covered and bought more disability insurance.  

Plant Seeds
Take this month to add a link to your email signature about disability awareness by going to http://disabilitycanhappen.org or https://www.lifehappens.org/awareness-campaigns. Both of these organizations have incredible awareness pieces that can be used in dozens of marketing scenarios.  Get the word out.   

Ask Your Clients Questions
Individual disability insurance questions:  Tell me, what is your plan if you can’t work?   What is the longest vacation you’ve taken and why did you come back to work? If today was your last day of work and you had to survive on your savings, how long would you last?  Walk me through how you and your family would cope.

Business overhead expense questions:    If you were told you couldn’t work for one to two years, will you be able to pay  all of your office expenses?  How would that affect your personal savings?   How many of your employees could you let go and then rehire once you are ready to go back to work?   How much and long is your office lease and what other business loans do you have?

Disability buy-out questions: Does your partnership agreement have a disability clause? When was the last time you reviewed your partnership agreement?   

Set Goals and start in May
How many clients have you helped to protect their paychecks?  How many conversations have you had?   Set a goal to have at least one conversation per day about disability insurance planning. The more conversations you have with your clients, the more awareness you will create with yourself. It starts with you. Have the conversation every day. If you have clients, then it’s a fair question, “What type of planning have you done if you can’t work?”

Whenever you drive by a car accident or hear about someone getting ill, say a prayer for their well-being, think good thoughts for them and their families, and hope that they worked with someone like you to protect their income. People that can’t work due to an extended illness or injuries from an accident  have so much on their plate—and hopefully an income problem is not one of them.  

At the end of the day,  Disability Insurance Awareness Month starts with you.   When you are relaxing during the Memorial Day weekend and you look back at the month of May, will you be satisfied when you reflect on your DIAM efforts?

For many advisors, life insurance recommendations will come before disability insurance is recommended. There are countless reasons to advise clients to buy life insurance, from accumulation to estate planning to income replacement…dozens of reasons.  When discussing life insurance with clients that are either single with no children or married with dual incomes, but still no children, the overt need for life insurance may not resonate with these clients.    As advisors we can recite emphatically the reasons these clients should buy life insurance, but the ultimate decision rests with our clients.  

We find that more times than not, for these clients, disability insurance tends resonate more consistently.  The facts are there… One out of four individuals in the workforce will become disabled for 90 days are longer before turning age 65.    In a meeting we just attended, an advisor stood up and stated:  “I have an easier time discussing disability insurance to my younger clients, that do not have kids, then talking about life insurance.  A disability can affect them personally as opposed to passing away.” 

The Market
We can make the argument that everyone who works needs disability insurance. There’s no doubt about it.   We find though that certain markets have a tendency to buy more frequently than others. The buying plane tends to follow a trajectory with one’s income. This is not to say that the need is any less in the lower income markets, nor to say there are not products that can be designed for the lower income markets.   It’s more of a function of affordability and comfort for a client to buy disability insurance in addition to their other fixed monthly expenses. You want to create a list of your clients/prospects and then rank them by the estimated Income, highest to lowest.  Then list their occupations next to the estimated income.   We tend to see a higher buying response when you have clients that have higher incomes ($75,000+)—they are self-employed or a professional (accountant, attorney, dentist, physician, etc.) and are between ages 30 and 55.   There are clients that are outside of these parameters that make great disability cases.  In addition, many clients outside these parameters have tremendous need for disability insurance as well.     

Understanding the nature of fixed expenses
If you accomplish anything in your discussion about income protection, it’s important to have your client understand and acknowledge that there are fixed expenses that need to be paid every month.   Fixed monthly expenses are an interesting topic as most clients, regardless of income, have some similar fixed expenses.  The utility companies, grocery store, car insurance company, and many other expenses are not a function of income, but of usage.   Therefore, if you had your client run through their monthly fixed budget, it’s very hard to find one less than 2,500 a month. Depending on the geographical area, the average may be much higher—closer to $4,000 a month or more.     You can find a monthly budget calculator on websites like Life Happens (www.lifehappens.org) or the Council for Disability Awareness (www.disabilitycanhappen.org).

The best way to do this exercise is to start with yourself.   What is your monthly fixed budget?   I’m guessing it’s more than $4,000 or  $5,000 a month, and probably much more.  

Once your client understands their fixed expenses and the necessity to have these paid every month, regardless of whether someone works or not, it becomes easier for them to understand why people buy insurance to protect their income.   It’s up to you how you present this product.  The natural method for many advisors is not what we find to be the most successful method.  

Start with need—why other clients buy this product. Discuss why we all work, concentrate on the fixed expenses we need to pay every month, and then move to the products. There are many individual disability insurance products in the marketplace, but a client has to understand the need first and why this product is such an important planning tool.  

Your success in this market starts with you.

When recommending disability income insurance to a client, many advisors are confronted with one or more of the four basic buying objections: No Need, No Confidence, No Hurry and No Money.  Usually the most challenging objection to overcome with a client is the No Need objection, when to the advisor, the need is so obvious.   Let’s explore more about how to address the No Need objection.

There are many things that people need to buy and certainly there are many things people want to buy.  I want to buy a new TV or a round of golf on the weekend.    Disability income protection insurance is a product that most clients need to buy and don’t necessarily think about buying it until an advisor recommends the product.

Income is a need, as we all need money to pay for our day-to-day basics such as food, rent, taxes, utilities, car payments, clothing, etc.  In fact, if you calculate a monthly budget, most of your clients will have fixed expenses of thousands of dollars every month.  Some will have more than others, but the number is substantial.   

It may help a client to visualize a bridge with all the above needs being held up by the supporting beams.  If the supporting beams break, crack or become unsteady, the bridge, and everything on it, will eventually collapse.  Your client’s paychecks are the supporting beams of any budget and financial plan.  If the paycheck were to disappear the bridge would collapse. This would be a catastrophic event for your client and your client’s family.

Your client has to understand the importance of their income. In most cases, it’s their most valuable asset.  Who is protecting your client’s paycheck?  For most clients, if there is no paycheck, then they will experience a lot of hardship.   It’s hard for a client to go from having income to pay bills and expenses to having no paycheck to pay for the same bills and expenses.  In addition, for many clients with health issues, they will actually find their fixed expenses increasing due to additional health care costs and higher deductibles.  It’s a full blown conundrum–more expenses are coming in, but there is no paycheck or income being produced.

It’s essential to only present the actual disability income insurance product presentation when you are fully convinced your client understands why this product is needed.    You never want to discuss a solution to a problem…that a client doesn’t understand is actually a problem.

Asking questions—the right questions—uncovers the need.

How important is your earned income?
In most cases, you will find that future earned income is the clients most important asset. For example, a thirty five year old earning $100,000 a year without any increases or inflation factors would earn, in a 30 year period,  $3,000,000. As we know, a sickness or injury could wipe away that income and that is a problem.

What is the longest vacation your client has ever taken?  How long do they normally take?  How long have you taken?
Most clients will answer two weeks, maybe three. When questioned why they only take a two week vacation most answer that they have get back to their job or business.  If an injury or illness were to take them away two or three years, or longer, that of course would be a problem.

If you have no income, what expenses to you plan on eliminating first, second, third…etc?
One of the most important questions on a mortgage application is: What is your income? Mortgage companies do not want foreclosures. They require you to pay your mortgage whether you are working or not and whether you are in good health or not. When your income stops due to sickness or injury, the mortgage and other bills must be paid.

Go to www.LifeHappens.org to see stories of real people and the events that have changed their lives. Please click on the  videos and disability stories.  Hearing these real life events is so important for advisors.  It’s amazing how many clients have been helped because their advisors recommended disability income protection in their financial plan.

One story that has resonated with so many in our office was the story of Bill, who was 32 years old when he became disabled.  Bill was on his way to his mom’s house when a car crossed the median and hit Bill’s car head on.  Bill suffered body traumas as well as chronic short term memory loss which made it impossible for him to return to work. Bill was very fortunate that his advisor understood the need for disability coverage and was able to show Bill why he needed to buy coverage at such a young age.   

The story resonates with many because he was so young when he became permanently disabled. He was fortunate to have an advisor who recognized that young adults who are just starting the wealth building process have a dire need for disability insurance. 

As an advisor, it’s important that you too have disability insurance.  What is your plan if you can’t work?  Who is going to pay your bills?  We know the importance of disability insurance, as being in this industry has shown us to expect the unexpected.   It’s important to plan for the twists and turns that tomorrow can bring.    

Remember that bridge we discussed in the beginning of this article?  When questions are asked and you have discussions with your clients, your clients will become more aware of the need for disability income protection. 

You have the solution to keep that bridge sturdy and your client’s financial plan strong.

We love this quote because it rings true in so many ways. When you buy anything, you are judging and weighing the cost of the product with the value you receive. If you perceive the value to be higher, then you may be willing to pay a higher price for that product or service. We humbly admit that we are not handy men around the house or cars, and when it comes to hardware, or even tires, we are completely relying on the sales clerk that is helping us. Who knew that for tires you need to choose a type, treadwear warranty, speed rating, wheel size and brand. There’s Bridgestone, Goodyear, Hankook, Kumho, Nitto, Sumitomo, Toyo… and the list goes on. The prices vary as much as the names of the companies, and each company has different styles, quality, and prices… exhausting for us to try to figure this out on our own.

We can easily just choose the lowest priced tire, but with my family in the car…we want the best. Tires can be complex on the surface, but a salesperson can be trained to understand and explain the difference so they can recommend the best tires-it just takes some education and training.

As advisors, we know people get disabled and some of them will miss a little work and some will never be able to work again. As an advisor, your client is looking to you for your recommendation. Which tire are you going to recommend? We’ll explore the world of disability insurance with you through the course of these columns. While these articles are a good starting point, we strongly recommend that you work with a disability insurance wholesaler to further your knowledge and ability to understand this marketplace.

One of the first products we’ll start with is long term disability (LTD), which is used in the group insurance world. Individual disability is usually known as IDI, while group coverage is known as LTD. There is also STD, for short term disability, but we are going to focus on LTD.

There are four “no” states of mind that can influence any buying decision: No Need, No Money, No Hurry, and No Confidence. Most buying decisions come down to one or more of these four states of mind. When (or in most cases “if”) the subject of disability planning is broached by an advisor and a client says, “Don’t worry, I have coverage at work”-for many, this is the end of the conversation. Time Out! When a client has LTD this is the start of the conversation not the end. Remember, “Price is what you pay, Value is what you get.” For most people, the company will provide the LTD coverage and the employee pays nothing-and the coverage itself can vary greatly. As an advisor, you need to insist on seeing the benefit booklet and as much material as your client can provide (certificate, premium if any, coverage amounts, class information, etc.). Usually their HR department can provide the information.

If you ask any the following questions, people will usually give you just a blank look:

• Do you know what percentage of income is covered?
• Do you know the monthly cap?
• Do you know the definition of disability and if it changes the longer you are on claim?
• Do you know if the insurance company cancels the group LTD, or if you leave employment, what your options are?
• Do you know what income will reduce your benefits, such as social security, worker’s comp, and other retirement programs?
• Do you know which disabilities will reduce your benefits, such as ones that can be attributed to depression, anxiety, back, soft tissue, subjective diagnosis and others?
• Do you know what counts as income (bonus, commissions, pass-through income)?

If a client loses the ability to work due to an illness or accident, their disability insurance policy can become a lifeline. Disabled clients tend to go into financial lockdown and the definitions of that disability policy become paramount. How many times have you read your actual car insurance policy? All of a sudden when someone gets into a car accident, that car insurance policy becomes very important-every word gets analyzed and studied. Words like “and” and “or” can be the difference between a claim and not a claim. This is the same thing with disability insurance contracts. You can get the help of insurance brokers like Staveley Head, who have experienced policymakers to better understand the wordings of your insurance document.

It’s well known that individual disability insurance (IDI) contracts can provide very comprehensive coverage and, in many cases, more comprehensive than group coverage. Individual policies can lock in premiums, policy language, and coverage amounts for a certain duration. Individual policies can be portable and follow your client regardless of where they work. Your client doesn’t need to be locked into a job or company solely due to benefits. The monthly benefit on individual policies can be set up so that it’s not taxable, while group LTD is often taxable to the employee. Why is this?

When someone applies for IDI, the insurance company gets to fully underwrite that individual. They get to ask medical questions, obtain medical records, and, if necessary, order standard insurance medical tests. This allows the company to be selective in their risks, which, for the most part, allows more comprehensive policies to be offered. Which brings us back to tires. Which tire are you going to put on that car? Which IDI company and/or product will you recommend for your client? There are a lot of companies and products to choose from and, based on your client, you need to find the one that is the better fit.

We look forward to being your co-pilot in your learning adventure about individual disability insurance.

What products does your agency offer and what suggestions do you have for producers to further protect their clients’ financial well being beyond life products?

Nardini:
We present ourselves as a full service insurance brokerage agency serving financial services professionals using a  product lineup that  consists of life, annuity, long term care, and disability income protection plans from the major carriers in the industry. Our staff has more than 150 years of experience collectively and we offer, in addition to competitive products from financially sound insurance companies, a commitment to the financial services industry, the people involved in the industry and the people they serve, to bring the best possible carriers, products and solutions for the need at hand. The client’s best interest is first and foremost the most important thing for Benefits Brokerage Agency, Inc. as we engage in the business of brokerage. We feel it is important to work with agents that think and act along those same lines.

English:
Consolidated Insured Benefits, Inc., offers whole life, indexed UL, term life and a complete suite of medical products.  It’s our opinion that whenever possible all life products sold should include living benefits, chronic condition and critical illness.  Life products sold with living benefits do not increase the cost of the coverage and allow for the death benefit to be accessed while the insured is living.  

Cohen:
We are seeing a trend towards the hybrid life with LTC or CI type riders. The trend is important as we are seeing a shift towards this marketplace. The challenge for the consumer and broker is information overload–there is a lot of product out there!      Many times a deeper analysis of your client is needed to get to the right suite of products. We have trained our brokerage consultants to work with brokers to help them understand the various suites of products and clear through the clutter.

Phillips:
Like most BGAs we offer life insurance.  It’s been a mainstay of ours for ages.  However, we’re probably more diverse in our “front-line” product offerings than many BGAs.   We also offer disability income products; long term care insurance; fixed annuities; and non-health insurance group products: life, STD, LTD, dental.   We’ve also started ramping up our efforts in the worksite life arena. 

When I was young in this business I took for granted that this was the “way things were” in BGA product offerings.   We’ve always offered more than just “cheap term and impaired risk” life products and I thought everyone in our space did.     The multiple product lines allow us to open doors that would remain locked if we were otherwise only a life agency.   We respect relationships that brokers might have with other agencies, but if a broker has a great relationship with another BGA for life products, that’s fine–use us for fixed annuities or DI. Just like a consumer might do the bulk of his grocery shopping at one supermarket, but just loves the corner bakery–we’re fine with a broker getting his French pastries through us while he gets his eggs and milk somewhere else so to speak. 

For those who want to use us as their “primary grocery store” we’ve got the milk and eggs, as well as those French pastries, a great butcher shop, and the freshest produce.  The proverbial “one stop shop” at play.

Likewise, in some unexplainable way it seems there’s a buoyancy to our revenues–if one product line starts to stumble, we’ve seemingly always experienced the dynamic that another fills in that drop off.  And, overall, we’ve been fortunate that  our diversity has led to slow but steady topline growth.  

In a similar fashion I think that’s why a broker should not just be a “life insurance agent”–clients need to consider multiple insurance products and the people they refer an agent to might need a product beyond life insurance.   

Our model has adjusted to this very recognition–not only by life insurance agents, but by benefits producers, property-casualty agents, and investment advisors.   They are looking for education, training and often outright partnership or point-of-sale help in lines outside of their area of comfort.  We are there as a credible and trusted source to help expand their practice beyond their core business and diversify their revenue stream. 

Carlson:
The collection of products we offer is intended to encourage agents to protect their clients beyond the scope of life insurance. Our fundamental product lines include individual life insurance, long term care, disability income, critical illness and annuities. To accompany life insurance coverage, we offer long term care and critical illness riders. Pensions and life settlements are also available.

Our group product line includes life insurance / AD&D, dental, vision, long term disability and short term disability.

We recommend formulating a diverse portfolio of products to promote security for all stages of life; to help cover unexpected accidents or illness, to be prepared with income for retirement, and to support loved ones in the event of death. By doing so, not only will agents provide a more secure future for their clients, they also strengthen their relationship with them.

Much of the traditional training and education of agents has either evaporated or shifted.  What does your agency do to fill this gap and where would you steer agents to find necessary training and education?

English:
At CIB, Inc., we offer extensive concept training.  Concept selling is a much better platform to communicate with potential clients.  Selling from the concept platform allows clients to see life insurance as a solution rather than as a product.  If you ask 10 people if they want to buy life insurance, nine will say no.  One will say yes because he is about to need it.  Selling from a concept like tax-free retirement or college planning allows clients to view the benefits and rewards of the life insurance contract as positives and not view life insurance from the stereotypical negative perspective.

Cohen:
Brokers need to take the time to expand their education and knowledge of not only the products, but the underwriting programs and the advanced technology that is available in the marketplace. There is “product” and then there is “process.” Today’s modern insurance broker needs to understand both to move ahead. There may be very little difference in product and a huge difference in process–and that edge can win you a case. Then again, you don’t want to sacrifice products of better value for just an easier process. There’s a fine line and our brokerage consultants are trained to help brokers identify both areas. We teach and run programs daily.  We are very consumer driven and attract brokers that are like minded.

Phillips:
We offer many educational opportunities for agents and brokers.  We market many carrier or marketing group webinars and presentations.  We direct brokers digitally to the endless array of training resources on carrier websites and industry websites. But we’ve taken more of a back-to-the-future approach after feeling many of these methods have fallen short:  we see brokers.  We call brokers.  We have face-to-face meetings and workshops with brokers to provide information, product training and education.  

There’s a manic chase for the millennials in our space–and every consumer space that’s out there.  I get it.   But I think too often an agency or broker assumes that their  current constituents are those that will consume the trendy opportunities that are out there.   We’re constantly bombarded by the fact that the average age of an independent producer is in his/her 50s.   We can bemoan the fact that our future is bleak and we can wring our hands that the industry is not reaching younger consumers, but while we’re angsting away, we’ve got to make a living.  We need to provide training and educational opportunities to the constituents who are here right now.  

While those 50-somethings (like me!) have come light years in their understanding and grasp of digital opportunities, for the time being the old fashioned way is the way most want to be interacted with in my opinion.  Don’t get me wrong, even the most primitive of agent or consumer is “jiggy” with current technology and it is a fact that more and more education and training is moving to a digital platform.   It will, someday, be all-digital, all-the-time.  But for now, I think the time tested methods of educating, training and marketing to an agent, or them marketing to a consumer, hold true.  

Plowing through with accepted methods to one’s constituents while laying the groundwork, understanding systems and knowledge is the trick.   I think we’re doing a good job with that. 

Carlson:
While we continue to organize webinars and seminars for agents to learn about specific products or processes, our emphasis is on a personal, hands-on approach. Whether over the phone or face-to-face, we consistently coach them every step of the way. We recommend prospecting methods and provide customized materials, teach them sales ideas and how to recognize cross-selling opportunities, walk them through contracting and application processes, and hold their hand through underwriting. At the core, we provide a complete backroom support system.

Let’s explore the hidden gems of disability insurance planning. 

Overhead Expense (BOE)
Your business owner clients have expenses of the business that will not go away if they become disabled.  Imagine a client that has to go through a year- long battle with cancer or an extended recovery from a major accident (car, skiing, slip on the ice…you choose).   Your business owner client still needs to pay the rent, utilities, support employee salaries, accounting and legal services… the list goes on.   So while the revenue of your client’s business decreases, the expenses continue, which means your client will either need to start paying expenses out of pocket (savings, retirement, etc.) or risk dismantling a business that took years to build.

Having to let go of highly trained employees that know your client’s business is just not a good scenario for an owner that wants to return to work.   A good overhead expense policy could help reimburse your client for many business expenses and most likely would have a tax deductible premium.  This is a must have for the individual owner and/or professionals and with policies that can be issued as high as $50,000 a month, the marketplace is really unlimited.   Some policies have various types of loan coverage available.  Also, some companies may even allow a professional to hire a like-professional to come in and work for the business—and have the cost of that professional a reimbursable expense.  Of course, please review the policy language of any BOE policy before meeting with your client.    Also, if the business is large and can pretty much run self-sufficiently without the owner working, the insurance company may question the need for this product, so you may need to inquire before submitting an application.   

Disability Buy-Out (DBO)
So you just finished the life insurance buy-sell and your are feeling pretty good about now.   Did you ever get a copy of the buy-sell agreement?  If you were able to obtain it and read it, most likely the attorney put a clause in the agreement that would be executed if one of the owners became disabled.   So your clients may have unfunded liability that they didn’t know they could have insured. DBO usually has  lower and different financial underwriting ratios than life insurance.  Therefore, don’t be surprised if you can’t obtain the same amount that was placed on the life insurance.   There may be some other rules as well, so it would be good to reach out to the home office underwriter before heading out to see your clients. 

Retirement Security DI
Problem: Your client is putting money away for retirement in some type of qualified plan.  Your client stops working due to a disability.  Your client can no longer put money away for retirement and is even talking to you about taking money out to help pay for the myriad expenses that can occur during a disability.   How about a policy that helps with extra payments to make up for lost contributions?  Retirement Security DI to the rescue.   Depending on the company and plan, these plans can replace some, most, or the entire amount that was being put away in the qualified plan.  There are various versions of these policies, but in general they are typically designed so that the accumulated disability benefits, for the most part, are somewhat restricted until a pre-set retirement age, such as age 65.   These plans usually have their own issue and participation limits, so your clients that already have individual coverage may still be able to obtain this coverage as well.      

Key Person DI
If you ask around in the marketplace, you should be able to find key person disability insurance available.    I’m sure you have clients that have key employees that create significant revenue for the firm.  In these cases, the firm is exposed to significant risk if that the key employee gets disabled.  What would happen to the accounts the key employee has developed and manages?  What is the risk of revenue loss?   Building infrastructure around key employees can be expensive—especially if that key employee is out on disability.   It’s so obvious when you think about it, but how many of your clients actually know this product exists?   There are underwriting rules to know that may vary with the various companies that offer this product.   Usually it’s designed for either non-owner employees or minority owners.    

In Summary
When disabilities occur, it’s a traumatic physical and mental experience for your client and his family.   It can be equally traumatic for the employer, business partner and colleagues of the business entity as well.   As trusted advisor, it’s important for your clients to know about these products and to be able to properly plan.   With knowledge there is not only power, but proper planning as well.  Reach out to the resources that are out there in the marketplace.  Help your clients today with solutions for potential planning issues of the future. 

Steven L. Brady, The Standard

Michael Cohen, Eugene Cohen Insurance Agency, Inc.

George G. Davidson, Secura Consultants

Craig Gussin, Auerbach & Gussin Insurance and Financial Services, Inc.

Keith Hoffman, NFP

Maureen A. Kirschhofer, Doc-DI.com

Thomas R. Petersen, Petersen International Underwriters

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

Q: What are some important agent best practices for selling DI?

Steven Brady: Agent best practices would include frequency of applications. We did a study on agents who write at least five applications a year. The actuaries found that the morbidity was much lower on agents/brokers who did at least five a year. I think the reason is that frequency creates confidence. Confidence is needed in placing a case that has a rating and exclusion and possibly limitations. Confidence also allows an agent/broker to seek out potential clients instead of waiting and being asked about disability. Many will say selling skills or underwriting thoroughness or even target market depth, but I think frequency is the best skill…just go out and do it.

Michael Cohen: Brokers have to ask their clients before the client asks them. Once that occurs, they may not be able to obtain the coverage! There are some great opening questions to ask a client, but starting with a disability insurance inventory is one way to open the conversation. Having an assistant or yourself gather the current disability coverage allows for the conversation. Most individuals do not know what they own or the details of the policies. Better yet, most policies haven’t been updated for their current needs. More times than not you’ll find that there is no disability coverage at all, which paves the way to more targeted questions and real planning.

George Davidson: Don’t make the decision for your client.

Producers make the “buying decision” for their clients without even asking them. We see this repeatedly. “My client doesn’t need this coverage. She has a group plan at work and that is sufficient.” The producer attitude closes down the client’s opportunity to protect her family and/or business. Establish a process that ensures that each client has the opportunity to vote.

Craig Gussin: Agents have to mention and ask every one of their clients to buy DI for many reasons: 1) If you don’t, some other agent will, and then your client has two insurance agents instead of just you. 2) Based on statistics, 25 percent or more of your clients will become disabled. If your client becomes disabled and asks you why he did not have DI, what are you going to say? How is he going to pay his bills? 3) You can increase your income greatly without much work-your clients like and trust you already and will buy DI if you educate them on the need.

Be sure you understand the different DI products and the benefits the different insurance companies will offer a person based on his occupation and income. Not all DI products are the same!

Keith Hoffman: Prospecting, DI storytelling and the consultative approach.

Maureen Kirschhofer: I believe that it is really important to sell the need rather than the features when first meeting with a client. Disability insurance is probably the most important insurance that clients can purchase. When you look at the statistics, it is shocking to see the number of individuals who will become disabled for more than 90 days before age 65. I tell my clients that if they love someone, they buy life insurance; if they love themselves, they buy disability insurance. After working for one company for many years, I really appreciate that I can present more than one option and company to my clients. That way it becomes their decision, not mine. When my clients have a claim, I will be there for them, helping them to complete forms and assuring them that the piece of paper they purchased from me is a contract that will pay them when they are sick or injured and can’t work. It is the “you never know” time of their lives. A disability is difficult, but when the bills come and don’t get paid, it is even worse.

My present clients are quick to offer referrals to me, and that makes me feel that I have done the best job that I can for them. I feel like I am a specialist. I am the cardiologist of the insurance market. I don’t try to be everything to every client, but I make suggestions to help them with their planning by working with other specialists whom I feel will do the best for them

Thomas Petersen: Set reasonable expectations and don’t oversell! There is a difference between explaining what disability insurance is designed to do and promising what a specific carrier will do. Expectations get high about the process during underwriting and claim time.

Ray Phillips: First and foremost, know what you’re selling. While there is a certain amount of complexity in knowing product definitions, for the most part it’s my experience that carriers make their policy provisions understandable and accessible. Agents owe it to their clients to know what constitutes a claim. I’m convinced that many do not review the coverage with their clients in an elevated manner. The fact is that income fuels all other insurance planning and investment planning. I’m not sure that this reality is expressed enthusiastically to the prospective DI consumer.

Future purchase option (FPO) riders are a must-sell to those who can qualify. Fact is, clients’ incomes do go up over time in just about every occupation. FPOs provide an efficient way for policy benefits to track with the increased exposure. While a person’s health may not deteriorate over time, the ease of accessing higher benefits is very appealing.

Hand-in-hand with that, when selling DI I think the agent should continue to communicate with the client consistently after the sale. Having a DI policy in force always provides an opportunity for a conversation. That conversation will allow for a review of policy provisions, an opportunity to adjust coverage to a client’s current situation (higher income, different job duties, etc.) or to provide suggestions on other coverages the agent can offer.

Q: Where should agents go for a) basic DI training, and b) continuing or advanced DI education?

Cohen: We find that this is really an apprentice type of business. Working with those agents and BGAs who have been selling disability insurance for decades is really the place to learn. The International DI Society is a great association that allows agents to dive deeper into disability insurance. In addition, The Plus Group is a nice source of regional BGAs around the country who provide training and education to agents.

Davidson: The Plus Group! If your “product source” isn’t your “information source,” then find a new partner. However, if you are serious about sales, you need to employ a sales strategy I learned from one of our carrier partners years ago: ask to get. Ask for training and you will likely get it!

Gussin: As an agent you should learn about DI from taking courses offered by AHIP, IDIS and other organizations such as NAHU and NAIFA, along with working with reps from DI companies. DI reps love to teach you and go on appointments with you, and they will help you make the sale. To get continuing or advanced DI education, join IDIS, the only organization solely geared toward DI.

Hoffman: There’s a distinct difference between product training and sales training. So I’d say product training can best be learned from BGAs and carrier wholesalers. Sales training from senior producers, senior BGAs and senior wholesalers. As an example, Impel Dynamic offer sales training services that can really help someone learn the ropes, but there’s nothing better than doing it on the job, because the “frequency of fatal accidents” diminishes with experience.

Kirschhofer: I was fortunate to work for a company that specialized in disability insurance. They had wonderful training both in my agency and at the home office. We met for some new agent training after about six months in the business, and I believe that this was the wood that kindled my fire to become a DI expert. Unfortunately, so many companies have dropped selling DI or don’t focus on it because it does not profit them, so agents need to go elsewhere for their training. I would recommend that they find out who is the best in DI in their area and take them to lunch and personally ask if they would mind mentoring them. I have worked with several agents in the Jacksonville area just because they asked. Nothing is more meaningful than seeing someone in action on a sales call. The International DI Society offers monthly educational seminars, and I would highly encourage any agents who want to sell more DI to try one of them. One is open for free, and then membership in the society is necessary to continue. The association has worked hard to establish an advanced disability designation in conjunction with AHIP. Here again, I would encourage anyone interested to go to the website, www.internationaldisociety.com, and check it out.

Petersen: In general, the best training still comes from the brokerage outlets, as they have a variety of carriers so they can advise on each case a producer comes across.

Unfortunately, most carriers do not train people to sell disability insurance. Many believe they do, but what they often teach is product knowledge, not sales or general disability education. Thus, most training is left to brokerage, to online sources, and through organizations such as the International DI Society.

Phillips: At the risk of sounding self-serving, an agent’s local BGA is usually a wealth of training and education. Likewise, many of the carriers provide wonderful training modules on their websites and have local/regional brokerage reps of their own to support their products.

Life Happens has a wonderful DI suite on their website, www.lifehappens.org. The Council for Disability Awareness also has great background information and abstracts on their site, www.disabilitycanhappen.org.

For advanced education, the International DI Society has partnered with AHIP for the following designations: Disability Insurance Fellow (DIF) and Disability Insurance Associate (DIA).

Brady: I think that training is the most evident problem with our industry today. The time was that with many carriers providing disability insurance, and many brokerage companies competing for business, we wrote the most we have written as an industry because we had the most training available at that time. Now, one must go to LUTC for DI training, and to the local independent DI wholesaler. We are fortunate to have independent wholesalers who believe in disability insurance and provide training on all levels, even on case help.

Q: What are some effective ways “non-DI” aents can partner with DI experts?

Davidson: Outsourcing has been a catch phrase in business for years now, and many times it has a negative connotation. The reality is that partnering with a product specialist is the best way to jump start your practice. Ask  in your network for a referral and visit with a product expert to make sure you both have the same business values. Develop a simple agreement on process and compensation, then “pick five!” The “pick five” is a great way to “date before you get married.” Identify five existing clients who exhibit the characteristics of a DI purchaser.

 • Between 30 and 55 years old.

 • Self-employed or employed with their current employer for more than two years, and earning $75,000 or more.

 • Children still in the home or in school.

 • Client is a “planner” and exhibits this characteristic in prior transactions.

 Now plan the outreach with your partner (introductory note and phone call) and start the process!

Gussin: Meet agents who sell DI at your local NAHU or NAIFA association meetings and discuss partnership with them. Also talk with some of the DI reps and ask them to help you find an agent who is an expert in DI. They will recommend a DI agent they know will be a good fit for you.

Hoffman: The most effective way is to go with an expert on many joint calls.

Kirschhofer: I briefly mentioned this before, but I treasure my relationship with my DI partner. We each have various strengths that we share with each other. We were competitors who met and instead of competing for clients became a company focused on working together with them. In many ways it had taken awhile to get into the market that we have, but it really works. While I love to review contract language with our clients and do educational seminars, Judi is great at focusing on marketing to them on a persistent basis.

Petersen: Just ask! However, most people won’t for fear of someone stealing a client. The reality is that many good DI producers would love to share a sale and help everyone.

Phillips: The agent needs to decide how much he wants to become involved with the DI sale. Does the broker want to present the product, or serve as a facilitator to the client’s consideration of DI?

As mentioned earlier, there are a number of local, state and national opportunities for an agent to get to know and understand the market. An agent can partner with a carrier brokerage rep or BGA to become educated on the presentation of the concept. Most often the carrier brokerage rep or BGA will assist in point-of-sale presentations to allow the agent to get comfortable in the process. Often this is done without concern for any commission split.

In each market there are other agents who specialize in the DI sale. They work with agents who do not want to become involved with the specifics of a DI sale, but rather are looking to “farm out” that business. Those cases are typically done on a commission split basis. Where can they be found? I’d suggest the local NAHU or NAIFA meetings, or even by referral from the company brokerage rep or local BGA.

Brady: The key is “partner.” Corey Anderson is a great example of a true partner. He works with agents who have the relationship with the client but no interest in becoming a DI expert. So they contact Anderson and he splits the case with them. I think that is the future. With disability insurance being so contractual-language-driven and so competitive, it takes an expert to see beyond price and get it through underwriting as sold.

Cohen: Anyone who has clients should be asking some of the basic DI questions. Disability insurance is easy to learn when you have the right teachers. Each broker can become an expert in this marketplace with a little help and direction.

Q: How are today’s products different? What’s good today, what would you like to see, and what do you wish would come back?

Gussin: DI products have changed over the past 20 years. For example, they would pay your client for life if he became disabled, but now they pay only to age 67. The one thing that has not changed is that if he becomes disabled he will receive a tax-free check until age 67. I believe the plans today are as good as or better than before. Just be sure you understand the product you are presenting to your clients based on their occupation and income.

Hoffman: The basic guts of the policy have not really changed. Sure, there are tweaks which have always created the “leapfrogging” that carriers enjoy, but there is nothing really new. “You get a benefit if you are too sick or hurt to work!” I really wish more life insurance carriers would focus their messages on total risk management for planning and not just promote life insurance for income replacement.

Kirschhofer: I guess that I have been in the business long enough to see a complete turnaround from the 1980s. When I began, companies were competing with one another for best cost, benefits and sales. Suddenly at claim time, they realized they had given away the store. Benefits were withdrawn, prices changed, and many companies are no longer in the business. Now, with more rational underwriting and rates, the companies are offering many of the same original benefits. I loved selling return of premium to my clients and wish we had more options to do this in my state. I had one client who remodeled her kitchen when her 10-year return of premium was up. It makes clients feel that they can achieve a benefit without being disabled. We need to convince our state insurance departments to realize that this is a great benefit and one that would be great to return. If you show potential clients a competitive rate of return on the extra premium, it works even better.

Petersen: Products today are nearly as good as they were in the “heyday.” Limits are up, definitions are excellent, provisions are broad, and access to group, individual, multi-life, excess and business coverages have never been greater. Underwriting is faster than ever, too.

There are some products that producers who have been in the disability industry for many years may miss, but some of these items cannot come back, at least in their original form, due either to regulatory or financial reasons. Case in point is return of premium. There are a couple of carriers that still offer this in some form or another, and my hat is off to them. However, most carriers will stay away from this due to the financial loading and reserving it requires. Another provision is the “lifetime” benefit. The concern for “over insurance” is not just the benefit amount that could create a possible malingering, but also having cash flow for the rest of a person’s life. While it still may have its opponents and proponents because of these theories, the fact is that this benefit might not resurface for some time. I do note that maximum benefit periods are creeping up, though!

Many carriers have been increasing their maximum benefits. This is true for personal disability plans as well as business plans. Fortunately for us, there are still many income producers as well as businesses and business deals which require higher amounts for protection than what most carriers will insure. Even within our business of excess coverages, we have seen new product designs that have been generated to meet the demands for these situations and to fill in gaps.

Historically, for example, excess coverage plans were limited to a maximum of five years benefit. Today we have benefits that can be paid up to age 70! This came as a response to the need for programs that better overlap traditional disability plans.

Key person disability planning is another area that has been changing. While there are a couple of traditional carriers that write key person, the benefits they offer currently are relatively low and only for a select group. Every business has a key person, and sometimes they are high income people such as the rainmakers of a law firm or a top executive, and other times they may be technicians who keep the business flowing.

So how do insurance professionals get training for these things? For the most part, selling supplemental or excess disability plans is similar to selling the base underlying plan since, in a perfect world, excess plans are just an extension of the base coverage. This is where product knowledge comes in. There are some differences in the product, but not the sales technique.

I refer back to another comment I made that what producers need to do is keep the discussion, at least initially, on what disability insurance does (regardless if it is personal, business, group, excess, etc.). Once the sales process goes beyond the expression of interest, then specific products should be discussed regarding how they work.

Phillips: Today’s products have many of the traditional definitions that made the DI market viable and substantial years ago. Specialty own-occ coverage is very available. Many carriers have residual definitions as good as or better than they have ever been. I’m not sure there has ever been a time when definitions have provided more robust coverage opportunities than at present.

I am a big fan of the old return of premium rider structure, and I would love to see that rider return in an affordable form. I’m not sure that with interest rates having been in the doldrums for so long-and apparently going nowhere anytime soon-there will be any innovations in that department.

With national health care a reality, I would also like to see more carriers offering the old “nondisabling injury benefit” or accident coverage in their plans. This allows for a sum to be paid out if a client is injured in an accident but not disabled-a sprained ankle, a separated shoulder, a twisted knee, etc. Such coverage can provide dollars to offset deductibles that might end up as dominant factors in the health insurance structure as we go forward. Plus it gives the client a very realistic view of a positive that the coverage can offer.

Brady: Products seem very similar to the best we had to offer in 1980-1985. I think products and underwriting have remained unchanged. GSI is a different animal, and certainly the future of DI growth for most companies. I would like to see a whole life version of disability insurance built and offered to new markets that currently do not purchase disability insurance.

Cohen: The need is there and should be covered. To preserve space, I can’t go into the products and features we would like to see. It’s important in today’s world to train brokers on how to ask and develop the need for this product. Once there is the need, there are resources that can  help review and educate the broker.

Davidson: This is the best time to be in this business! Premiums are lower than they have been in years. Carriers are offering programs to help with  multi-life and business owners. There is more capacity and better underwriting. Demographics are swaying in our favor, with the largest buying group ever about to hit the prime DI buying years. Position yourself now as the go-to person for income protection and you will reap the rewards for years to come.

Q: In LTCI sales, one school of thought is to get at least some coverage in place, with a goal of striving for more coverage in the future. Does this approach lend itself to the DI market?

Hoffman: Agreed, but it is the approach that is incorrect. Many times, at the point of sale, the producer recommends a reduction in the benefit amount to “save premium.” The benefit should be the last choice to reduce premium. It makes more sense to tinker with the elimination period or the benefit period to save money. The reason is that once you’re disabled, it will be hard enough to live on 60 percent of your income. [KH]

Kirschhofer: If cost is a problem-and I tell my clients that they should look at about 3 to 6 percent of their income to protect that income-something is really better than nothing. If they have to decide between a shorter benefit period or a smaller indemnity, I would suggest a shorter benefit period. What I say, if this is an issue, is, “Close your eyes and picture yourself disabled.” Then decide what you really need in a product that will help you to continue in your world. A disability can be a living death, but we can make it tolerable by taking away the fear of living without an income. [MK]

Petersen: It seems to be a thought brought in by some and may have some merit, but the reality is that maximum benefits and benefit excess plan maximums are based upon an adequate amount of coverage, not an overabundance of coverage. Thus, if you get half of what you should have, you go broke only half as fast as without coverage.

LTCI is not designed to replace income in the purest sense, but to provide funds to pay for a specific type of expense. It is not there to cover household bills, mortgage, etc. [TP]

Phillips: I think this approach can and does work in the DI markets. While I am truly a proponent of protecting a client from that catastrophic, long term situation, often it can’t happen within a client’s budgetary constraints. Elimination of riders should be considered first, as far as allowing for the clients to afford something.

Lengthening elimination periods or shortening benefits periods can then be looked at if the client balks at a more comprehensive plan.

If the client cannot-or does not want to-afford a comprehensive DI plan, then something is better than nothing, in my opinion. [RP]

Brady: I think that idea is currently used with future purchase options and automatic increase riders, but to buy a small policy today and grow seems opposite of what most people want. They seem to want the most they can get now and not wait until later. [SB]

Cohen: The future purchase option is one of the most valuable parts of a disability insurance contract. These come in different shapes and sizes, but need to be positioned properly if a broker is going to have success in this marketplace.

The ability to make one’s product less expensive today so that clients can have some protection in force and, in the future, be allowed to apply for more without health questions is very productive and viable. [MC]

Davidson: Of course. Planning is never an “all or nothing” endeavor. Your client may not be able to save as much as he should, but he can start by saving a little and then it grows over time. Property/casualty customers may not have the highest limits, but they don’t go “naked” because of it. Income protection involves diversification (some coverage at work and some personally owned), and recognizing that you may not be able to have everything you want but you at least should have what you will absolutely need. [GD]

Gussin: Yes! I sell a lot of DI and add a future purchase option so clients can buy more DI in the future, regardless of their health. Get your clients some DI, and as their income goes up (and they can afford to pay more) you increase their DI coverage.  [CG]

Health—Occupation—Financial. These are the three key elements of traditional disability insurance underwriting. The disability marketplace has evolved, and so has underwriting. While companies can issue policies on a more expedited basis, the fundamentals of traditional disability underwriting will come into play, especially as larger, more comprehensive policies are written.

The key to success in marketing and selling traditional individual disability insurance is to know when one of these areas has a high probability of causing your client to have a problem getting a policy issued without a modification—or issued at all. There are some companies that may be able to offer more limited policies for these conditions and underwriting issues. This discussion will be for the typical individual disability policies that require traditional underwriting. Of course, underwriting will vary by company and product, so always check with your underwriter.

Health Issues

With many clients, this can be obvious. People with known health issues can have problems obtaining disability insurance. Many conditions that cause concern in life insurance underwriting can also cause concern in disability underwriting (cancer, diabetes, heart disease, etc.). What isn’t so obvious is when a client has a medical condition (or conditions), but was recently issued a preferred rate class for life insurance. There is no way to list all the potential issues that can have different results, but let’s take a look at a few that tend to be more common. These areas shouldn’t be glossed over in your typical pre-screening process.

Muscular-Skeletal Issues: Any current or past history of muscular-skeletal issues can cause an exclusion rider or even a decline. An exclusion rider may let the insurance company issue a policy but exclude disabilities caused by a certain condition, such as a back or shoulder issue. Areas to look out for would include back conditions such as pain treated with prescription medication, bulging discs and disc diseases, sciatica, neck sprains, spinal stenosis and a myriad of other back issues. Also, any other bone, joint, or consistent soft tissue type pain can cause concern. Try to inquire about these issues beforehand so that you can consult with your underwriter or pre-sale team. Be sure to find out if there has been any physical therapy, chiropractic care, physician care and/or prescription medications. You may find out that the DI company indicates that an exclusion rider may be predicted. In which case it’s much easier to prepare your client for a rider at the time of application, as opposed to at the time of delivery.

Mental/Nervous Conditions: In many situations, clients can get life insurance issued while on treatment for anxiety, depression and other mental/nervous conditions. For disability insurance, these almost always result in an exclusion rider, reduction in benefit period, ratings and/or, in some cases, a full declination for insurance. Most brokers will ask what medications someone is taking during the pre-screen interview. I would advise most brokers to repeat the medication question, specifically asking if the client has currently or in the past taken any medications such as Prozac, Xanax, Lexapro, etc. For some reason, clients may not admit to the medication at first, maybe due to thinking that you were only asking about medications for physical ailments and not mental ones. Also, any therapy or counseling from a social worker or psychologist can be problematic, even if no medications are being prescribed. Find out how long your client has been in treatment, any hospitalizations and, if they are medicated, have they had any changes in medication or dosages in the past couple of years. Changes in medication may show improvement in one’s condition, but usually it shows a lack of control.

Sleep Apnea: This has the potential to be a real problem in disability underwriting. Find out when it was diagnosed and if your client is using a c-pap machine on a regular basis. A copy of the sleep study would be great for pre-screen purposes.

Colitis/IBS/Crones: While possible to get life insurance with these conditions, the disability insurance companies tend to be more conservative on these issues. Be sure to concentrate your questions on control, flare-ups, medications and changes in medications, hospitalizations, and operations needed for treatment. In many cases it’s common to see these cases get ratings, reductions in benefit periods, exclusions and declinations.

Occupation

A cornerstone of DI pricing and underwriting is to properly classify the occupational class. Most companies have multiple occupational classes that may control pricing and available plans. While on the surface this may appear to be an obvious and simple task, it can cause confusion in the field, and additional underwriting inquiries. It’s no fun trying to go back to a client who was shown rates for a top class and then trying to explain why the issued class was much lower and has a much higher premium and/or limited benefits. I would suggest to start wide and get more narrow when asking about occupation. For example, an engineer could be an electrical engineer, a construction engineer or a custodial engineer. Start with the industry, then work to obtain the exact job in that industry. For instance, a salesperson in the liquor industry may be classed differently from a salesperson in the auto industry. Also, it may be helpful if your client can break out their duties in general percentages, such as sales, administrative, supervisory (and if so, how many employees), manual labor, and technical (such as an architect). For clients who have ownership, you’ll need to dig a little deeper: length of ownership, percentage of ownership, and how many employees. If this is a new business owner, find out if your client has done this occupation in the past or if he is taking over an established business. On a side note, if anyone works out of his home, you should find out what percentage of time he needs to leave the home to conduct business, as there are guidelines on these types of scenarios. Of course there are a myriad of occupations and additional questions that may be asked, so be sure to check with your pre-sale team or underwriter.

Essentially, the underwriter will be looking for predictability and stability of employment or occupation. Your pre-sale team should be able to assist you in helping to obtain the correct occupational rate class.

Financial

Disability insurance is about insuring one’s income. Therefore, the underwriter will need to know and confirm what someone’s income is in order to consider issuing a policy. While there are many aspects of financial underwriting, some of the primary items we’ll touch on will be income, coverage in force, passive income, and net worth.

Income: For many of your employee W-2 type clients, this will be fairly straightforward. For some of your clients, you may need to ask some additional questions. The important underwriting concerns are usually stability and predictability of income.

Individuals with fluctuating incomes and/or bonuses: Most DI companies will take an average of the net income over a period of years. It would be best to find out the last three complete years and consult with your pre-sale team or underwriter. If the income is trending down or there is an obvious decrease of income in a given year, you may want to inquire as to the reason for the decrease.

Individuals whose primary income is reflected as a 1099, and business owners: The income that the underwriter will be seeking is the net income, after business expenses, but before taxes.

Business owners with pass-through income: For individuals who are shareholders of an S-corp, or members of an LLC, there most likely will be W-2 income from the business and then Schedule E non-passive income from the business. Most underwriters will allow you to combine these incomes for underwriting purposes.

Newly employed: Individuals who have changed employers in the same industry may not be an issue, though the underwriter may want to see an employment contract or the most recent pay stub to confirm income. If the client has switched from a W-2 to a 1099 type of employment or is starting a new business, the disability company may want additional information or may not consider issuing the policy until stability of the employment or business can be established. There can be variations among DI companies regarding how they treat newly established businesses, so be sure to consult with your pre-sale team or underwriter.

In-force Coverage: It’s important to know how much coverage is in force and who pays for that coverage. If the coverage is group LTD coverage, be sure to find out if your client contributes to any of the cost.

Passive or Unearned Income: It’s important to note that disability insurance is meant to insure income that is earned from working. Some of your clients may have substantial unearned income from rents, dividends, trusts or other sources. Just because your client has unearned income doesn’t mean he will be prohibited from buying disability insurance. Disability insurance companies have formulas that are used to establish how much earned income can be insured when unearned/passive income exists. Get as much detail as you can on the unearned/passive income and consult with your pre-sale team or underwriter.

Substantial Net Worth or Substantial Income: An individual who has a very large substantial net worth or an income that is in the millions may not be able to qualify for individual disability insurance. Find out as much detail as you can and consult your pre-sale team or underwriter.

Disability insurance is one of the most satisfying and important products to recommend to your clients. Working through the issues above will help make the logistics a much more enjoyable experience.