Michael Cohen

One of our regional sales VPs for a disability company would always start out his meeting by saying:  “You’ve got to ask to get when it comes to disability insurance.  Many times, discussing disability insurance is obvious.  When developing a financial plan, it’s obvious that a discussion of how your client’s income would continue if they could not work should be part of that planning process.  Many advisors work with clients on insurance planning, but are not considered their financial planner.   It’s during many of those conversations that the disability insurance conversation can and should happen.     

Life Insurance Planners
The need for disability insurance can be similar to and as important as the need for life insurance.  

Income Replacement: Many times the amount of life insurance recommended is based on the income of the primary income earner.  There are various formulas to recommend the face amount of insurance, but a popular one is to simply to use 10 to 20 times income.   We all know that the likelihood of being disabled is greater than that of dying during the primary income earning years.  During the life insurance income replacement conversation comes a great opportunity to discuss disability insurance.  Sometimes a life insurance planner may wait until the life insurance is approved and then discuss disability insurance.   Those planners prefer this method, as they know that their client is insurable and thus feel more comfortable discussing the disability insurance products.   

Business Buy-Sell Life Insurance: Many times the buy-sell agreement will not only contain a provision for death, but also will have a provision for disability.  When this is missed or not addressed, your clients may have an unfunded liability that can cause an issue at a later date.   Disability buyout (DBO) is a wide open market, as many brokers forget to address this part of a buy-sell agreement.   Asking for a copy of the buy-sell agreement can help you to identify when this product is needed.  

Business Loans: When a client needs life insurance for a business loan, many times they are an owner of the business.  In any business there are expenses that need to be paid regardless of whether the owner is working or not.   Business overhead expense (BOE) coverage is an essential product for many small businesses.   

Property and Casualty Brokers
Some of our most successful disability insurance producers are actually brokers that focus primarily in property and casualty and have the proper state licenses to discuss life and health products.  

Personal lines—new home coverage:  When a client seeks out P&C insurance for a new home, asking about the life and disability insurance is a natural follow up question.   Buying a new home or upgrading the home is a life event that triggers the need to discuss disability coverage or a review of current policies to see if current coverage is still adequate.

Personal lines—car insurance for children or luxury cars:   When a client calls in and wants to put his child on his car insurance, this is another life event moment.   When a child is able to obtain a driver’s license, you know that college planning may be the next big financial decision for the family.  A review of the primary income earner’s life insurance and disability insurance is essential.   A client may have bought disability insurance when they first got married or first bought a home.   When a child is old enough to drive is a good indicator that a review of life and disability insurance coverage is due.  For many clients, their incomes over the past 16 plus years has greatly increased, yet, many have not increased their life insurance or disability insurance.  Also, when a client wants to insure a luxury car can be a nice indicator that their income has increased and that their life and disability coverage should be reviewed.   

Commercial lines coverage for a new building or equipment:  When a business client is requesting protection to cover the loss of recently acquired assets, this could be a good time to ask about BOE coverage.  When a small business owner or practitioner can’t work, the expenses of the business still need to be paid.  Asking your client if they own a business overhead expense policy can lead into a discussion about planning for a disability.   BOE coverage can provide reimbursement for certain qualified expenses and can help retain certain employees during a time of the business owner’s  disability.   

Employee Benefit (EB) Brokers
When working with a business on employee benefits, the concentration is often on health insurance and other group insurance products.   EB brokers have a great advantage, as many times their work involves consultation on group disability insurance (LTD) and working with key executives and/or the business owner(s).   The group disability insurance may not cover the high income earner’s full income.   For example, if the group coverage is designed to be 60 percent to a cap of $15,000 per month, those earning more then $300,000 will be capped out.  If an owner/executive has a salary of $450,000, plus an annual bonus of $200,000 or a pass through non-passive income of $200,000, the percentage of income replacement is much less than 60 percent.  An individual disability policy can help to equalize the coverage of the executive(s). These key members that run the firm and provide its leadership should have benefits equal to or greater than the employees they help to support.  If this inequity is not addressed, then the leaders of the firm may not have benefits of equal weight.   In addition, if the amount of key members exceed a certain amount, usually five to 10, it may be possible to get guaranteed issue individual disability insurance (GSI plans).  

Remember, you have to A-S-K to G-E-T.  More important,  you want to make sure your clients have the coverage to protect themselves and their families.  We hear about disabilities occurring to people every week.  Let’s make sure their incomes are protected so that they can concentrate on getting back to good health. 

You may have noticed that words are chosen very carefully in our insurance world.  If you review the language of any insurance policy, you’ll see that companies are quite deliberate with their use of language. 

There have been many articles written and studies conducted that have suggested that consumers, not familiar with our industry, misunderstand the term “disability insurance” (DI) until it’s explained to them by their advisor.   

There are various ways to describe disability insurance and we know that the name, in itself, can’t be changed, so that is why we focus on what disability insurance can do for our clients.  Of course, each policy is different and a client needs to be eligible for claim based on the contract that was bought. In addition, a disability policy may not replace someone’s income in full as there are issue limits and so forth.   But, when a client does qualify for a claim, that policy can be their financial lifeline to help them get through some tough times.  

Concentrating on ways that disability payments can help is another way to explain the importance of this product.   Dis-Ability, or lack of ability to work, also causes a lack of ability to earn money to pay for our monthly expenses.    

Let’s take a look at some “abilities” payments that a disability claim may help a client pay, partially or in full:    

• The ability to continue paying monthly mortgage payments—which gives the client the ability to continue living in their home.
• The ability to pay property taxes, homeowner’s insurance and monthly homeowner’s dues.
• The ability to pay for common regular utilities and other expenses such as a cell phone, internet service, cable TV, home gas, electric service.
•  The ability to pay for their required medical treatment(s), personalized health care (home care, respite care) and personal upkeep (haircuts, nail care, beauty care products, cosmetics).
• The ability to pay insurance premiums (car, home, medical, life, LTCI).   Note: Most individual disability insurance policies have waiver of premium benefit.
• Emergency repairs or unexpected medical expenses that need to be done (car, home, pets, family members, dental expenses). 
• Emergency travel to see a sick relative or a funeral.
• The ability to pay for basic home maintenance such as landscaping, snow plowing, house cleaning and extra costs that may be incurred in order to live in a house designed for someone that’s disabled. 
• The ability to help pay for a child’s education (private schools and/or college). 
• The ability to continue to pay credit cards or other debt that was incurred before the disability occurred such as college loans your client has been paying.   
• The ability to have some relief that money will continue to be received while on claim.  The mental stress caused by financial pressures can be a challenge for even healthy clients.   
• The ability to provide for one’s family, such as:  Music lessons, gymnastics, school supplies, new school clothes, shoes, food, medical care, Boy Scouts, Girl Scouts, Little League, school tutors, test preparation classes, swimming lessons, ballet, religious school, summer camp, etc.
• The ability to have cars:  Car payments, car insurance premiums, gas, car registration, repairs and maintenance.
• The ability to maintain dignity and pride that the provider can still provide in some capacity.  The ability to not feel that they made a mistake by not insuring themselves and becoming a possible financial burden on family and friends.
• The ability to watch their savings be maintained instead of being possibly depleted by not having insurance. 

What would you add to the list?   

Everything starts with you, the advisor.  Educate your clients on the need for disability insurance.  What’s your client’s plan?  Take a few minutes to walk through how that conversation will flow with your client, client’s spouse, or your client’s adult children.

When discussing individual disability insurance (IDI) products with a prospective client, you could share many real-life examples of how IDI policies have protected families from financial ruin. 

For example, from the website www.lifehappens.org, there's the story of Dr. Valerie King, a single mother with three young daughters. After Dr. King had a series of surgeries to treat her ulcerative colitis, she found herself disabled and unable to do the work she loved. Fortunately, years earlier, Dr. King was protected with the IDI coverage she unexpectedly now needed—ensuring a bright financial future for her young family.

What about the IDI policy owners who never had to make a claim?  How have they benefited from their IDI policy?  Has their money been well spent?  As you know, an insurance company has to manage it so that there are more people that never make a claim than those that will. 

So, let's consider an incredibly important benefit every IDI policyholder enjoys—whether they make a claim or not—the benefit of peace of mind. This psychological benefit pays every minute of every day the policy is in force.  From personal experience, this is a benefit that can't be underestimated.

Over the years we seen clients use their policies, but we’ve seen more not use them.   Thankfully, we’ve never needed to make a disability claim on our policies.  For all of us though, we’ve received tremendous benefit in knowing the policy was available and actively protecting our income.   That knowledge has been priceless to us and all of the policyholders that have bought disability income protection.    

Conversely, we dread to think how we would have felt if we had been disabled and we did not have IDI coverage. The psychological toll would certainly have been as devastating as the financial toll—perhaps even more so. 

In life we have all kinds of safety nets in place like DI products. These safety nets may never be used, but they regularly give us that priceless benefit of…peace of mind. 

If someone skydives they usually have a backup parachute, which you’d think would be vitally important.  While rarely used they do have substantial value.  If you have a client that enjoys cruises, could you imagine paying less for a cruise without lifeboats?  Would one even consider taking a cruise if there were no life vests or lifeboats attached?   Would you buy a car without airbags or safety belts?  These are worthwhile investments and wouldn’t even be contemplated by most clients.   

While we have never jumped out of an airplane, we certainly would not skydive without a backup safety parachute. We do take cruises and we drive all over the country. Knowing there are airbags in our cars makes us feel safe—as do the lifeboats on the cruise ship. They allow us to travel with peace of mind. Knowing we are doing our best to protect ourselves puts us at ease. We are more relaxed.  We personally value the feeling of knowing that we have prepared for the unpredictable—the feeling of being able to do as much as we can, ahead of time, to prevent something tragic.    

Taking the cruise and car analogy further, if someone offered you a discount cruise on a ship that had no life vests or lifeboats, would you board that boat to save money? How about if someone offered you a discount on a car without airbags and other safety equipment? Would you take the deal? Better yet, would you put your children or spouse on that cheaper boat or in that less expensive car? 

Disability insurance products give responsible, successful, caring clients the incredible opportunity to protect their incomes from stopping and the devastating effects that can have on their families.   Yes, the financial benefits of IDI protection will be there if needed but, whether a claim is made or not, peace of mind will always be there for the life of the policy. 

Value perceived can influence  the buying decision for many clients. We were always taught the miracle of insurance: That you can pay pennies for the potential dollars received.  When we present life insurance, we talk about the annual premium for the total death benefit received.  Say, for example, we have a 40 year old who is being presented $1 million of 20 year term insurance for about $600 per year.  The value…$600 for $1 million is pretty clear value.   It’s the pennies for dollars classic example.   

Now take the same 40 year old and who is being presented disability insurance.   Say the illustration shows that he can buy $5,000 per month of coverage, payable to age 67, for a premium of $2,000 per year.  This is the way disability insurance is typically presented, and for some consumers this presentation does not emphasize the true value of the policy. These policies are so valuable that it’s important that the presentation doesn’t de-emphasize the true value.   Think about it, we are presenting a monthly benefit and quoting an annual premium.   

So what is the potential monetary value of that disability policy?   If the 40 year old above gets disabled a year and a half after buying the policy, so that the elimination period is satisfied on the 42nd birthday,  the yearly payment could be $5,000 a month, times 12…or $60,000 a year.  If the disability lasted to age 67, then that could be 25 years of payments, or approximately $1,500,000.   So that $2,000 per year in premium would have the potential to be as much as $60,000 per year or, depending on when the claim starts and the elimination period is satisfied, $1.5 million…which brings us to the pennies for dollars.  

Now, the actual total payout would be based on the client’s age at the time of claim, elimination period, and benefit period.   Also, if a policy has an automatic increase, cost of living rider, catastrophic disability or other riders, then the total payout can be even higher.   For example, if that 40 year old also bought a $10,000 a month catastrophic disability rider then a qualifying claim could potentially triple the payout amount.  $5,000 per month base benefit + $10,000 per month of catastrophic disability would be $15,000 per month x 12 months x 25 years—up to $4,500,000 of payout.  Again, the actual payout would be based on the elimination period and age at claim.  

If you look carefully at many of the company provided illustrations, you may be able to find the total potential payout.   We have found that some companies will calculate the potential payout based on the base policy only and some will calculate the total potential payout by taking into account the catastrophic disability rider and/or the cost of living rider (COLA).    

Make sure to emphasize to your client the potential annual benefit and potential total benefit of the contract.   In describing the monthly benefit, it may also help to quote the premium in a monthly amount as well.  Having aligned dollar amounts and units can help clients understand the true value better than misaligned dollar amounts.   

The miracle of insurance is that a client can transfer risk for fractions of the true cost of replacement.   The ratio of premium to potential payout needs to be identified for your client so that the real value can be presented correctly.   The miracle of insurance…paying pennies for dollars.

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.