Raymond J. Phillips, Jr., CLU, LTCP

I bought my family a very nice Christmas present last holiday season. I purchased a critical illness policy on my life. It just seemed to make sense to me, and I have a feeling that this reality might creep into the psyche of many insurance consumers in the upcoming years. Simply put, it provides funds for flexibility in the care setting, should a covered malady or condition occur.

Structure and Underwriting

An easy way to think of critical illness insurance (CII) relative to other fixed insurance products that have been sold is that it pays a claim like a life insurance policy would, and is underwritten in a similar fashion to how a disability policy would be processed.

As with a life insurance policy, benefits are payable in a lump sum when a claim occurs. There is a fairly broad menu of covered illnesses that trigger benefit payment, and there is some variation of that menu from carrier to carrier. But the general structure typically provides benefits for heart attacks, strokes and cancer diagnoses (though coverage often extends well beyond those ubiquitous situations).

Insureds purchase a benefit amount—much like a life insurance death benefit—that suits their desire and premium commitment. Policies can be purchased in smaller amounts or well into the six figure benefit amounts. Based on a schedule developed by the carrier, a percentage of the purchased benefit is payable at claim time based on which condition has occurred. Most often this is 100 percent of benefit purchased, but it can vary by carrier and by lesser severity of condition.

There is no waiting period or elimination period for this claim to be paid, beyond typical processing and review. Effectively, it can provide funds in short order for the claimant and family.

This is a morbidity-based product, so it shares some of the underwriting traits with its morbidity sister product, disability income. But a very important difference is that there is not nearly as much emphasis on underwriting ambulatory conditions—back problems, etc.—with a critical illness policy. It can be a worthy consideration for those who have difficulty with disability income insurance underwriting because of conditions that might impact mobility or ability to work at a given occupation, but whose overall health is in good order.

Usage of Funds

When looked at in the context of the black-and-white reality of a major health event, CII can provide flexibility in care options as well as peace of mind. It affords policyholders confidence that funds will be there for strategies and comforts that health insurance might not provide, and for which disability benefits are not earmarked.

Most apparent is the opportunity to provide funds for the shortfalls that might be inherent in a person’s health insurance plan. Consumers with high-deductible health insurance plans can use funds to offset their deductible requirement. Likewise, those who have had a major health insurance claim often find there are co-pays or limitations in coverage that they did not anticipate. CII provides dollars that allow an insured to postpone dipping into savings when those deficits occur.

Look beyond just the opportunity to help relieve any structural insufficiencies in the makeup of a health insurance plan. Suppose the individual wants to receive care or treatment in a specialized facility—the Mayo Clinic or similar institution. While perhaps a health insurance policy provides care in such settings, it will not pay for things such as travel, lodging or meals for the insured or loved ones who accompany them on such quests. CII provides a pleasant cushion for these types of expenses to be addressed.

Similarly, concerns about whether second (or third) opinions or experimental treatments are covered can be alleviated by the funds provided by a CII plan.

Funds can be used “just to make someone’s life a little easier and more pleasant.” Cancer treatments can be grueling. Cardiac recovery can be frustrating. A debilitating disease can be depressing. Critical illness funds can provide help in caregiving or even mental relief.

A person can use these dollars to hire someone to help with housework or cooking. Or, for that matter, they can be used for a brief getaway—a sojourn from the reality of the difficult situation they are facing. The concept of CII as “comfort insurance” is valid and allows the insured “fun money” with which to enhance their quality of life and do things they might not otherwise experience if relying solely on savings.

Flexibility in a health care setting and the peace of mind this insurance brings to a claimant are valid, positive reasons for an insurance professional to include this in discussions with clients and prospects.

Strategies for Client Discussions and Sales

Approach Health Insurance High-Deductible Self-Insureds and National Health­ Care Clients. A logical segment to approach on the subject of critical illness coverage are those who are maintaining high-deductible health insurance plans and/or participating in one of the national health care options that are now available.

In the “old days” of health insurance it was not unusual for an individual to find surprise out-of-pocket costs on their health insurance plans during a major health episode. This is a given on high-deductible plans and on plans offered through the new national health care exchange. Critical illness coverage provides for these shortfalls, as well as providing additional flexibility of funds for experimental care, second opinions or travel to preferred facilities that may not be covered in their basic health plan.

Discuss with those who have experienced a family member or close friend with a covered illness—those who have seen the costs of a major health claim will be more in tune with the costs of care and the benefits that can be derived from a CII plan.

Again, the potential flexibility of health care is obvious, but a secondary effect is the “comfort insurance” aspect of CII coverage. Using the funds to provide meals or house cleaning can be a tremendous emotional lift to a claimant. Access to excess funds for a weekend getaway or vacation can provide huge emotional return to those who are experiencing a major health problem covered by the critical illness coverage.

Disability Income Supplement, Alternative or Supercharger. Another client base that needs to be aware of critical illness coverage is those with existing disability income (DI) plans. First, it can be used as “waiver of elimination period” coverage. The funds from a CII plan can be used to spell a client during the existing DI’s elimination period in which no benefits are paid. Likewise, it can be a consideration for an alternative to short term DI coverage. In fact, there are times when a major health event takes place—think of a heart attack—where the insured is recovered and back at work before a DI plan even pays any benefits at all. It is especially prudent for those with a long elimination period on a group or individual DI plan to consider.

CII can provide morbidity coverage for those occupational classes that are underserved by the DI markets: government workers; policemen and firemen; public school teachers, etc. These and others often have limitations on how much DI monthly benefit can be provided. CII can help with that shortfall.

CII is also something that can be considered for those who perhaps cannot get DI coverage due to their occupations, or even because of their income status: homemakers, part-time workers or self-employed individuals with extensive write-offs.

CII can also serve to provide those with large income coverage additional morbidity insurance beyond what can be provided in the DI markets. While the client needs to be made blatantly aware of the shortcomings of a CII plan compared to a regular DI plan—specifically, no coverage for degenerative claims, mental/nervous issues, accidents, etc.—it is, nevertheless, a way for those with large incomes who are maxed out in the DI markets to address some of their excess exposure.

We are at the ground floor of a new era of health insurance planning. Critical illness coverage will likely experience heightened interest. It provides funds for flexibility in the health care planning process as well as providing  funds for those with in-force DI plans and those who may not have access to a robust disability income plan due to occupation. The prudent planner will make this product part of his insurance portfolio. 

Maureen Kirschhofer, CLU, ChFC, Principal, Kirschhofer & Associates

Raymond Phillips, Jr., CLU, LTCP, President, The Brokers Source, Ltd.

Kenneth Sapon, CLU, CLTC, LUTCF, RPh, President, Champion Agency, Inc.

Q: What led you to specialize in the DI market?

Maureen Kirschhofer: I began my insurance career more than 30 years ago in the disability market with a major carrier. I was an art teacher who was tired of seeing art departments downsized and closed. I was encouraged to get into sales, but with an art background there wasn’t much opportunity within my major, so I chose insurance. Reflecting back on that choice, my timing was lucky, because today I am not aware of any company with DI as its primary focus for training agents.

Back then, we had to calculate our rates from a rate book, which was a major challenge for me. More importantly, we were taught how to sell the need for income protection rather than merely peddling rates. Back to basics has always been the best approach!

Raymond Phillips: We’ve been marketing DI in some shape, size or form since the late 1980s. We’ve always offered many different product lines: inexpensive term life insurance; impaired risk life insurance, long term care insurance, fixed annuities, group life and long term disability.

In our model, multiple products have led to opportunities to not have to say “no” to a broker. We have expertise in all facets of the fixed insurance marketplace, which allows us to constantly update messages for our brokers, as well as multiple opportunities for educating, building relationships and encouraging brokers to cross-sell. When a life producer comes to us for DI, it is because he is used to talking to us and he doesn’t have to learn a new phone number or the quirks and idiosyncrasies of working with a new agency.

So DI has been one of our specialties from day one because it allows for a better “one-stop shop” experience for a broker or firm doing business with us.

Kenneth Sapon: I studied and graduated as a pharmacist working in hospitals. My natural market became pharmacists, nurses and, of course, physicians. They would rather talk insurance needs than drug therapy! Can’t help it if I am lucky.

Q: What are the most challenging issues for a disability insurance specialist today?

Phillips: Today’s topsy-turvy economy has led to a kind of “personal DI paradox.” Many workers have been displaced and are working at firms that don’t have benefit packages that are as rich as their previous ones, or they are starting out in their own business venture. Their exposure and individual DI need is perhaps greater than it ever has been, yet the uncertainty of their new situation leads to the fear of spending for no more than just the most essential of life’s survival needs.

Further exacerbating this dynamic is the naiveté that many have regarding corporate benefit packages and the cost involved. Someone who has always had corporate benefits is generally unaware of the cost of coverage. Thus the cost of an individual DI plan seems extremely expensive to someone who has never purchased one before.

In the physician market, more and more practices are owned by health plans or hospitals. At one time, working with a medical practice was a given for a DI planner. Today it is just not as easy to prospect individual doctors, when often many of their financial decisions are provided by and/or decided on at a corporate level rather than at the individual practice level.

Sapon: Today’s DI specialist has fewer issues than ever before. Products, pricing, full underwriting, simplified underwriting and guaranteed issue have never been better.

Kirschhofer: DI specialists have many challenges. First we must assist our clients in seeing the need for income protection and, just as important, we must become a major part of the underwriting process. Convincing clients who have been given exclusions or ratings for medical conditions that they are lucky to be insured for everything else is not an easy task; however, advising clients that a rating is a possibility during the application process makes delivering a policy with an exclusion much simpler. Another important point to mention is that there is a possibility of having the exclusions removed if their health has improved—and you will call each year for a review of their situation.

Disability insurance is so undersold and those of us in the DI business must share our knowledge. Too many agents today would rather give up a disability sale than ask for help. I have mentored other agents that I have met through NAIFA and SFSP and it is very rewarding to assist them. My suggestion to agents who haven’t sold DI is find an experienced DI broker and learn everything you can about this rewarding market.

Q: When selling DI insurance, a common challenge brokers face is a client’s “it won’t happen to me” attitude. What is the best way to get beyond such objections?

Sapon: DI is important to the person buying it—but what is more important is that person’s family having the ability to maintain their standard of living.

Kirschhofer: Through the years I have seen many of my clients use their disability policies—most of whom were not very old when they did. As I go through an illustration to explain the various options for the policies, I relate how my clients have used them. From a permanently disabled emergency room physician who was attacked by a prisoner being treated at an area hospital to pregnancy related claims, I use my words to paint a visual picture of clients who are disabled and using their policies.

Then I go back to the question: If you were sick or injured and couldn’t work, how long could you go without an income? Listening to their answers is just as important as explaining the benefits. I ask them to picture themselves disabled—what would they like to have?

Phillips: This is always a difficult objection to overcome. First, I’d suggest you point out to the client the opportunity to calculate their own “personal disability quotient” from the Council for Disability Awareness website (www.whatsmypdq.org). In fact, it would be great to pull the website and calculator up on screen when with your client. The calculator shows what the chances of disability are and what the length of the average disability would be, based on the client’s occupational duties, overall health, etc. The Council’s “Disability Counter” shows in real time the number of disabilities happening by day, month or year (www.disabilitycounter.org). Great material to illustrate that disabilities are for real and happening “before your eyes.”

It can also be helpful to point out the many ways DI can happen. Again the Council’s site has a very helpful tool (www.disabilitiescanhappen.org). The “Life Stories” section shows how many different forms DI claims can take. It is helpful to identify what the client’s perception is of what will lead to a disability. My bet is that their perception is that it’s going to be a major accident or catastrophic illness. While those situations can lead to disability, often clients lose sight of the fact that for a good DI policy to pay, it does not have to be a cataclysmic event.

Q: What advice do you have for a producer who is just entering the disability insurance market?

Kirschhofer: As president of the Inter­national DI Society, I highly recommend that anyone in the DI market join the organization and attend the annual conference. Not only will you hear the stories of disabled people and how they were able to cope, but will have an opportunity to be with people from all aspects of the industry—producers, brokerage representatives, home office staff and claims representatives. I don’t know anywhere else that this would be available with such an intense immersion into the market. Every month members have available to them a study group with various lessons covering all areas of DI business. Discussions range from Council for Disability Awareness statistics to how to market DI from the experts in the industry. One session is free, but to continue an agent must be a member. Check out www.internationaldisociety.com.

Phillips: The first piece of advice I have is: Ask your prospects if they have DI insurance. There are really only three potential answers that they can give—and there are selling opportunities for each.

Answer 1: Yes, I have it at work. Most producers would stop there, thinking there is no opportunity. But that’s wrong—the follow-up question should be: How much and what does it cover? Very seldom will a client know much about his DI benefits from work. Ask to see a copy of the benefit book and explain you want to make sure there is not a coverage gap. A client making $125,000 who has a group LTD plan at work that covers 60 percent to a maximum of $5,000 has an “income gap” that is not insured—and he probably doesn’t even realize it.

Likewise, confirm the definitions and the coverage to make sure of the exact definitions of disability and, especially, what income is covered. Often a group LTD contract does not cover bonuses and/or commissions, making for an even wider gap in covered income to insurance.

Answer 2: Yes, I purchased my own. This provides an opportunity to do a DI policy audit. Ask for a copy of the policy to see exactly what it covers. My bet is that the client won’t have a great understanding of what he has.

If the policy has been in force for a number of years, chances are it hasn’t kept pace with his current income. Also, confirm that the definitions are appropriate for the client’s occupation and compare to what might be available currently in the market.

Answer 3: No, I don’t have any. You’ll be surprised at how many individuals will provide this answer. The opportunity is there for the taking.

Another piece of advice I’d give is to pay attention to young professionals. Most carriers will provide some amount of coverage for young professionals, based on the probability that they will end up in a solid income situation in the very near future. Many may recognize industries such as medical, dental and law. But realize there are opportunities for accounting students and those new in practice as well as engineers, information technology professionals, architects, physician’s assistants, pharmacists and others.

Getting young professionals as clients forms the foundation of a future relationship and sales. Placing a future purchase option for those individuals ensures the opportunity to increase DI benefits as income increases, providing the insurance professional future sales opportunities.

Which brings one last piece of advice: Always put a future purchase option on a policy when available. Make it a standard of your sale. The fact is, even the most blue collar of clients is apt to have future income increases. While many will not have health issues emerge that would impact the underwriting of a new policy to match increases in income, the reality is that clients will be more apt to exercise a future increase rider opportunity than to submit to the full underwriting process of a new application. It’s more convenient for the client and for the broker.

Sapon: Work with a consulting BGA who has had experience working directly with clients and is willing to educate. Another approach is to partner with a senior agent who is willing to split cases and give you priceless on-the-job training. Learn and get paid! Maybe if things work out, you can become a part of his business continuation plan.

Q: What advice would you give to a producer who has been in the disability insurance market for awhile?

Phillips: The advice I’d give for someone who has been in the DI market for awhile is the same I’d give to a producer who has been in any market for awhile. Talk to your in-force clients! Meet with in-force clients to perform a policy review to see where it fits compared to their current situation—as well as to ask for referrals.

One of the old adages of marketing that works is: Who is going to do business with you? Those who have done business with you! The fact of the matter is that approaching an existing client is much easier than building a new relationship from the ground up. It seems that many in the insurance business have forgotten this adage, because I deal with many brokers in all product lines who’ve not updated their clients’ plans. Chances are a client has increased income and/or received a new job title and duties since his policy was purchased. He’s probably underinsured and may qualify for a better occupational class.

Likewise, other products can be offered if appropriate—business loan DI, pension DI, business overhead coverage, even critical illness coverage to complement the in-force DI, etc. While there is a chance a client will not purchase the amount of coverage you recommend, there is a 100 percent chance of a non-purchase if the subject is not brought up to him at all.

Or, the other opportunity when doing a policy review with an in-force client is to ask for referrals. There is no doubt that technology is becoming more and more a part of society’s fabric. Maybe I’m looking at this market through old-fashioned lenses, but I believe DI is more of an old-fashioned sale. I think a face-to-face interaction is vital to an appropriate understanding and purchase of DI. It is not a commodity. For that reason, I think it is ripe for the old-fashioned business building technique of getting referrals.

Sapon: Pay it forward—find a young agent to train. You will revisit the skills you had that brought you such success. You will then start selling again, what a concept. Synergy, it’s one plus one equals 10.

Kirschhofer: Several years ago I met a local agent and we found out that we were pursuing the same clients. Instead of competing with each other, we decided that we could complement each other and we joined forces. While we share some strengths, each of us has areas where we are strong. It is much more fun to work together, especially for me, since I work out of my home—this gives me time for idea sharing. Between the two of us, we have almost 60 years of experience in selling DI protection.

Our clients know that they get two for the price of one. We share the commissions 50/50. We have designed a website for our company which includes DI training that we get from the Council for Disability Awareness. We also focus on a specific market doing seminars, working at trade shows and getting endorsements for that market

Q: What disability product innovations should producers know about?

Sapon: Some really exciting and updated products are available today: unlimited mental and nervous coverage; pure own occupation for all occupations; residual riders that can be triggered with no income loss, no time or duties requirement, and no recovery benefit period, allowing the client to return to work full time and still remain on claim until they build their business back to what it was. There are also DI benefits that pay if a family member needs the insured’s care, survivor benefits, COBRA benefits and more. Now is the time to be in the disability insurance business! [KS]

Kirschhofer: I wish that I could say that the companies in Florida were offering the return of premium products that I sold about 10 years ago. For those of you in other states who have that option today, calculate the actual return on the extra money for the benefit; with guaranteed interest rates minimal, it is a great benefit.

Beginning in 1981, DI products changed dramatically. I used to compare them to Avis and Hertz. When one company added a benefit or decreased their prices, the others would follow. Then with the claims problems in the early 1990s, companies started taking everything away.

Another dramatic change in our industry is that now we are down to about 17 major carriers—but the good news is that benefits are changing for the better. For the first time ever, some of my carriers have improved their classifications and decreased their rates at the same time, plus they are adding benefits.

A benefit period to age 70, while not a major change, does not cost that much more for younger clients and adds five years of benefits.

Catastrophic illness benefits are not very expensive but can be viewed by your clients as something that will assist them should something really serious happen.

Presumptive disability that begins at time of claim and can become a lifetime benefit is also attractive. Depending on the occupation of the client, some innovations can be really attractive, others not so much. An obstetrician in a sole practice who is disabled for several months may never get back to the same pre-disability earnings, even if he returns to work, so a recovery benefit will be an excellent option to consider.

As I mentioned earlier, selling DI is simple—paint a picture so each client is able to understand how he could use DI benefits. [MK]

Phillips: There are products that I would not necessarily refer to as “innovations,” but they definitely don’t seem to be viewed as mainstream DI opportunities.

DI Buyout. I’m not sure there is a more undersold product in the DI industry. A strong buy-sell agreement will have disability language in its buyout trigger. The discussion of funding this with insurance (very similar to funding the death trigger with life insurance) should occur with all business entities with a buy-sell.

Pension DI. Products exist now that allow insureds to protect their ability to fund a retirement plan. Think about it. When a disability occurs, very often saving is cut off completely or curtailed, whether it is via an existing pension plan or on a non-qualified basis. This coverage allows contributions to continue. Benefits are paid out at age 65, just when the individual DI plan reaches the end of its benefit payout. It can help buoy an individual’s lifestyle through the retirement years.

Business Loan DI. As the name implies, a business owner’s loan payback can be protected should there be a disability. The product works great if working with a lending institution, the business owner directly, or where a young partner has an ongoing obligation to buy out a senior partner.

Key Person DI. Another undersold risk is that of a business’ key person becoming disabled. On the life side of the coin, we get applications in every week for a key person life on behalf of a business. Yet the same companies buying the life coverage are frequently not informed about insuring key employees for disability. [RP]

Though disability is behind a significant number of home foreclosures and personal bankruptcies, insuring against it has not been a high priority for most workers because many assume they’re already covered through Social Security, workers’ compensation or employer-provided group plans.

Most Americans don’t realize a disability could interrupt their income—and fewer still are protected from that loss by adequate savings, private insurance or government programs.

Just consider the following statistics on disability recently compiled by the Council for Disability Awareness:

More than 10 percent of Americans between the ages of 18 and 64 have a disability (U.S. Census Bureau, Selected Social Characteristics in the United States: 2009).

8.1 million U.S. workers receive Social Security Disability benefits as of October 2010 (SSA Beneficiary Data, 10/10).

Nearly 90 percent of disabilities aren’t work-related and thus don’t qualify for workers’ compensation benefits (National Safety Council, Injury Facts, 2008 edition).

Applications for Social Security Disability Insurance (SSDI) benefits increased 21 percent from 2008 and are projected to increase in 2010 as well, yet only 35 percent
of initial SSDI applications were approved in 2009 (Social Security Administration).

100 Million Americans are not protected by private disability insurance (Council for Disability Awareness, Long-Term Disability Claims Review, 2005).

Once again the LIFE Foundation has de­clared May Disabil­ity Insur­ance Aware­ness Month. It’s a time when the insurance industry comes together to do something about the enormous gap that exists between Americans’ need for disability income protection and the actual coverage they have in place. This year’s theme is “Pro­tect Your Pay­check.” LIFE will be launching the Produc­er Plan­ning Tool­kit later this month to help insurance professionals pull together a quick and effective campaign for May. Some of the many promotional endeavors include the following:

• Microsite. LIFE has created a microsite, www.protectyourpaycheck.org, to focus Americans on the fact that too many are leaving their most valuable asset—their paycheck—completely unprotected. At the end of this month, this will become a standalone microsite that will feature the best of LIFE’s web-based DI resources. It will also be one of two places where consumers can enter the “This Moment Made Possible by My Paycheck” photo contest.

• “This Moment Made Possible by My Paycheck” Photo Contest. Accessible through the www.protectyourpaycheck.org microsite and LIFE’s Facebook fanpage beginning later this month, this contest will ask consumers to submit a photo with a caption that captures a moment that their paycheck has made possible (e.g., family members enjoying time together in their home, a memorable vacation, etc.). There will be a photo carousel on the www.protectyourpaycheck.org microsite, and people who grant LIFE permission will have their photos featured there. It will only take a few minutes to enter, and the person who submits the best photo and caption will receive a $500 gift card.

• DIAM on the LIFE Website and Blog. During May, the homepage of LIFE’s main website will focus on disability insurance, including a link to LIFE’s popular “Disability Needs Calculator” and the “Lifetime Earnings Calculator.” LIFE will also feature disability insurance content on “The Insurance Word Blog” throughout the month.

• Disability e-Cards. LIFE has a suite of electronic greeting cards, designed to give insurance professionals a cost-free way to communicate with people in their communities during DIAM and throughout the year. There are disability insurance e-cards that were developed specifically for use during the May campaign. You can access LIFE’s e-cards at www.­insureyourfuturenow.org.

• Turnkey Planning Kit. LIFE is creating a new planning kit for agents to use during May, which includes free downloadable flyers for use in mailings and client meetings, a DI sales ideas podcast, links to important DI resources, as well as a marketing guide so agents can create their own quick, effective DIAM campaign to reach out to their communities.

• Media Outreach. Throughout the year, LIFE reaches out to personal finance reporters at the nation’s leading print and online publications. During May, LIFE’s focus will be on story ideas relating to disability and disability insurance.

• Public Service Announcements. LIFE will develop and distribute radio PSAs to 1,000 radio stations across America.

The following information will provide you with some helpful statistics and information as well as some sales ideas from leading DI specialists from The Plus Group.

Social Security Disability Insurance: Participation Trends
and Their Fiscal Implications

A series of issue summaries from the Congressional Budget Office, 7/22/10

Benefits in the Program
“Average monthly benefits for disabled beneficiaries were $1,065 in May 2010. Benefits for spouses and children were lower, averaging around $300 per month. Disabled beneficiaries usually receive the same amount of benefits each month, boosted by annual cost-of-living adjustments, for the rest of their lives.

“DI benefits, like all Social Security benefits, are tied to a worker’s past earnings through a progressive formula. That is, workers who have higher earnings receive larger benefits, but the replacement rate—the portion of earnings that benefits replace—declines with earnings.

“For example, a 55-year-old worker who has had earnings equal to the nationwide average (in 2008, $41,000) during all of his or her working life and who becomes disabled this year will receive monthly benefits of $1,544, replacing 45 percent of those earnings. Yet if that person’s earnings had been half as much, the benefit would have been $993, replacing 58 percent of earnings.

“Because the benefit formula is linked to the growth of average earnings nationwide, average initial DI benefits grow at approximately the same rate as average earnings.”
For the entire eight-page report in pdf format, go to www.cbo.gov/ftpdocs/116xx/doc11673/07-22-SSDisabilityIns_Brief.pdf

About the Personal Disability Quotient

The Personal Disability Quotient and the PDQ Calculator were ­developed to aid in educating consumers by the Council for Disability Awareness. The statistical basis for the PDQ Calculator is the 1985 Commissioners’ Individual Disability Tables A and C, Society of Actuaries.

For questions about the PDQ or CDA, please call 207-774-2634.

For more information and other client questionnaires, go to www.DisabilityCanHappen.org.

Your Chance of Becoming Disabled
Check the box below that reflects your total points. Read across to see your estimated chance of becoming disabled and unable to work for three months or longer before the age of 65.

__ less than 25 points
   5-25% chance (below average)
__ 25-35 points
   25-35% chance (about average)
__ 36-49 points
   35-50% chance (above average)
__ 50+ points
   50% or more chance (significantly above average)

The Length of Time a Disability May Last
                                                 Probability
                           Average      of disability*
                          length of    lasting 5 years
       Age          disability*       or more
__ 20-24       69 months          30%
__ 25-29       74 months          32%
__ 30-34       78 months          35%
__ 35-39       82 months          38%
__ 40-44       85 months          40%
__ 45-49       86 months          43%
__ 50-54       86 months          45%
__ 55+          84 months          46%
*For disabilities lasting three months or longer.

Mind the Gap In Your Key Clients’
Group DI Plan

By Ray Phillips

A trip on the London Underground is a unique experience. The complexity of the subway system borders on anarchy. Yet through it all a proper British structure keeps the system moving in a timely, efficient and orderly way.

As one stands on the platform and a subway car approaches, an otherworldly voice bellows from a loudspeaker, Mind the gap. This is the London Transit Authority’s way of telling riders to be careful getting in the car lest they trip over the space between the car and the platform, or worse yet, get a foot caught in the small chasm.

A prudent DI planner might use this anecdote with clients when discussing their need to supplement a group long term disability (LTD). “If you don’t Mind the gap, you might get caught short at claim time.”

Consider this scenario: A well-compensated client has coverage at work. His perception is that it completely covers his income and there is no need for additional individual coverage. But remember, Mind the gap.

Let’s assume the client is making $225,000 and that he does indeed have a solid group LTD plan at work—60 percent of salary to a maximum of $10,000 per month. The client’s annual DI benefit would provide $120,000 of taxable benefits (this benefit is taxable if the employer is paying the premium). Obviously, there’s a shortfall relative to his income here, and realize that the gap would be wider if the client’s income was higher or if the group LTD program’s monthly cap was lower. Yet an appropriately structured individual DI plan can address that shortfall.

Likewise, bonuses and commissions are not countable toward the income a group LTD plan will protect. This might further widen the gap, especially for those who are in a commission-oriented occupation or who have a history of healthy bonuses.

When working with the clients who have DI coverage provided by their employers, it is important to make sure the income they’re making is suitably protected. Group LTD benefits may not protect as much income as the client assumes. Remember to think of the London Underground and Mind the gap in your client’s group LTD plan!

Tips for a Successful
Voluntary Multi-Life DI Case

By Reed Schnittker

The individual disability income (DI) insurance industry has seen growth in the voluntary multi-life marketplace. It’s an attractive market because it allows:

• Employers to maintain comprehensive and budget-friendly employee benefit packages to attract and retain employees.

• Employees to purchase valuable coverage at a discount through a carrier their employer has endorsed—often with streamlined underwriting.

• Producers to see increased referrals, increased cross-selling opportunities and more commissions.

To be successful, producers need to understand the customer, effectively communicate the offering, and work with the employer to establish a plan and enrollment strategy that best meets the employer’s needs.

Understand the Customer. Employers are the “gatekeepers” to employees, and a strong relationship with them can result in better support, access to employees, and a stronger plan design. When meeting with employers, position yourself as an expert for employee benefits and ask questions that help you deepen your understanding of their workplace and objectives. The knowledge you gain helps you and the insurance carrier develop a plan design that meets employer and employee needs.

Communication. Putting benefit decisions in the hands of employees means more education and communication is needed. Most employers welcome assistance in helping employees understand the benefit offering. The best way to educate them and ensure a successful enrollment is to use a variety of communication methods with messages that address their needs.

Establish a Plan. Creating a customized plan design and determining the best ways to communicate with employees takes time and coordination. Work with an insurance carrier that offers assistance, such as customizable communication templates, employee enrollment packets and enrollment help. Establish employer expectations by clearly defining your role and theirs regarding account set-up, enrollment communication, enrollment meetings and policy delivery.

Following these tips when selling and enrolling a voluntary multi-life DI program can provide benefits for everyone—you, the employer and their employees.

Disability Protection
For the Single Business Owner

By Ken Bloch

Single business owners invest countless hours and energy into creating wealth, stability and security for their families. These businesses are not only the single source of income, but also future retirement income and legacy for the owners. Will the value of such a business withstand a disability moment?

The sole business owner is the strength to his family, employees and clients. However, even the most stable businesses can become fragile in a disability moment. When this happens, a business suffers a loss of value due to the loss of leadership.

A single business owner protects his income with personal disability insurance and business expenses with a business overhead policy. His family is protected with life insurance. What about protection for the business? A single business owner can insure the value of his business up to $5,000,000 based on current market conditions and receive a permanent total disability lump sum payment after a 12-month elimination period. The value of the business is calculated using a multiplier of wages plus profits. Benefits would not be payable if the business owner was able to sell the business.

Every sole owner business should consider this coverage—physicians, attorneys, CPAs, dentists, manufacturer’s representatives, financial planners, and other executives and professional business owners. After a severe stroke, how long will any of the above occupations be able to maintain their client base and business value?

Discussing this issue with your business professional clients gives you the opportunity to review all facets of business insurance with them. It also provides the opportunity for new agents to utilize daytime activity to create new clients and build a successful career.

Important Resources for Disability Insurance
Information and Education

The Life and Health Insurance Foundation (LIFE)
www.lifehappens.org
888-543-3777
LIFE is a nonprofit organization, formed in 1994 by seven leading insurance producer organizations, to better educate the public about important insurance planning topics. LIFE coordinates three industry-wide awareness campaigns: Insure Your Love (observed in January/February), Life Insurance Awareness Month (observed in September) and Disability Insurance Awareness Month (observed in May). A wealth of information is on the site, plus the organization provides various promotional materials for clients.

Council for Disability Awareness
www.disabilitycanhappen.org
207-774-2634
Since it began in 2005, this nonprofit group has engaged in communications, research and education, helping the American workforce become aware of the growing likelihood of disability and its financial consequences. This website contains useful information that can be helpful in marketing DI to clients.

The International DI Society
www.internationalDIsociety.com
562-481-2381
The International DI Society is dedicated to the task of preserving and enhancing the disability insurance industry. Membership includes industry regulators, producers, educators and insurers. IDIS has a mentoring program for newcomers to the disability market. The Society hosts an annual meeting in the fall. The website provides helpful articles and a very useful glossary of terms used in disability insurance.

The American College
www.theamericancollege.edu
610-526-1442
The premier educational institute, specializing in financial services. Offers several respected industry designation programs, as well as other specialized educational classes. For courses specializing in disability insurance, go to www.theamericancollege.edu/insurance-education/lutcf-insurance-skills.

LIMRA
www.limra.com
860-688-3358
More than 850 financial services companies in more than 70 countries around the world turn to LIMRA first to help them build their businesses and improve their performance. This 90-year-old organization provides financial services companies with the latest industry information and makes recommendations that address their needs. While much of their information is proprietary to member companies, the website has useful information.

The Plus Group
www.plusgroupus.com
800-831-1018
The only national insurance brokerage organization focused on disability insurance. There are 20 partners who represent the recognized leaders in the income and asset protection industry. Helpful articles can be found on this group’s website.

Disability Insurance Forum
www.disabilityinsuranceforums.com
This is a website/blog where disability insurance agents can interact with each other. Use this to find joint work partners across the country, debate products and learn more about disability insurance.

Armed with this information and sources, you should be ready to take advantage of the promotional materials available from the LIFE Foundation to bring DI into your product mix.