Cross-Sell Opportunity: Add DI To The Long Term Disability Sale

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The growth of small businesses in the last decade created a huge potential for combined group long term disability and individual disability income sales.

Further, with the odds of people becoming disabled and a market many agents have ignored, the opportunity is great for agents to position themselves as a valued resource by offering combined disability solutions.

Consider the numbers: Approximately 30% of all people aged 35 to 65 will suffer a disability for at least 90 days, and about one in seven of those individuals can expect to become disabled for five years or more (Health Insurance Association of America; The New York Times, February 2000).

In addition, in 2000, only 21% of small businesses with fewer than 100 employees planned to add LTD benefits. (U.S. Small Business Market, Preliminary Results, LIMRA International, 2000)

Hence, the sales opportunities. The question for producers, is: How do I tap this growing market? Here are some suggestions.

First, to open the door, focus on the positives of group LTD. These positives include:

–Its affordable. (On average, LTD premiums cost employers one-half of 1% of payroll).

–Its guaranteed issue (with certain pre-existing condition clauses) for eligible employees.

–It does a good job of providing a basic platform of coverage (60% of salary).

Next, assess the sales opportunities. Here, there are two potential routes to take.

One of these routes is through small businesses that currently provide group LTD.

Here is the rationale: For some employees, group LTD may not meet all their needs. LTD generally covers salary only. Many key employees dont realize that bonuses, profit-sharing, and pension contributions may not be covered. They may think they have 60% income replacement, when in fact they might have only 30% because of these limitations.

The solution? Offer voluntary individual DI to expand the coverage and help meet the needs of these employees.

A second route to take is through small businesses that do not offer income replacement benefits at all.

Here is the rationale: A typical group LTD plan covers 60% of earnings. But some employers may find the premium too expensive.

The solution? You can respond to this objection by suggesting purchase of a group LTD that covers 50% of salary (not 60%)a design that will reduce premiums by up to 40%. Then, for employees who need additional coverage, you can offer voluntary individual DI to supplement the group benefits.

The bottom line is that, in both scenarios, stacking individual DI on top of group LTD can protect up to 85% of most employees total compensation.

And remember to point out that voluntary DI offers a variety of benefits. Most carriers offer 10% to 30% discounts for three or more lives, for instance. Also, many allow individual billing, resulting in less administrative hassle for the employer–but you can still offer list bill on larger cases. Finally, DI carriers may offer underwriting concessions for multi-life cases, simplifying financial and medical requirements.

In todays market, employers are definitely interested in talking about disability coverage to help them attract and retain key employees. The group-individual cross-sale is a perfect solution.

Become a resource to your clients. They need the protection that a salary continuation plan affords. If you dont fill the void, who will?

, CFP, is a director of disability solutions in the Atlanta office of Principal Life Insurance Company. He can be e-mailed at: Schamay.Don@principal.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, February 25, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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