How To Sell Critical Illness Insurance? Demonstrate The Need

Youve decided to expand your portfolio. Youve selected critical illness insurance as the product of choice. Now how do you actually sell it?

If youve ever sold disability income insurance, you probably know how to sell critical illness insurance, right? After all, the products are the same arent they?

No they are not!

While some of the basic concepts are the same, the provisions within the policies are vastly different.

A disability insurance plan (DI) will pay if your client meets the insurance companys definition of disability after a waiting period, generally of 30-90 days. A critical illness (CI) policy has a waiting period of 30 days (90 days for life-threatening cancer) and begins paying upon confirmed diagnosis of one of the covered conditions.

Both policies are designed to cover all or a portion of a persons income in the event of a catastrophic event. The buyer selects an amount, and a length of payment option. With disability income, the client will also select a waiting period, or deductible time period. How much can a person buy? It depends on several factors, including how much they earn (DI and CI) and what they do for a living (DI).

DI plans usually require ongoing proof of loss to continue receiving payments. CI plans pay out after confirmed diagnosis to the end of the selected payout period. No ongoing proof of loss is needed.

Recovering (going back to work) could be bad news with DI. Payments will usually stop when you go back to work. CI plans pay whether youre working or not. And, while DI plans may require retraining to find a job as part of the contract language, that language is nowhere to be found in CI policies.

Disability plans will usually insure up to 60% to 70% of a persons income. Most CI plans dont have that restriction. Some plans will insure up to 100% of a persons income. And since critical illness is not considered disability insurance by most state insurance departments, the amount provided by a CI policy is not coordinated with SSI disability or private disability plans in those states.

The major difference between DI and CI is that DI will generally pay for any cause of disability (disease, injury, etc.) and CI will pay only for a defined group of critical illnesses. So which is better for your client? Both!

Actually, the answer is “They probably ought to have both!” because they do different things for different situations. A complete protection plan will include both DI insurance (to cover the actual loss of income until a person can go back to work) and CI insurance (to cover those costs not covered by traditional health insurance plans).

So, now that youre convinced, how do you convince your clients and prospects? Simple. Let them convince themselves. Ask a question!

The easiest way to get your client to agree to the need is to ask if they know anyone whos ever had a heart attack, cancer or stroke and survived. Everybody knows someone. Then ask what their life was like for the first year or two after “surviving.”

Chances are youll hear things like: Their health insurance just didnt cover all the costs. Their DI insurance helped, but they had so many more expenses than usual that they had problems. It got to the point that they had to borrow money to get out of “illness debt” or theyd have lost their home!

Its a fact that more people survive a critical illness than die immediately from the illness. In the last 20 years, deaths due to the “big three” (cancer, heart attack and stroke) have gone down significantly. But disabilities due to those same three are up dramatically! Things that used to kill, now disable.

Here’s another frightening statistic: roughly half of all home foreclosures are due to serious medical problems, whereas only 2-3% are death related. Simply replacing lost income (DI) wont solve all of a survivors problems.

The Journal of the American Medical Association recently studied families that had experienced a critical illness. The report found:

“Many critical illness patients required considerable caregiving assistance from their immediate family members. In far too many cases, a family member had to quit work. . .to provide care for the patient. Over 30% of families surveyed reported a loss of most or all of the family savings–while others reported a major loss of household income.”

Its estimated that in 2000, the total overall cost to cancer patients was just over $107 billion. Of that, direct costs (hospital, doctor and medications) accounted for $30 billion. The remaining $77 billion were indirect costs. These are the types of things not covered by traditional major medical plans and include ongoing household expenses, costs of new or experimental treatments, loss of income while receiving treatment, loss of income while caring for a stricken family member, non-covered or out-of-network medical and physician expenses, travel expenses to specialized treatment centers, i.e.–airfares, hotel, meals, auto, etc. and home health care needs.

These indirect costs can put a strain on a familys income and savings. In fact, in many cases where one family member has contracted a critical illness, the additional stress put on the “well” family members is often too much to bear. This stress includes mental as well as financial stress.

A critical illness plan can go a long way toward relieving that financial stress. And when the financial stress is relieved, a large part of the mental stress also vanishes.

Recent research indicated that most consumers are not familiar with the concept of critical illness insurance. But once introduced to it, they found it appealing and easy to understand.

Over two-thirds of Americans are concerned about the sufficiency of their income if they suffer a major illness. Show them what critical illness insurance can do. Show it, and they will buy!

Timothy Nicholson is vice president and chief marketing officer of National Guardian Life Ins. Co. He can be reached via e-mail at tjnicholson@nglic.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, May 20, 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.