I can remember when Cadillacs and Chevrolets were the primary cars of choice, can you? These automobiles seemed to serve most Americans’ travel needs very well 3 or 4 decades ago.
The “Caddy” epitomized luxury and served the wealthy but with a high price tag, while the “Chevy” provided the rest of us with a reliable, comfortable vehicle that the middle class could afford.
The high-pressure salesperson would try to sell a Caddy to everyone who walked into the showroom. He would entice us with the leather seats, eight-track tape player and many other “bells and whistles.” With each option, our excitement would grow. But, when we sat down to discuss price, we were disappointed to realize that affordability would have to be the deciding issue. We “wanted” a Caddy, but “needed” and could afford a Chevy to satisfy our basic transportation needs.
This analogy may have been a long lead-in for an article about disability income coverage, but I believe you’ll see that it’s appropriate.
What Your Peers Are Reading
When proposing a DI product in the medically impaired market (someone who cannot obtain “standard” coverage), you have two distinct issues. First, the product design is a Chevy compared to the Caddy plan that the person does not qualify for due to their health. It has “graded benefits” for the first 2 years and the benefit periods are 2, 5 or 10 years compared to the Caddy’s “to age 65″ period. You really are comparing Caddys to Chevys, or even apples to oranges.
Second, the biggest difference to consider among products is the price of the plan. The impaired market has its Caddy–the loaded 10-year benefit period. And, proposing the maximum program for which your client is eligible is in everyone’s best interest. However, in the medically impaired market, the cost can be 5%, 8% or even 10% of a client’s income. That amount is just too much to expect someone to pay. In the “regular” DI market, the rule of thumb for estimating the cost is approximately 2% of a prospect’s income. The medically impaired client realistically should pay a higher premium for DI coverage, but how much higher is reasonable?