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Life Health > Life Insurance

The Road Less Traveled

By Howell H. Hughes Jr.

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For many years the number of agents who regularly discuss disability income protection with their clients has diminished. Around medical universities there are usually a cluster of financial representatives who work with graduating professionals, but the numbers generally thin dramatically the further away you travel.

One of the reasons many shy away from disability is that there appear to be a lot of moving parts and on the surface it appears confusing. The actual duties a person performs determines the rate used to determine the premium. A company president who operates heavy equipment obviously has a more hazardous job and is more likely to be injured than one who sits behind a desk.

Also, whereas life insurance rates are based on mortality, disability rates are based on morbidity. With life insurance, if you’re still breathing no benefit is paid. Disability insurance on the other hand pays a benefit when you are sick or injured and can’t work. There are many things that may keep you from working that wouldn’t threaten your life or impact your longevity.

Other factors swirling around in the income protection decision cycle are the waiting period before benefits begin to be paid, the length of the benefit stream, the definition of total disability, and whether the premiums are permanently locked in or may potentially vary based on claim losses. There are other features and riders that may be added to the policies, usually adding to the cost.

That certainly is quite a lot to consider when determining what is both appropriate and cost effective for the client. However, over time the various components begin to make sense and fall into place. In addition, learning the basics is easily accomplished if someone new to the scene brings in an experienced agent to help.

I routinely get calls to assist other agents who are older and have been in the industry longer than me who need help providing income protection for their clients. In other cases I get referrals to high income prospects because so few others are able to assist.

What many don’t realize is that individual disability pays higher premiums over the first ten years than a life policy does. Life policy premiums generally are structured to pay 100 percent of the first year’s premium out in commissions over that ten year period. Disability commissions are normally 110 percent. Additionally, the persistency is higher on disability policies, so less of the premium will drop off the books, again increasing what an agent receives in compensation.

For individuals who are just considering income protection, they often haven’t yet applied for life insurance either. Helping with the disability protection decision frequently leads to multiple sales. These sales may include the spouse or significant other. Establishing a relationship early on may position the agent to be the financial advisor for that person in all areas in the future.

Income protection is vastly underutilized in the business environment as well. It can be a high speed avenue of approach to business owners, with few others discussing this need with them. Here the activity is predominately a daytime one and may result in multiple lives and multiple products ultimately being offered to the company. Business owners are open to discussing the need if you can hook their attention.

An effective way to do that is to ask if the business owner would continue to draw a salary if sick or injured. They look at you like you are crazy when they say, “Of course!” The next question is, “Do you have a salary continuation agreement in writing at this time?” The normal reaction to this most frequently is a blank stare and a question in return, “What’s that?” This is your cue to explain the penalties from not having an agreement in place prior to a disabling event.

The disability field is wide open with relatively few agents gaining the proficiency necessary to work in it. There is a growing need for the protection and carriers are improving their offerings with unique features and riders. It can be an entry vehicle to daytime activity in the business marketplace.

The road less taken can be a very productive one for any agent willing to learn the ropes to be effective there.

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