When looking to add new clients to their portfolio, many brokers may be overlooking a profitable opportunity: Executives. Selling individual disability income (IDI) insurance to C-level professionals often can be the ticket to large sales and a reliable clientele.
This niche market is a prime target for IDI plans because C-level executives covered solely by an employer’s group long-term disability (LTD) plan are often at a greater disadvantage than a typical employee. This is due to a group policy’s maximum monthly benefit, which may not cover the executives’ full incomes.
C-level IDI policy sales are rooted in educating executives of this problem, which can pay off for both the client and the broker in the long term. Executives who buy IDI policies have the safety net of guaranteed income protection should they need to take a disability leave of absence. And they can take comfort in knowing they’ve made a smart investment for both themselves and their family.
In turn, selling to this exclusive market is a huge opportunity for brokers, as the earning potential from a sale is quite large and the customer base secure. Informing executives of a need they may not have previously considered can build a strong relationship and establish trust, a move that can open the door to selling to the entire board room.
The problem with group LTD
C-level professionals often are unaware their company’s group policy, while fine for regular employees, may be insufficient for them. This provides brokers with an opportunity to help educate executives on how they can fully protect their incomes and their ability to earn income in the future, a problem many executives may not have considered previously.
As mentioned above, a group policy’s maximum monthly benefit could hinder the level of income an executive would earn when out on disability leave. For example, employees earning more than $200,000 annually would need additional coverage to be as protected as the typical worker, as most group LTD plans offer a standard maximum monthly benefit of $10,000 to $15,000. And a maximum monthly benefit typically does not cover bonuses or incentive pay, which can make up a significant portion of an executive’s annual income.
In addition, benefits from employer-paid group LTD plans typically replace only 60 percent of an employee’s earnings. These earnings are generally taxable, which could bring down that figure even more. IDI policies, on the other hand, are not taxable and pay out the full income amount.
How IDI can help
Brokers can help executives and other high-earning clients fully protect their incomes with IDI insurance products. Target plan participants for these products are those in board-level positions in large corporations or other high-level earners, including doctors, lawyers, architects and accountants. Successful touch points build off the problems identified above: expose an executive’s potential for lost income and identify how IDI coverage can provide this protection.
To sell these policies, brokers may be more effective by approaching executives individually, as HR managers may discourage the sale to keep their organizational costs low. Brokers don’t have to have tenured relationships with executives to sell these policies. Cold-calling an executive to expose the problem and provide an IDI solution also has been proven to be effective.
Helping one executive realize the importance of additional disability coverage can even open the door for brokers to the entire boardroom. When multiple executives are interested in IDI insurance, brokers have the opportunity to sell guaranteed standard issue (GSI) policies, which offer benefits for both the clients and the broker.
Layered on top of an existing group LTD plan, these GSI policies offer a lower cost to clients and increased commission for brokers due to the multiple policies sold. Unlike group LTD plans, brokers cannot be replaced on these policies, offering them a set income from the sale.
Getting executives on board with a GSI IDI policy is easy, as an executive does not need to participate in any medical underwriting to obtain coverage. This step shaves months off a policy sell and can be a big draw for executives who don’t have time to spend on paperwork.
In addition, the portability of an IDI policy remains intact even if it was sold on a GSI basis. If an employee chooses to leave with the policy, both the premium and own occupation definitions will stay intact, as will the class level at which the policy originally was written.
It is important to note IDI insurance plans are often more expensive than group LTD plans, but significant discounts can be accrued when layering individual disability benefits on top of an existing plan. In addition, certain perks, including higher benefits, guaranteed premiums and affordable rates, are all cases that brokers can make to executives to show them how invaluable the product can be.
Education is key
Executives and high-wage earners can be at a disadvantage if they rely solely on group LTD insurance to protect their incomes. Layering additional individual policies on their group coverage will help ensure their income is more fully protected should they need to take a long-term disability leave and will help protect their future income should they be unable to return to their original occupation.
Explaining that IDI insurance policies can protect the amount of income an executive can retain while out on a disability leave, in addition to the integrity of their position, are important for brokers to understand when selling IDI insurance plans to the C-suite. Guiding customers through the process of choosing and purchasing individual disability insurance opens the door to a new niche customer base, and in turn, offers brokers a secure policy and income to look after for years to come.