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Disability insurance: Addressing the facts with clients

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Disability can be a difficult topic for most clients to understand, especially when it comes to how it can affect their own lives. As a result, disability income insurance can be one of the most complex products to sell. The reality is that 64 percent of wage earners believe they have a 2 percent or less chance of being disabled for three months or more during their working career, according to the Council for Disability Awareness. However, according to the U.S. Social Security Administration, the actual odds that an individual entering the workforce today will be disabled for an extended period of time are around 25 percent.

I have sold disability insurance for the past seven years, and now my agency leads with it because of a few different approaches to take. The reality about disability income insurance is the first priority.

Approximately 70 percent of my clients are young professionals, mainly physicians, whose biggest asset is several decades of earning power ahead of them.  If they should become disabled and can no longer work, they risk losing that income. Insuring their earning power asset is the No. 1 reason they need a DI policy. And until they can build up other assets at some point in the future, they will need DI. As physicians, they help disabled people in their careers and probably understand better than most the emotional and financial impact disability can have. 

Besides physicians, other professionals also understand that they need to protect their years of earning potential. Missing time from work due to illness or injury can have significant economic impact, as they cannot easily be replaced. Sales people are also a good example. Even though they may have a variable income, they can purchase a policy and increase the coverage when they have successful years. Business owners are also a key market. Many have thought of life insurance for succession planning, but they may stand a greater risk of disability than death. Many have key buy-sell agreements but only a handful are appropriately funded.

Approaching disability with facts and emotion

When approaching clients, put the emotion and financials into the discussion. When first meeting with a couple or young family, discuss their goals and ambitions, and review their plans to achieve their dreams. How are they going to meet their goals if they can’t work, especially if they have a family? Which dream would they have to give up if they didn’t have the income to finance their plans: sending their kids to college, a comfortable retirement, or independent living and counting on their children for support?

Use storytelling and examples to build a rapport and do a personal fact-finding about their friends and family members. Ask about their family history and inevitably, they all have a family member or friend who has had a heart attack, a stroke or is disabled in some way for some period of time. This gets the conversation about DI started. In a second appointment a more in-depth case relating their personal experiences to the lives they lead now can be presented. 

Most clients assume that disability is caused by an accident, so present the other reality of disability. Any one of a number of common health issues can prevent an individual from working. Most are surprised to learn that approximately 90 percent of disabilities are caused by illnesses rather than accidents.

According to the Council for Disability Awareness, the most common causes of existing disability claims in 2012 were:

  • Musculoskeletal/connective tissue disorders – 30.7 percent. This category includes claims caused by neck and back pain; joint, muscle and tendon disorders; foot, ankle and hand disorders, etc.;
  • Disorders of the nervous system and sense organs – 14.2 percent;
  • Cardiovascular/circulatory disorders – 12.1 percent;
  • Cancer – 9.0 percent; and
  • Mental disorders - 7.7 percent.

Addressing DI opposition

Even when faced with the reality, there still can be opposition. Most clients say that if they can’t work, their spouse will work. While this point has validity, consider the reality of life and human nature. If you have a terminal cancer diagnosis, does your spouse want to spend the last year of your life working? Additionally, he or she may not be able to bring in that same income. DI can help keep the family together for that period of time.

The odds of disability are greater than death before retirement. In December of 2012, there were more than 2.5 million disabled workers in their 20s, 30s and 40s receiving Social Security Disability Income benefits. Even if someone has a disability for only two to three years, that is still two to three years without an income.

For younger clients, a term and a DI policy can be bundled together, allowing them to focus on one decision instead of two. Make the decision as easy as possible. Since the odds of disability are greater at younger ages, this is the product to focus on, not the life policy. Since DI typically is an expensive decision, eliminate a second decision — or budget concerns — with inexpensive term. As their income increases, they can increase their DI coverage with proper riders. If it is in their best interest, when they have maximized their DI, go back and talk about converting their term policy to a permanent form of life insurance.

A “good,” “better” and “best” strategy, which ranges from having a basic group policy to a fully loaded policy with all of the options, can be discussed. There are many options in a DI policy and a policy can be designed to be suitable for most budgets.

Examples of this flexibility are about eight to 10 factors that can all affect the premium, such as a 90- or 180-day waiting period or benefit period, like five years, to age 65 or to age 70. The coverage amount, the policy’s definition of disability or the number and type of riders also play into the premium calculation

DI can also be presented in terms of the monthly premium versus annual coverage. For example, I might say a $150 per month premium will purchase $60,000 in comprehensive coverage, not $1,800 buys them $5,000 a month of coverage. It is a psychological perspective. 

Sixty-nine percent of workers in the private sector have no private long-term disability insurance, according to the U.S. Social Security Administration. Agents need to be prepared. There is an overwhelming need for DI to be presented in a simple way for clients to understand and an affordable way for clients to make a purchase.