Preparing clients for a modified disability offer

Selling individual disability insurance can take time. From first broaching the subject with your client and submitting an offer, to underwriting and application approval, the process can often take a few weeks, if not months, to complete.

There also can be a back and forth between the carrier and client to clarify documentation, especially during the underwriting process. What’s more, this process can often end in an unexpected result for your client: a modified offer.

What is a modified offer?

A modified offer doesn’t mean your client isn’t eligible for coverage; it means that a policy is approved, but, due to the client’s medical history, the policy may have an exclusion for a certain medical condition, may have a higher premium than expected, or may have benefit limitations placed on it. The client will still have coverage, but, for example, the policy may not cover a client’s back if the client was in a car accident years ago and has continually sought care for a musculoskeletal condition.

Related: Brokers look to combat PPACA with disability sales

A client’s medical history is one of the main factors that contribute to an individual disability insurance policy coming back with a modified offer. As an advisor, it’s often difficult to know your client’s full medical history. An advisor may not be aware of a client’s full medical history at the beginning of the process, making it hard to predict what conditions an underwriter may exclude from a policy.

When you’re presented with a modified offer, you may not know how to bring this subject up with your client. The client may be surprised by the fact they weren’t approved for a full policy. Or, if not adequately prepared, the client may not think the modified offer presented by a carrier is worth it, and will either try to back out of the sale completely or encourage you to pursue coverage through other carriers.

Equate the process to something familiar

To help counter these reactions and keep the sale, I encourage brokers to set expectations early with clients. An approach I often take when first broaching the subject of individual disability insurance with clients is to equate the process to another scenario they may be more familiar with: applying for a mortgage.

For a strategy you can use to position this for your clients, read on.

How do you tell your client about possible turbulence? (Image: Thinkstock)