DI Sales

An agent was friendly with a neighbor down the street. This 48-year-old executive vice president of a construction company was married and had one college-bound son. The agent never discussed business with her neighbors — especially disability insurance. Eventually, the neighbor had a stroke, which caused a severe speech impediment and required her to obtain live-in care. The benefit provided from the company's long-term disability (LTD) plan was nowhere near the 60 percent replacement level the VP thought he was getting, because the plan only covered his salary, not bonuses. His wife, who had never worked, was forced to get a job. As he slowly recovered, the $5,000 monthly LTD benefit eroded because he was able to make money from telemarketing sales working from home. This limited benefit situation might not have occurred if the agent had asked her neighbor if he was aware of the shortfalls of employer provided group LTD plans. Don't be afraid to ask.

An individual policy with an ulcer waiver was issued to a small business owner. After much effort by the advisor to place the case, the applicant refused to accept the contract with the waiver and ripped up the policy. Two weeks later, a robbery occurred in the business and the owner was permanently disabled due to a gunshot wound. There are so many ways to become disabled. Don't let your ego, or your client's, get in the way of a properly underwritten disability policy.

A single mother of two, who worked as a real estate agent, was always on the go. Her family depended on her steady income, and she was always under pressure to sell. When approached on the subject of disability income protection, the mother always said she already had coverage.

One day, she collapsed at home due to the adverse effect of a new prescription medication. She was hospitalized for six weeks, and for the next two years was unable to work such a vigorous schedule. She thought she had bought a superior disability policy many years ago from an association offering this protection as a benefit, but suddenly found out that it covered her for cancer only. Both children had to take time off from college. Make sure your clients know what they have. Offer to do a review.

Two surgeons were equal partners in a medical practice. Both were concerned about the possibility of coming up with a large sum of money to buy out the other's ownership interest in the event that one of the partners left the practice. As an alternative, they thought about using company profits, creating a sinking fund or borrowing from the bank. They decided that all were unacceptable when they considered what would happen to the practice from the time one partner left until the buyout was completed. Jeopardized growth, lost productivity, reduced credit rating, increased debt and disputed valuations would all add up to trouble. They eventually bought only life insurance, because the agent neglected to point out the disability provision already written in their buy-sell agreement.

As time passed, one of the doctors developed an arthritic condition in his knees and was unable to go on rounds or stand in surgery for any length of time. As a result, the practice had to take a large, high-interest loan to buy out the disabled physician. Meanwhile, the search for a new physician was cumbersome, because the practice now looked unattractive due to the low patient load. Help physicians protect the practices they've worked so hard to build.

An advisor was presenting to a group of 10 executives on the merits of participating in the supplemental disability program. This plan was being offered because the group LTD was not enough protection for these key managers. Initially, there was interest from three execs, and the advisor was at the end of his meeting without much more to say about why these guys should acquire more coverage. The advisor was okay with this, because only three lives were required to get a permanent and portable discount as part of the plan design he'd proposed. The meeting was about to end when one of the executives stood up and explained that a few years back he'd had a stroke, which restricted his speech. Without the group LTD plan from his former employer, he wouldn't have had any income protections. But group is not enough, and he recommended that his colleagues get supplemental DI.

With that testimonial, five additional executives fell right in line, and the advisor walked out with 80 percent participation in the supplemental plan. The two remaining executives were young and chose to take their chances.

Within six months of this meeting, one of the young executives who declined the coverage was injured in a rock climbing incident and developed back problems that prevented him from sitting or standing too long at work. He filed a disability claim, receiving less than he needs to maintain his former lifestyle.

"We've had some time now to look at an income protection plan for you. We've reviewed your expenses, discovered your exposure and even explored the probability of becoming disabled at your age.

However, you still feel you'll never get so sick or hurt that you couldn't do your job. Let me take a more practical, economical approach.

I call it "Gone with the Wind."

Your current income is $100,000, and we're looking at a premium of $3,000 annually. That's only 3 percent of your income, and the premium will never increase. Here's a box representing your current income and this box inside represents your premium in terms of a percentage.

In good times, we expect your income to increase, but your premium, as I said, remains the same. So, if your income were to double, what percentage of your total income is now tied to the same disability premium? Correct, 1 ½ percent.

But, in bad times, if your income were to decrease by half, what percentage of your total income is now tied to the disability premium? Right, 6 percent. Now your policy's a more vital part of your total income protection plan.

Now, what if you suffered a stroke and your income was "gone with the wind"? What percentage of your total income is now tied to the disability policy? Correct, 100 percent. All you have left is the income that would be generated from the disability policy.

So let me show you the choice that you have. Here's Job A, where your income when healthy is $100,000 and your income when disabled is 0. Then there's Job B, where your income when healthy is $97,000 and your income when disabled is $60,000.

Which job do you want? Which job will provide you with security, provide for your child's education, buy the groceries and pay the bills?"

"Based on our initial discussion, we've identified a real need for disability insurance. The ideal situation for you would be to have as much benefit as possible coming to you right away. Thus, keeping your bills paid at home and your expenses paid at work will not only protect your credit rating, but it will keep your business alive while you can't be there to run it.

Here's a plan I've put together with a 30-day elimination period and the maximum amount of benefit you qualify for based on your income. As you can see, this plan has a pretty good-sized premium as well.

How would you like me to double your coverage for the same cost?

If we drop from a 30- to 90-day elimination period, the premium drops too. That's quite a savings as well for your individual policy. Now let me show you a Business Overhead Expense (BOE) policy with a 30-day elimination period so your benefit comes in right away to keep your business alive. As you can see, I've now doubled your coverage with a 12-month benefit period. Guess how much this policy costs?

This second policy will reimburse your business for all covered expenses when you can't be there and the premium's tax deductible, too. Can we go ahead with the paperwork or do you have any questions?"

There are two objections that you may encounter. The first is when the client says, "I don't need BOE. I can have my partner keep the business going for me."

Here's your answer. "That's true, but with BOE your partner wouldn't have to concentrate on just meeting monthly expenses. He could make sure the business is turning a profit with the help of insurance money paying your portion of the overhead."

The second objection is, "Sounds okay to me, but now you've made me wait three months before I receive any benefits from my personal policy."

Your answer is, "That's true, but if I can provide you with money to keep your business alive after 30 days, wouldn't you have some accounts receivables that are due in 60 or even 90 days? With delayed payments to your business, you could probably pay yourself 100 percent income for the first three months.