Disability insurance: How to sell, and why they buy!
Corry Collins, CLU, CH.F.C.
If you are 30 years old today, and you are a professional earning $350,000 per year, indexed by 3 percent annually, how much will you earn by age 65? The answer: $22,146,580. So what is your biggest asset? It's your ability to earn an income. It's not your house or car, it's actually you! Now, when you are talking with a client and you give facts, you speak from strength.
So, if you suffered a lifelong disability today, your emergency fund would be exhausted in 90 days. In addition, your retirement fund will be depleted in maybe nine months.
Statistically, your spouse will divorce or separate from you in six months (according to a 2009 WedMD article). Your home will foreclose in 24 months (60 percent of filings in 2007 were due to medical costs according to a 2009 Harvard University study). And with this, you have their attention.
I have been in the insurance business now for over 30 years. You know, one of the beautiful things about this business is that you get to design your practice based on the products or the clients or the type of business you enjoy. You don't have to run your business because someone else is doing it a particular way. For me, to a large extent, my practice has been built around disability insurance, and almost all of my clients are physicians. It's what I enjoy doing.
I would like to talk about how I sell disability insurance to professionals. In part, I would like to talk about target marketing, and I would like to talk about positioning yourself as an expert in a particular field. By the time we are finished, you should know how to build a niche market, how to compare plans, and how to base a presentation on fact, not opinion.
I believe you have a choice to be a generalist, or you can become a specialist. This is what physicians do when they decide early in their career on their speciality. In our business, we have the freedom to grow and develop our practice in the direction that suits our interests and desires.
A number of months ago, I received a call from MDRT, and the question was, "Do you believe in free speech?" And I said, "Of course I do." A voice on the other end said, "Good, would you come to Florida and give us one?"
I am from Nova Scotia, and I think it would be appropriate to show you a few photos of home. This first photo is of the lighthouse at Peggy's Cove. [visual] They say this is the world's most photographed lighthouse, in all its grandeur and stature, overlooking the Atlantic Ocean. This is about 30 minutes from my home. And look at this stunning shot of a small town called Lunenburg, not far from Halifax where the schooner called the Bluenose was built. You know, home is home, and when I sell insurance, we often sell insurance that allows our clients to remain in their home when the unthinkable happens.
I like to start my presentations with a thought, a quote, and a question. So without further ado, the first thought is this: To be successful in this business you need to do something every day that has a potential to earn $1,000. We have about 260 workdays in the run of the year, and our business becomes so busy that sometimes our business runs us as opposed to us running our own business. With the phone calls and emails, the regular mail, the paperwork, and the interruptions, I wonder sometimes at the end of the day if I actually got anything done. So at the end of each day, I always ask myself this question, What have I done that has the potential to earn $1,000? If I have not done anything to earn a potential $1,000, I make sure I go back and do something. Every now and then, something happens in the run of my workweek where I make $1,000 or more, and when I trace it back to the root, it was because of something that I did one day. Maybe it was something I did months, maybe weeks, or maybe a year ago that had the potential to earn $1,000. And if this is the only thing you learn from this session, I think it's well worth it.
The quote I would like to begin with is from Walt Disney. He said, "Whatever you do, do it well. Do it so well that when people see you do it, they will want to come back to see you do it again, and they will want to bring others and show them how well you do what you do." If you have a passion for what you do, you will do it well. And this is because you love what you do. And if you love what you do, people see the harmony in your process.
And finally, the question for you is this, If you were accused of being a financial planner, would there be enough evidence to convict you in a court of law? Of course, this is a rhetorical question. However, it brings to mind the question, Are you really doing the job that you are telling people you're doing for them? Are you truly a financial planner? Are you making plans and following them with the client? Or are you just selling a product for the quick sale? The point is to do the job that you tell people you do, whatever that may be.
I've been in the insurance business for the past 30 years, and I've built my practice around living benefits and life insurance and, very specifically, I've built my practice by dealing with physicians. I'd like to talk about target marketing and disability insurance, where we can target market not only by product but also by our specific clientele.
Five years after I started in this business, I wanted to redesign my business. I wanted to deal with educated people who made above-average incomes. I also had a passion for disability insurance because my father was disabled, and I was brought up in a home that was able to survive based on the fact that disability income was coming in every month.
My attention was drawn to the physician market. They were educated, they made more income than the average person, and not everyone could get in to see them. So I started calling doctors. I had no real plan; I just called doctors. In those days, it was a little easier than now. I managed to get a list of newly graduated doctors. I looked their names up in the phone book, and I called them at night. I was smart enough to know that since I had a passion for disability insurance, and because doctors were self-employed, they would be a good prospect for me.
I would sell one-on-one. I had my meetings in the hospital cafeteria. When I didn't have a meeting, I would eat at the cafeteria anyway just to be seen. I would travel to a different hospital and call another list of doctors from the pay phone in the lobby and ask if they had time to see me right now.
Then I got a little smarter and started my Lunch and Learn sessions, and I bought lots of pizza and coke. Next, I started having sessions with the medical students who loved the pizza.
We didn't do anything magical; we just did something that no one else was doing. What I learned was that all the doctors had the same problems financially, and I became good at solving their problems. Then doctors starting calling me, and I became the specialist.
This can be done with any speciality—doctors, dentists, physical therapists, print shops, lawyers. Get to know their association plans and study their problems. Design a presentation and start calling people and say, "We specialize with (an occupation), and we would love to show you what all of your colleagues are protecting themselves with."
I believe in what I do. To start off with a story, my grandfather died of a heart attack at the age of 41. My father had his first heart attack at the age of 38, and we refer to his as an unsuccessful heart attack as he only became disabled as result. Throughout my father's life, he had a total of four heart attacks, three open-heart surgeries, and seven aneurisms. He died at the age of 80. As for me, I had a stent placed in my heart at the age of 49; it's a family thing. I refer to this next slide as Corry Hart, pun intended. [visual] In fact, it's a diagram of the vessels of my heart, and the yellow lines are where the two blockages were found. One blockage was found in the main left descending artery, which they referred to as the widow-maker. A blockage here is generally fatal.
You see, what killed my grandfather and what made my father live a life of disability is the same problem that was found in me. Yet, through modern medicine, I had a procedure where they inserted a stent through my wrist, up my arm, and into my heart while I was awake. And this procedure avoided a heart attack, and it avoided surgery and, as a result, it avoided a disability. Doctors are getting better at what they do. And in many cases, things that used to kill people now just makes them disabled or, in other cases, simply uninsurable.
The face of disability has changed greatly over the past number of years. This is a 1949 advertisement from the London Life Insurance Company. [visual] The first point I think is ironic is that the image of the person who's disabled is sitting in a wheelchair smiling at a check. Today when we see someone walking down the street, we don't know whether that person is able or disabled.
Disability is something you often cannot detect as you see a person walking down the street. In fact, in Canada, mental illnesses account for 31 percent of claims according to an RBC Insurance document in 2015. What is unique is this insurance company, back in 1949, wanted to demonstrate some of the monthly payments that they were making on specific claims. In particular, they were paying for a few things, such as mental illness and diabetes, but as we look back now from 2017, you will also see things like tuberculosis, wet pleurisy, rheumatism, and apoplexy. As uncommon as some of these things are, I gave this presentation to a group of doctors and nobody in the room even knew what apoplexy was. My point is that not too many years ago, people were becoming disabled from things that today we don't even know what they are. In today's world, we see people become disabled from things, such as chronic fatigue syndrome, carpal tunnel syndrome, HIV, and severe back pain. In many cases, the people from 1949 simply would not recognize today's diseases. Which brings us to my next question, What will you become disabled from in 20 or 30 years' time? This is why people need a disability policy that has guaranteed wording that will not change as to allow the policy to exclude future unknown problems.
This brings us to my first point of owning a quality disability policy. Let me begin by telling you why I sell so much disability insurance. Back when I was 12 years old, my father had his first heart attack. Dad was 38 years old. With the exception of a few trial returns to work, Dad remained totally disabled for the rest of his working life, and passed away at age 80. Disabled and poor.
Through my own experience, I have learned that people may become disabled from one thing; however, they often remain disabled from secondary causes. Financial issues often become problematic, and further, relationship issues also follow, turning what might have been a strong family unit into something much less desirable. Not every case ends up this way, yet every case has the potential for something, such as a heart attack, to transform itself into financial problems, to depression, to divorce, to more. You see, our job is to be a financial advisor not a family therapist. However, in a way, I believe we do sell the glue that keeps families together.
Before we go any further, I would like to test your awareness. What I would like to do is to show you a box that has a sentence inside. I would like you to read the sentence inside the box once to yourself. In the box is a sentence, which reads: "Finished files are the result of years of scientific study combined with the experience of many years."
FINISHED FILES ARE THE RESULT OF YEARS OF SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE OF MANY YEARS
Now that you've had a chance to read the sentence, I would like you to reread the sentence, but this time what I would like you to do is count the number of times you see the letter F.
Did you see all three Fs? Did you see four? Five? Six? And here's the answer; there are six.
At least 50 percent of the people in my presentations get this wrong. We were all given the same information, we were all given the exact same instructions, and we were all given the same time limit. Yet, most of us got it wrong. So, why? We, as people, look at things through our own filters. We see things as we want to see them. We see based on our preconceived notions. The lesson is to look at things from someone else's perspective so that you might be able to see and learn. In this illustration, there were six Fs. In our business, we need to allow our clients to see what we are showing them from our perspective and not necessarily from the same old "filtered" perspective.
When we are speaking with the clients, it's not just the words that we use to describe things; it's the inflection we put on our words that will either allow them to understand or not. To show you what I mean I have a sentence that says, "I didn't say you stole the money." Tell me what those seven words mean.
When we say these words, "I didn't say you stole the money," it actually has five different meanings based on how I place the inflection.
Example number 1: "I didn't say you stole the money" means it was not I who said you stole the money.
Example number 2: "I didn't say you stole the money" means that I may have implied it, but I didn't say it.
Example number 3: "I didn't say you stole the money" means I said someone else stole it.
Example number 4: "I didn't say you stole the money" means I didn't say you stole the money, but you took it without asking.
Example number 5: "I didn't say you stole the money" means that you didn't steal the money, but the art on the wall was taken by you.
When we are explaining how disability insurance and life insurance work, we sometimes fall into to the old trap of using our old acronyms, or we at least say things in the way we think people understand. What we need to do is to reexamine what it is that we want to say and test our clients to find out if they actually understood the same thing that we're trying to explain. We always know what we're saying, but we don't necessarily know what our client is hearing.
And that brings us to the expression, "Don't say things that can be understood. Say things that cannot be misunderstood."
A number of years ago, when I was looking to retool my business, I read a book called Positioning: The Battle for Your Mind by Al Reis and Jack Trout. It's an old book now and likely outdated from a marketing standpoint. However, it taught me the lesson of how to position yourself and your product in the mind of the client. I knew I wanted to sell disability insurance, and I knew I wanted to deal with doctors. My problem was that the competition at the time was the Ontario Medical Association, which was the number one organization selling disability insurance to physicians across Canada.
In the book, they used the example that Hertz was the number one car rental dealership, but Avis wanted to be number one. Avis understood that it was almost impossible to be number one, so they set their sights on being number two. The tagline that Avis used was "We are number two, but we try harder." I might not have been able to become the number one disability salesperson in Canada, but I could certainly become the disability expert for my market area, and I did. I was local, so I met doctors in the hospitals, and I knew the product inside and out. I became a salesperson solving disability issues specifically for physicians in all the local hospitals.
One way we used to find out what the priorities of the clients were was to draw this diagram, which is called the Life Program Story. [visual] The bottom line represents your lifeline, and here you are at your age, maybe 25, and the line continues to your age 65. This green line represents the dollars that you're going to earn. But your income is going to stop one day because of one of three things:
- You're going to live too long.
- You're going to die too soon.
- You may have a disability or critical illness.
And then we asked this question, Wouldn't you agree that if we solve these three major financial problems, we will have solved the three greatest financial problems that you will have in your life?
And finally, we would ask, Which of these three problems is the most concerning for you?
- Living too long is a savings problem.
- Dying too soon is a life insurance problem.
- Having a disability or critical illness is a disability insurance or critical illness insurance problem.
Ultimately, we would want to solve all three problems for the clients. However, we would begin with what the clients saw as the most concerning issue for them at this particular point in their life. This is how we position and prioritize the solutions.
When it comes to disability insurance, there are generally three different types. There is group insurance, there is association insurance, and there are private plans. With my clientele, the private plans are generally the professional policies for professionals.
When positioning the private plan against the association or the group, we look at:
- Ownership of the plan
- If there are guaranteed premiums
- Guaranteed definitions
- Who has the right to cancel the policy
The private plan has the benefits that the client was looking for in a disability policy. The client will also benefit from the guaranteed premiums for the life of the contract and the fact that the definitions within the contract are guaranteed as well. It also points out that with private plans, the insurance company cannot cancel the policy without your permission. The group and the association plans are all substandard in these areas, which effectively add more risk for the client when solving the $22,146,580 problem.
Another distinction that we point out between group insurance and a private/professional plan is that group insurance is referred to as a service where a private plan is referred to as a benefit. What I mean by this is that under a group plan, the service is that they will replace your income, and they will help you get back into the workforce as quickly as possible. We do not consider a private plan a service because you actually purchase a benefit, which is a specific amount of money paid to you when you become disabled. This amount of money is paid to you until you return to work. In the private/professional plan, rehab is not mandatory. In fact, if the own-occupation option is added, you are paid even if you are unable to continue in your regular occupation, and if you decide to work in a different occupation.
We often run into business owners and professionals who are part of a group insurance plan. Group insurance is very good for the average individual. However, private plans offer much more in the way of contractual benefits. When we make a comparison between a group and a private plan, we look for specific items to be able to compare, and then we show this to the client.
One thing to keep in mind is what Tom Hegna, who has spoken at MDRT several times, says, and that is that he no longer offers opinions, instead he replaces them with the facts. What a refreshing thought this has become for me. I evaluate the client's situation and then offer some quality facts.
The group insurance evaluation can contain whatever number of items you want to compare. The following items are the ones I find most effective. I will explain each one of these. There are things, such as the right of subrogation, the rehab benefit, partial disability insurance, residual disability insurance, the qualification period, the criminal act exclusion, the preexisting conditions, as well as the reductions in coverage, guaranteed or non-guaranteed premiums, the guaranteed or non-guaranteed definitions, the maximum overall disability benefit, and what kind of income qualifies for benefits.
In no particular order, however, number one on my list is always the right of subrogation. By definition, subrogation means, in a legal sense, "one party has the right to step into the shoes of another party for the purpose of bringing a claim for damages." By way of example, what this means is that if you have a group insurance policy and you put a claim forward, the group insurance carrier will pay your claim if you meet the definition. If your disability was caused by a third party, such as in a car accident, somebody then has the right to sue the third party for damages. Often in a group insurance policy, you give away your right of subrogation to your group carrier so that they can sue to be reimbursed for the claim they paid you. This is called waiving your right to subrogation, so why give away your rights when there are options? The option is to purchase a private/professional plan and retain your legal rights for yourself. So, speaking to the first point in the comparison, with group insurance, you may give away your right of subrogation. And in a private/personal policy, you retain that right.
In the comparison, we next look at is the rehabilitation clause. Often we find that the group insurance rehab program is mandatory to submit to. And if you do not submit, your claim will be stopped. Under a private/personal policy, you are offered a rehab program, but it is not mandatory to participate if you are otherwise happy to live out your remaining years receiving a claim check.
Next, we have the item of the residual or loss-of-income clause. This is something that we find is very often covered both in group insurance and in personal plans.
When it comes to partial disability, which is a benefit for the loss of duties even when there is no loss of income, we find group insurance policies do not often have partial disability where private/personal plans do. This is major. A note here is that many group insurance plans have residual or loss-of-income benefits, but they call them "partial disability," and this only causes confusion to a client.
A qualification period is the number of days that you must be totally disabled first before any consideration will be given to pay a residual or loss-of-income benefit. With group insurance, we often find that, before they pay out anything for a residual claim, you must have been totally disabled for 90 days first. Otherwise, a residual claim is not paid. This is not required for most private/personal professional plans.
An exclusion that we often see in group insurance in addition to the standard exclusions is that of criminal acts. This means that if you become disabled while performing a criminal act, such as drinking and driving, the claim will not be paid. In most private/personal professional plans, this is not the case.
Often in group insurance, we find that the benefit paid will be reduced by other plans, such as pension income or benefits from an auto insurance claim. There's often no such reduction under a private/professional plan.
The next item is about the premiums and whether they are guaranteed. Group insurance plans do not offer guarantees generally beyond a year or year and a half. Under the private/professional plan, the premiums are guaranteed to age 65. In addition to the price, we find that the definitions are not guaranteed under group insurance. However, the personal plan definitions are guaranteed to age 65.
Within group insurance, we often see an overall maximum monthly benefit, which is payable based on a formula. So you can find yourself in a position where you become disabled with a high pre-disability income, but your group insurance is restricted to a lower monthly benefit, creating a shortfall. Under a private/personal plan, when you set up your policy, you determine the amount of coverage you want, and when you become disabled, that is the amount they pay.
And finally, there is the question of what income is covered. Many group plans calculate benefits based on actual salary earned. If a business owner is receiving dividends, if they are splitting income, or if they have retained earnings, these sources of income may not be covered. However, in a private/personal plan, you can arrange it so that all forms of income qualify.
Therefore, if you do an analysis and then create a document and describe the differences between the existing group and the personal/professional policy, you will not need to offer an opinion; you simply offer the facts.
So if you wrote a letter to a client, and you say:
We ran an analysis on your disability insurance through work, and we found that there are 12 deficiencies in your current program, which will reduce your benefit, or worse, not pay at all.
- We submit that these deficiencies place your financial well-being at risk.
- We have noted that you have given away some of your legal rights should a claim occur.
- We see that you agree to participate in a mandatory rehab program.
- You are not covered for partial disability insurance.
- A partial or residual disability claim will not be paid unless you are totally disabled first.
- Your claim will be denied if you become disabled while committing a criminal act, such as drinking and driving.
- Your benefits will be reduced if you are receiving a pension or benefits from an auto insurance accident while disabled.
- Your premiums and your definitions are not guaranteed under your contract.
- The maximum benefit they will pay you is $4,000, where otherwise you qualify for $9,000.
- The group insurance is only covering your salary where we see that you also receive dividends that are not covered.
A personal/professional program solves all of the above.
Business owners often hurt themselves by what I call reverse self-discrimination. Business owners want to do good for their employees by putting in a group insurance plan, which offers disability insurance. However, the definitions and the wording in the contract are created to keep the cost down for the average employee, and not necessarily to the advantage of the business owner who is in a different financial position than his employees. Offering the private/personal professional plan solves this problem.
I'm often asked about the own-occupation rider for professionals. The most common policy options that I offer to clients are:
- Own-occupation rider
- Future income option
- Cost-of-living benefit
For the own-occupation rider, it really depends on the status and belief of the client. For student professionals, if they become disabled before they reach their ultimate income but want to be sure to be able to get as much income in their hands even if they are working in another occupation, it's a great option. Established physicians like the own-ccupation rider too because it makes a policy a little more well rounded.
Own occupation is often misunderstood. The base professional plan (without own occupation) usually says that if you're unable to perform the important duties of your regular occupation, then you are disabled. However, if you choose to enter a different occupation, your disability income will be reduced as a percentage of the new income that you're earning in the new occupation. The only thing that the own-occupation benefit would do for you is to allow you to work in the new occupation without the base policy being reduced. In other words, the own occupation potentially allows you to have two incomes—one from the disability plan and the other from the new occupation.
For professionals starting in their career, the cost-of-living benefit can make a huge difference in the benefits received. In a shorter claim, such as a benefit with two to three years, the cost of living will not have a chance to increase your benefit by a great deal. However, should you have a claim that lasts for several years, the cost-of-living benefit can make a world of difference.
The future income option is a guaranteed right to be able to purchase additional insurance without the need to prove that you are healthy or insurable in the future. For younger professionals, this option is not only a matter of convenience but it is also a godsend for those who may develop diseases or ailments as they get older. For example, a 23-year-old medical student can buy a small policy at age 23 and be guaranteed to be able to increase the policy in line with her income for the rest of her career, without providing health evidence beyond what is needed at age 23.
And finally, the cost-of-living benefit does nothing for you until a claim begins. Then, each year you are on claim, the paid benefit can increase by the consumer price index, compounded for the life of the claim. Therefore, a $1,000 claim can increase to between $1,775 per month up to $15,800 per month depending on the CPI. Well worth the $10 per month for the benefit.
So let's go back to the beginning. If you were a 30-year-old professional earning $350,000 indexed at 3 percent to age 65, is that $22,146,580 worth protecting with a solid personal contract, or with a group contract?
We've all heard the expression that if you own the goose that laid the golden egg, which would you insure, the goose or the egg? Well I'm here to tell you that you are the golden goose, and you are that money machine that is producing money year after year.
One final concept is to describe the policy and to explain the seven ways to claim using a private/professional plan. The seven ways to claim are:
- Total disability
- Own occupation
- Partial disability (loss of duties)
- Residual disability (loss of income)
- HIV benefit
- Survivors benefit
- Return-to-work benefit
A policy pays in more than one way. Explaining that a policy can pay even when there is no loss of income is a real eye opener.
Here's a funny but sarcastic way of looking at disability insurance. If you were going through a divorce right now, what percentage of your income would you be ordered by the judge to pay your ex-spouse? Many people say 50 percent or 60 percent or 70 percent, and that's when you are at odds with your ex-spouse. So how much money would you like your spouse to have when you love him and when you're disabled and you're still around? Now, what's the difference between that number and the amount of disability insurance you have?
In reality, we don't often solve all of our clients' problems at once. Our relationship is a process, not an event. In any event, you will not sell disability insurance if you don't talk about it. Sadly, I receive calls all too often from clients saying they are disabled from accidents or illnesses. I am happy that we are able to put checks into their hands so they can maintain a sense of dignity.
Corry Collins, CLU, CH.F.C., is a 16-year MDRT member from Halifax, Nova Scotia, Canada, whose practice focuses on physicians. Collins has a broad knowledge of living benefits including disability, critical illness insurance and life insurance.