By Scott Fowler
The first question I ask when meeting a new agent is, “Do you write disability income insurance?” Most say they have written DI policies in the past, but haven’t written any recently. My next question is, “Why not?” I get the same answers every time: “It’s too hard!” There are a lot of roadblocks that a producer faces on a daily basis. But with a little extra knowledge, you can turn these into success stories. Let me give you two examples of common DI roadblocks and how you can turn them around.
Roadblock No. 1: Lifestyle vs. tax return. I seem to run into this scenario at least once a week. Your prospect is a small-business owner who’s clearly successful: He drives a nice car, lives in a nice neighborhood and seems to have no problem affording his lifestyle. In this case, he owns a small construction company and has been in business for over five years.
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Hopefully you discover the difference between gross income and net income during your factfinder by asking the right questions. |
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You do all the right things while presenting, so your client is ready to buy. During the process, he tells you his income is $100,000. Based on that income, you can offer him a $4,800 monthly benefit to age 65. Your client agrees, and you fill out the application. He hands you his tax returns, and you find out that, because of his current deductions, his adjusted gross income is only $30,000. Since you can only insure 60 percent of his AGI, his $4,800 benefit has now been reduced to $1,850. Your client is not happy. “Why bother if it’s only going to be $1,850; I can’t live off that,” he tells you. You know that he could not afford his lifestyle earning only $30,000 a year. What are your options?
Solution: Hopefully you discover the difference between gross income and net income during your factfinder by asking the right questions. Once you have the proper information you can offer the following solutions:
- No. 1: Find a carrier that allows you to increase the benefit by 20 percent because the client is a business owner, thus increasing the monthly benefit to $2,250.
- No. 2: Add a catastrophic rider, which increases the monthly benefit to 100 percent of income upon total disability. In this case, you can add another $850 a month. Now the monthly benefit is $3,100.
- No. 3: Add a disability insurance business overhead expense policy, which is not based on income. Since your client is a business owner, he has the option to insure his company’s expenses. Keep in mind that every dollar of benefit paid to your client is one less dollar he has to pay out of his own pocket. He can “buy” the $1,700 he is short of, or insure the total amount of expenses.
By combining solutions 1, 2 and 3 with a future purchase option (which will keep the policy’s benefit in line with inflation), you now have a substantial benefit to make your client happy. With a little creativity, you were able to get his benefit up to the original $4,800 a month.
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You were also able to warn the client that he will most likely be offered a modified plan. |
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Roadblock No. 2: Adverse underwriting. You stop to have coffee with one of your best clients. You sold him adequate life insurance three years ago, and now he is finally ready to buy DI coverage. Since his life insurance still seems to be adequate, you bypass the usual questions and go straight to the application. During the underwriting process, however, the company uncovers through the medical records that your client is taking a small amount of depression medicine for an episode that happened early last year. The carrier declines the case. The decline is placed in the MIB on your client’s permanent record. What could you have done?
Solution: In the previous case, your client didn’t consider his medication to be relevant when completing the application. In his mind, this medication does not affect his ability to work. In the future, by asking the right questions concerning medical history and prescription medications, you can hopefully catch something like this—before you send in an application.
There are many carriers in the marketplace that still have issues with applicants who have taken, or are still taking, depression medication. However, there are many companies that make great offers depending on the case specifics, such as knowing the treatment dates, prescribed medications and the result. You can match the right company to the right situation.
By asking these detailed questions, here is what you know: Your client has been taking the medication for almost two years, it was prescribed because your client was going through a nasty divorce, and the prescription has not changed. You can now contact the underwriting department to see who will offer the best coverage. In this case, you are able to get two traditional carriers to offer a five-year benefit with a mental nervous exclusion and no reduction of monthly benefit.
In addition to finding an acceptable solution, you were also able to warn the client, before the process started that because of his current medication, and the fact that mental nervous claims rank second with most carriers, he will most likely be offered a modified plan. Your client, however, will be more concerned about a serious illness or accident, and will be happy to be protected.
This is an edited version of a much longer speech given at the 2007 MDRT Annual Meeting. For more information, go to www.mdrt.org. Used with permission, all rights reserved.
Scott Fowler is a partner with Bellevue, Wash.-based DIBroker, one of the largest independent disability income and long-term care insurance brokerages in the country. Contact him at 425-462-7137 or by email at scott@dibroker.com.
April 2008
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Interviewing Referral Partners
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