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The Middle Market Equals Opportunity

Reach this untapped group with innovative voluntary workplace benefits.

By Neiciee Durrence

Middle-income Americans represent a significant portion of the
U.S. population—estimated at more than 78 million people. They earn between $20,000 and $75,000 in annual household income and have limited discretionary income and savings. Because they tend to live from paycheck to paycheck, they are at significant financial risk if they suffer a disability, a life-changing illness or even an untimely death.

Progressive insurers have recognized this risk and have designed affordable products that provide adequate protection for this market. They prepare agents to help customers understand what could be lost without adequate income protection and they encourage their agents to offer solutions through voluntary supplemental benefits at the worksite.

There are three voluntary products that today's middle-income earners should consider when making their financial-planning decisions: term or universal or whole life insurance, supplemental voluntary short-term disability and critical-illness coverages.

Life insurance is one of the easier products to sell because most people view it as a necessity and understand its concept and benefits. Many workers have employer-paid life insurance, which typically provides a death benefit of one or two times their base annual earnings. The employer-paid amount is a source of protection, but is limited at best. The need for life insurance goes far beyond paying for death-related expenses. Individuals should also consider a life policy as a much-needed support for covering debt and paying for a range of financial plans. The challenge for agents is helping their customers determine what policy is most suitable for their financial plans. The choices for the customers most likely will be between term, universal or whole life insurance. Consequently, it is important to recognize and communicate the benefits of both. And if the client has the resources, it does not have to be an either or decision.

Term insurance works best for clients concerned primarily with having a high death benefit amount, need the manageable short-term cost of a cheaper policy, or need short-term debt protection. Universal or whole life insurance is the choice for clients who can invest more over a longer period in order to generate interest income.

Middle-income earners often choose to purchase a term life insurance policy because it is relatively cheap and the death benefit is high. These are positive factors and make sense early in a person's career; however, customers can better minimize risk by investing in permanent life insurance. Consider this: term life is cheaper while the owner of the policy is working. It is during an individual's working years that term may be more appealing when higher amounts of coverage are needed to ensure that one's children can be educated and the mortgage can be paid in the event of an untimely death. But term premiums skyrocket at the same time the individual retires and lives on a fixed income.

When positioning universal or whole life insurance, agents should ask clients to carefully consider what it would take to maintain their family's standard of living and cover future plans. The answer will likely point to the fact that universal or whole life is at least part of the benefit solution. Premiums for universal or whole life coverage will earn a guaranteed minimum interest rate, providing a means to level premiums over the lifetime of the contract. With most interest- sensitive whole life coverage, the policyholder can elect a paid- up option, typically at retirement, when the policy requires no further premium payments to stay in force until maturity. For the middle-income consumer, this can be a very appealing plan design.

Supplemental short-term coverage
As is the case with life insurance, many middle-income Americans may think they are adequately covered by their employer-provided group disability plan. This is often an unfortunate misconception that can leave an individual woefully unprepared to deal with an accident or illness resulting in his inability to work and earn a living.

While a good source of basic protection, employer-paid group insurance is not always enough to cover the significant financial impact of many disabling conditions. The good news is that an increasing number of employers are recognizing this shortfall and are offering competitive benefits packages that give employees the option to buy additional coverage for more protection.

For agents, there exists a unique opportunity to sell voluntary supplemental short-term disability insurance, targeting companies with fewer than 1,000 employees. Such companies are often the best prospects for supplemental short-term disability sales because companies with more than 1,000 employees typically have more resources to invest in richer benefit programs.

Employers with limited resources will invest first in core benefits like medical and long-term disability benefits, strategically placing dollars in the coverages that are most necessary to recruit and retain employees in today's competitive marketplace. Smaller employers will look to achieve cost savings by shifting the expense of selected benefits to their employees to fund their core benefits program.

A common goal for all employers is to provide a well-rounded comprehensive benefits package for their employees. For employers seeking to shift the costs of certain benefits, quality supplemental voluntary products can be the answer.

Insurers can capitalize on this by offering a voluntary supplemental short-term disability product that ensures the individual will get the full benefit he pays for. Often, the plan design includes a two-year maximum monthly benefit period, with benefit amounts ranging from $400 to $5,000 per month. Payment of the monthly benefit begins after a prompt and fair claim-adjudication process.

Progressive insurers go one step further by not requiring coordination of benefits. This means that the company underwrites the policy at the point of sale, without regard to how much the person holds in other in-force policies at the point of claim. The customer receives the payment for which he contracted and is free to use the funds as he wishes, often for expenses such as travel to and from the hospital, home health care, or costs that aren't covered by other medical or disability policies.

The critical-illness cushion
A critical illness presents financial risks and ramifications that middle-income earners cannot afford to ignore. A relatively new benefit solution is a voluntary critical-illness policy that complements medical coverage by providing supplemental financial assistance in times of critical illness. The policy language often goes beyond terminal illnesses to encompass life-changing health events like a major organ transplant, stroke or heart attack.

Critical-illness policies provide supplemental income, as do traditional disability coverages. The difference is that critical- illness claimants receive the benefit in one lump sum. It is beneficial to the claimant to have access to a sum for unpredictable expenses, particularly in the ever-evolving health care landscape of today. For example, if consumers are offered a chance to participate in a progressive clinical trial, they would be more financially prepared. They might also be able to finance incidental health expenses such as home health care, automobile modifications and caregivers. Since most medical policies will not pay the total costs associated with a medical event, a critical-illness policy provides an important cushion.

Innovative critical-illness policies build on the basic benefit by offering riders that recognize that individual employees have different protection needs. Some may have spouses and children to protect, while others may want the insurer to cover the cost of health-screening tests.

Agents should remind customers that in today's world of frequent medical breakthroughs, people with conditions that once seemed fatal like cancer, heart attack and stroke now have higher survival rates. By investing in critical-illness coverage, the insured will be better protected throughout the illness as he recovers. And most importantly, he will have a level of financial comfort that will allow him to focus on getting well rather than on financial worries.

Winning sales at the worksite
The permanent life, voluntary supplemental short-term disability and critical-illness policies discussed in this article meet a need in the middle-income marketplace. Middle-income Americans can access these important benefits through the worksite, where employer, employee, and agent objectives are met in a triple-win situation.

By allowing agents access to the worksite, employers are providing their workers with the opportunity to purchase supplemental benefits conveniently through payroll deduction. On many occasions, this can be achieved at a reduced cost and with enhanced underwriting to those contracts sold on a truly individual basis. These savings and underwriting advantages are of particular importance to middle-income earners who seek the best value for their limited discretionary dollars.

As an agent conducts the benefits consultation at work, he must keep two goals in mind: employer endorsement and employee education. In working as a consultant, the agent should seek to identify potential gaps in an employer's benefits program. He should work with the benefits manager to understand the overall objectives of the corporate-benefits program and how supplemental products may help the company achieve that goal.

With the employer's endorsement, the next step should be implementation of a targeted benefit communication, which can be achieved in several ways depending on the dynamics of the company. These include the number of employees, shifts, locations, etc. While one-on-one enrollment is always preferable to ensure more personalized communication of the corporate-benefits program, several options are available to facilitate the communication and enrollment process. Group meetings, interactive voice response, intranet and Internet support are just a few of the options that can be customized to the specific needs of the corporate client.

When communicating benefits to employees, the agent's primary goal should be to educate prospects about what group coverage they have, the supplemental voluntary options available and why they should consider making these voluntary elections. Once the employees realize the risk of being underinsured, they easily understand the need for additional or supplemental coverage.

At this stage, it is important to convey the idea that supplemental coverage offers more than just additional financial security. In addition to the discounts made available by on-the- job purchase, employees may take advantage of guaranteed issue policies, simplified underwriting guidelines, and the avoidance of requirements such as medical information bureau (MIB) reports, physician statements, or undergoing blood tests. And many insurers do not require conversions at certain ages, which cause premiums to increase.

Perhaps what is most important in today's mobile workplace is that supplemental benefits are often portable. Customers may choose to continue convenient payment through automatic bank drafts or they can send payment coupons directly to the insurance carrier.

Maximizing opportunity
For the middle-income American consumer, voluntary supplemental permanent life, short-term disability and critical-illness policies can help fill the gap often left by core medical and disability programs. Convenience and access are major benefits of buying voluntary supplemental benefits at the worksite. Employees can select from products that have simple policy language and are supported by an efficient enrollment process, express underwriting and ease of payment through payroll deduction. Also, employees can take the benefits with them when they retire or leave their jobs, often with no additional underwriting or increase in rates.

Agents can reach middle-income Americans with these innovative supplemental products and services through the worksite. Once there, a triple-win situation exists: Employers gain an attractive enhancement to their benefits package, which will help them recruit and retain a loyal workforce. Employees can purchase supplemental benefits that provide critical financial protection for themselves and their loved ones. And agents gain access to a largely untapped market.

Neiciee Durrence is vice president, product management, UnumProvident Corporation. She can be reached by phone at 423-755- 7204 or by email at


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