There are some people out there who love to work, and there are others who live to work. If you are reading this at the dinner table or during your “off- hours” then you may be one of the live-to- work ilk. And there is nothing wrong with that. I enjoy asking business owners what they love more—their business or their family. Then watch them think about it. Some entrepreneurs even describe their business as their “baby” because they have seen it grow from an idea to a living, breathing, adaptable being. Their business is their passion, purpose, and pride in life. Business owners feel uniquely tied to the company they have built and therefore carry strong professional obligations to meet before they can take care of their avocational wants and desires. This requires round-the- clock care and maintenance in times of plenty. But business owners are the last to get paid in times of famine. When a business is quite literally the source of happiness, pride, purpose for a client or prospect, it is imperative to ensure the financial security of the company against the risk of illness or injury—the most common cause of bankruptcy. Below I’ve outlined four key points that our top disability advisors have used to start the conversation about disability planning. 1. MAKE IT IMPORTANT There are innumerable factors than can affect a company’s success or failure. Don’t miss the opportunity to ask your client to identify those risk factors and what is truly at stake. It’s a fun exercise. Many external forces will come to mind—politics (particularly sentient right now), the economy, rising costs, etc. However, the success of any business is predicated on the performance of its leadership. Ask the business owner to identify what risk factors could potentially threaten his effectiveness as a leader. If the client does not mention it first, then don’t be afraid to ask about his health or the health of his employees. If the client’s health is cavalierly cast aside as a non-issue then you know you have an open door on underwriting. Try responding with, “I’m so glad to hear that. If everyone is healthy then that means this is the perfect time to take action and ensure that health will never be a problem for your business. Let’s set something up that keeps the business afloat if you or a key employee needs to step away.” The importance of continued health cannot be ignored, nor should it be taken for granted. This is something out of your control, out of the client’s control, and out of the business’s control. No one chooses when or how an injury or illness occurs. That is the whole point behind DI, and it must be conveyed. One final best-practice to develop the importance of this coverage is to speak in terms of aggregate benefits as opposed to monthly benefits with annual premiums. Monthly disability benefits can sound like peanuts especially when sold alongside life insurance. An advisor may sell a $1 million 30-year term life policy along with a $10,000 DI benefit to a 30-year- old. Both cost $150/month. What’s the better deal? Most people will try to do the math when put on the spot. Some might even say the life coverage at first glance. Realistically the DI has far greater potential benefit and a higher likelihood to be used during working years compared to term life insurance. So next time you are working on a $10,000/month DI case try selling $4.2 million of potential benefit for the exact same price. 2. MAKE IT INTERESTING There are several exciting developments in the world of DI. Most of these updates make things infinitely easier for brokers and clients alike. While these new solutions and advances might be endlessly fascinating to you (as they are to me!), your client might feel rather differently about DI in general. Make a point to identify their interests by asking the business owner to rank the following list of concerns. 1. I want to be financially secure if I become disabled. 2. I want my company to be financially secure if I become disabled. 3. I want my company to be financially secure if my business partner becomes disabled. 4. I want my company to be financially secure if my key employee becomes disabled. 5. I want my key employees to be financially secure if they become disabled. 6. I want all my employees to be financially secure if they become disabled. 7. I want to be financially secure if my business partner can no longer make the payments to purchase the business from me. Here’s what to discuss in greater detail based on list above. 1. Individual Disability Insurance 2. Business Overhead Expense 3. Disability Buy/Sell 4. Key Person DI 5. Guarantee Standard Issue 6. Group Long-Term Disability 7. Loan Indemnity DI 3. MAKE IT EQUITABLE Business owners bear a burden that their employees do not. An employee is guaranteed base wages per the terms of his employment contract. Most business owners don’t have the same luxury. A business owner’s compensation is the last thing in a long line of other financial obligations. Employee benefits like workers comp and group disability may be included on the list of regular monthly expenses. Most entrepreneurs are simply unaware that there is a way to secure their income in the event of illness or injury. Typically owners will exclude themselves from worker’s comp because the premiums are too expensive for the low likelihood of the owner incurring an injury at work. A savvy insurance broker may find that individual DI policy has a comparable premium to a worker’s comp policy but it is important to highlight that individual DI covers the owner around the clock, at work and at home, for both injuries and illnesses. Owners would be smart to consider their DI options in lieu of a worker’s comp plan. Some business owners will understand the importance of having a Group LTD plan for recruitment and retention of their best and brightest employees. Most of these plans will cover the management team, to include the owner. However, many plans are bought and sold on as a commodity on a spreadsheet. That means these group plans can leave the higher income earners with significant holes in their disability coverage. Oftentimes we see Group LTD plans that cover base wages at a rate of 60% with a maximum of $5,000/month. That means anyone making more than $5000/month may be subject to a lower income replacement rate. An owner making $10,000/month will suddenly have to find a way to live on $5000/month which may be fully taxable as income. A commodity plan like this can leave a business owner with less than one third of her gross income, resulting in significant hardship not just for the owner and her family, but for all the employees as well. Their employees effectively have a better disability contingency plan than the decision-maker. Help your business owners make their plan more equitable with a supplemental individual DI policy. 4. MAKE IT EASY Occupational underwriting, financial underwriting, and medical underwriting be damned. Not to mention the process of undergoing blood draws, urinalysis, and lengthy health questionnaires. Fortunately those days are behind us if you can follow these simple guidelines. Guarantee Standard Issue (GSI) is the best thing to happen to the Individual DI market since they reassessed the doctor market. The occupations that are best for this: attorneys, architects, CPA firms, pharmacists, programmers, scientists, small-animal vets, tech employees, and any executive groups you encounter. All it takes is five lives and an employer who is willing to pay a little more to protect their top employees. Incomes should be over $100,000 and a Group LTD plan should be in-force on the first $3,000-$5,000/month. Carriers have been very bullish in this market segment as they all scramble to compete for marketshare while it’s still ripe. These are individual policies issued on a group basis. Qualification is guaranteed as long as each employee has worked continuously for the past 180 days preceding the application date. Big discounts may be available as well. If five lives and employer-paid funding is too difficult, or the occupations are medical or more hands-on in nature, then do not fret. We may still be able to issue with massive multi-life discounts. These discounts can be as high as 25% and issued on a gender-neutral basis. That means females (who are priced to pay higher premiums) can walk away with a discount as large as 40%. That is nearly a two-for- one rate for some professionals. Business owners love a strong discount and if there are any females entrepreneurs then you need to be looking for a potential multi-life sale with just three more lives. Casual DI producers, do not despair. Single-applicant business is not going anywhere for the time being. In fact, there has never been a better time to be taking individual applications. Simplified Underwriting is back in a big way. Your client can avoid financial documentation and medical exams as long as the applicant applies for $6000/month or less and s/he is below the age of 45. Combine this with an e-application TeleApp and you can take an application with just 24 questions (and that number includes basic client info like “name” and “address”). These Simplified plans can also be sold with $4000/month in future increase options, meaning the client can secure up to $10,000/month without ever doing a blood-draw. This is the wheelhouse for sole proprietors who are too busy to return calls. Send a Simplified quote with every inquiry. GO GET ‘EM DI is an exciting avenue with strong renewals. You can build a practice for the long-haul on the back of your DI business. Whether you are on the doorstep of retirement, thinking about a comfortable stream of income to carry you through, or you are a young producer, the renewal compensation from DI is unlike the Life Insurance world of the one-and- done commission transaction. The service work is about the same. Keep your options open by staying vigilant when you are working with business owners. And remember most people don’t buy DI because they don’t know how to ask. Help them bridge that gap!
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