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4 Fallacies About Selling Individual Disability Insurance

Many advisors would agree that their clients need individual disability insurance (IDI). However, many of these same advisors choose not to sell it. This could be because they do not feel informed enough about the product. Maybe they do not want to dilute their focus on their primary area of expertise. Or it may be that they simply do not know an effective way to transition the conversation to IDI.

Anyone who depends on income to pay the bills and maintain a standard of living needs to protect that income. What if a client gets sick or injured and is unable to work? The last thing you as the financial advisor want to hear is a disabled client asking, “Why didn’t you warn me?”

I have heard some advisors openly admit that they know they need to sell IDI. Some even express fear that they may be missing an opportunity to protect their clients’ incomes. They are just not sure how to incorporate IDI into their sales. Fortunately, there are simple and effective ways to add IDI to your practice. After hearing advisors tell me the following perceived stumbling blocks to selling IDI, I have some advice on how you can position the product efficiently and effectively.  

1. Where do I start the conversation?
My assumption is that advisors who are meeting prospects for the first time will always lead with their strength. That strength is the product or service they know best, which drives the majority of their revenue. This may come with a practiced conversation starter, allowing for a skilled opening and high engagement from prospects regarding how the product can help fill a need they have.
In my talks with advisors over the years, I have picked up some effective ways to transition from other products to a conversation about IDI. Just knowing where to start — how to get people thinking about their need for income protection — is the first and most important step in selling IDI.

Here are five examples of how to pivot from different products to IDI:

Financial plans with periodic contributions
“The best financial plan in the world will survive only as long as your income survives. Before we part today, let’s agree on a plan to make sure your income will continue even if you cannot work. Otherwise, all this planning we just did could be for naught.”

Life insurance
“Congratulations on getting this life insurance policy in place. If you are not here to provide for your family, they will still have a source of income. However, what if you get seriously sick or injured and survive? You might not be able to work for years, if ever. Who will take care of you and your family then?”

Individual health insurance
“This health insurance will make sure the doctor, hospital and pharmacy get paid. But if you get seriously sick or hurt, who will make sure you get paid? Let’s talk about how to protect your income if you are not able to work.”

Long-term care insurance
“It is likely that the need for long-term care will arise late in life. But what if some serious illness or accident strikes during your working years? Wouldn’t you need your income to continue?”

Group long-term disability (LTD)
In this instance, consider talking with your employer clients and discuss layering IDI on top of existing coverage they might have with you. “Group LTD is a great foundation of protection for your employees. But, as you know, the group plan is structured in a way that does not fully cover your executive team and other higher-earning employees. Let’s look at filling in the gaps left by group LTD with individual disability insurance.”

2. Whom do I target?
Not everyone on your client roster is a candidate for IDI. People with high net worth (more than $10 million), those who are older than 60 or who derive most or all of their income from passive sources (e.g., ownership of rental properties) are not eligible for or simply do not need IDI.

However, clients younger than 60 who generate most, or all, of their earnings through full-time work and depend on those earnings to maintain their standard of living need income protection. The best prospects for IDI are business owners and people in white-collar occupations with above-average incomes.

3. I am not an IDI expert.
Fear of the unknown can be a big sales inhibitor. IDI contracts, with their unique array of provisions and choices, may seem daunting at first glance. Many advisors are reluctant to begin discussing a product they are not completely comfortable with, and they are hesitant to commit the time it takes to become an IDI expert.

First, focus on the need, not the solution. Job one is to get your clients to agree that they would, in fact, suffer financial loss — or even ruin — if an illness or injury left them unable to work for an extended period of time.

Second, rely on one of the many IDI brokerage agencies around the country to be your expert for IDI case design, proposal assistance and support. There is nothing wrong with saying to a client, “I am going to take your information back to my office and work on putting some proposals together for you.” If you send the IDI brokerage office the client’s basic information, that office will put together recommended designs and proposals for you.

4. This will distract from my core business.
Advisors often balk at devoting precious time to introducing a new product for fear that their core business will be diluted. If that is stopping you from selling IDI, consider teaming up with an IDI expert as a referral resource and split commissions. This obviously needs to be someone you know, like and trust. For help in finding potential producers, ask your IDI brokerage agency. If you get your clients sensitized to the need for income protection, it is a perfectly natural step to say, “I will have my IDI specialist contact you.”

There is too much at stake for your clients’ well-being to avoid the IDI conversation. Armed with proven transition statements and your own firm belief in the need for this important piece of financial protection, you can succeed in the IDI arena.

Doug Waters, CLU, RHU, REBC, is second vice president of individual disability income insurance sales, Standard Insurance Co. Doug may be contacted at [email protected] .

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