lifemarketers presents the abc ’ s of disability
TRANSCRIPT
The Sales Process Understand the Client’s Occupation
Develop the Need
Highlight Policy Benefits
Help the premium fit financially
Understand the Client’s Occupation
What does your client actually do during the day
What are his or her “substantial and material duties”
How is Your Client Paid?
Base Income (W-2)
Bonus (W-2)/Commissions (1099)
Profits (Schedule K-1 or Form 1120)
Residual Income
Fact Gathering Age/DOB
Group LTD Plan
waiting period/benefit period
% income covered
maximum monthly benefit
definition of earnings
Savings
Expenses
Why Disability Income Protection
Your clients need the protection
Effect on the family
Effect on the client
Effect on society
Mortgage foreclosures - 48% due to disabilities according to the U.S. Housing Authority (1984)
Potential effect on small business/employment
Are You Protecting the Right Asset?
Potential Earnings to Age 65(with 5 percent annual salary increase)
Annual IncomeAge $50,000 $100,000 $150,000
30 $4,516,000 $9,032,000 $13,548,000
35 $3,322,000 $6,644,000 $9,966,000
40 $2,386,000 $4,773,000 $7,159,000
45 $1,653,000 $3,307,000 $4,960,000
Chances of a DisabilityWhat is the chance of having at least one long-term
disability which lasts for three months or longerbefore reaching age 65?
Age Probability
25 44%
35 41%
45 36%
55 27%
Source: 1985 CIDB Disability Tables1980 CSO
Chances of a Disability
What is the chance of being disabled for life if thedisability has lasted at least three months?
Age Lifetime Disability
25 25%
35 28%
45 33%
55 40%
Source: 1985 CIDB Disability Tables1980 CSO
Typical Policy Benefits
Noncancelable and Guaranteed Renewable
Fixed monthly benefit
How does the base policy pay?
20% loss of earnings
cannot perform the substantial and material duties of your job and not working in another occupation
under the care of a physician
Regular Occupation rider removes the loss of earnings requirement.
Understanding the Basics
Benefit Period - how long benefits will be paid
Elimination Period - how long the insured waits before benefits begin
Benefit Amount - the monthly benefit payable under a total disability
Occupation Class - risk class affecting benefits and premium
Common Definition of Residual Disability
Requires a loss of income and usually a loss of time or duties
Percent of income lost equals percent of income paid
Ex.: a 60% loss of income with a $5,000 monthly benefit will result in a $3,000 monthly benefit
Partial Disability - 50% of benefit payable for 6 or 12 months
Catastrophic Benefits
Presumptive Disability
Presumptive disability with loss of speech, hearing, sight or the loss of use of any two limbs
Benefits are paid for life and no elimination period is applied.
Common Optional Riders Cost of Living Benefits
Future Insurability Benefits
Automatic Increase Benefits
Premium Refund
Residual
Return to work
Extended disability benefit rider
Subject to variation and state availability.
Cost of Living Benefits
Increase the monthly benefit on each anniversary date of the disability
Compounded interest
Has an overall cap of two times the monthly benefit
The younger the client the greater the need.
Future Insurability Benefits
Benefit Update Rider Allows benefits to be increased without re-
qualifying medically. No limit to amount of increase except for maximum issue amount.
Option dates will be every 3 years or by special trigger. Expires at age 55
Triggers that open an early option are loss of group sponsored LTD, reduction of LTD, or change of employment(When purchased on top of Group LTD it acts as a portability rider to the group).
Occupation Classes We are insuring duties not job titles
What is your client’s day like
If any manual duties what are they and what % of time do they represent
Do they have ownership
How many employees
Affects costs and benefit
Tax Consequences Premiums paid with pre-tax dollars - taxable
Premiums paid with after tax dollars -
income tax-free
More than 2% owners of Partnerships, S-Corps, LLC cannot deduct premiums
Example $100,000 income qualifies for $4,800
income tax-free or $5,950 taxable benefits
Assuming 28% marginal tax bracket $4,800 income tax-free benefit is comparable to $6,666 monthly gross income
Medical Underwriting
Common Concerns
Musculoskeletal
Mental/Nervous/Drug/Alcohol
Stress and anxiety counseling
Diabetes
Blood pressure and cholesterol
Attending physician statements
Blood and Urinalysis
Financial Underwriting
What is your client’s net income after business expenses
Complete the income history including bonus and pension contributions
Include signed tax returns with all schedules for business owners
Unearned income
Common Objections
I have savings
My spouse can work
I can do my job from bed
I have protection at work
It costs too much
Savings…What’s It Really Worth?
40 year old with $250,000 in the bank
Assume 20 years of disability with investments accruing at 8%
$1,900 per month will be paid out over 20 years
Can you live on $1,900?
My Spouse Can Work
What does your spouse earn now
Who will take care of you while you are sick? What’s that worth?
If you really don’t need the second income why not take a small percentage of it and ensure the second income continues in the event of disability
Group Long Term Disability
Myth - “It’s cheaper because it’s group”
Typically more conservative benefits
Pre-existing condition limitations
New cost containment provisions
Less adverse selection
Premiums and benefits can be modified
Plans can be canceled
Why Supplement Group LTD
with Individual Policies Benefit may be too low
Benefits are typically taxable
Rates not guaranteed
Usually not portable
Usually conservative definitions
Bonus and Pension benefits may not be covered
Your client needs it
With Benefit update rider you now add portability
Cost
Try to keep premium at 2% or less of
income
90, 180 or 365 day wait
Five year or age 65 benefit period
COLA or not
SSI Integration