Disability Income Disability Income 2 Hour CE Dawn M. Boyer, MBA - - PowerPoint PPT Presentation

Disability Income Disability Income

2 Hour CE Dawn M. Boyer, MBA LUTCF Executive Vice President

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Why do your clients NEED Disability Income i ? Protection?

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Have a Story to Tell

Lifehappens org Lifehappens.org

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18% of consumers 18% of consumers remember their agent or advisor mentioning income protection.

Most DI sold by Most DI sold by CLIENTS Asking!

LIMRA –2009

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Disability On the Rise

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Keep It Simple for your Client! Keep It Simple for your Client!

Elimination Period Benefit Period Benefit Amount How long before payments start? How long will payments last? How much will the payments be?

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How does Disability Insurance work? Occupation Definitions FIRST Occupation Definitions FIRST

O O You are unable to perform the substantial and Own‐Occ EXAMPLE: If a surgeon develops a tremor that prevents him from practice as a surgeon, he can ll t di bilit b fit if h t t substantial and material duties of Your Regular Occupation; and you collect disability benefits even if he returns to work as a family practice physician. If he was earning $300,000 a year as a surgeon and had are under regular care of a Physician appropriate for your Injury or Sickness If he was earning $300,000 a year as a surgeon and had a $180,000 DI benefit. While collecting the DI benefit of $180,000 per year, he can earn an income of $150,000 per year (or any other amount) as a family practice Injury or Sickness.

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p y ( y ) y p

• physician. Not bad, huh?

How does Disability Insurance work? Definitions FIRST Definitions FIRST

M difi d O O

You are unable to perform the substantial and

Modified Own‐Occ EXAMPLE: Once Dr. Brown returns to work as a family practice physician, he can no longer ll t f ll di bilit

the substantial and material duties of Your Regular Occupation; and you are not engaged in

collect full disability. His disability benefit will be based on a percentage of lost

any other gainful

• ccupation; and you are

under the regular care of Ph i i i

His disability benefit will be based on a percentage of lost

• r reduced income. In this case, his annual benefits of

$180.000 would be reduced to $90,000 due to having a 50% loss of income. Remember his income is now

a Physician appropriate for Your Injury or Sickness.

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$150,000 instead of his pre‐disability income of $300,000.

How does Disability Insurance work? Definitions FIRST Definitions FIRST

G i f l OCC

Because of injury or sickness you are unable to perform the

Gainful‐OCC EXAMPLE: The insurance company will determine what type of work is suitable for Dr. Brown.

unable to perform the material and substantial duties of Your Occupation, or

The insurance company determines what type of work is suitable for Dr. Brown. If Dr. Brown were deemed suitable

Any Occupation for which you are deemed reasonably qualified by education training or

for other work due to his prior education, training or experience, he would not be eligible for any DI benefit. Would the insurance company expect him to flip burgers?

education, training or experience.

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Probably not. But, why take the chance?

How does Disability Insurance work? Other Definitions

This provision says that the policy will waive the elimination period

Other Definitions

Presumptive Clause

p y p y p and begin paying benefits from the first day of Presumptive Total

• Disability. The insured is presumed to be totally disabled if he/she

suffers the permanent loss of (a) the sight of both eyes; (b) the use f b th h d b th f t h d d f t ( ) h (d)

• f both hands; both feet or one hand and one foot (c) speech (d)

hearing in both ears. Stroke is an example of this.

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How does Disability Insurance work? Definitions FIRST Definitions FIRST

The Recurrent Disability Clause

The clause defines how the carrier will respond to recurrent bouts with the same disabling illness or injury. Many policies state that if the same disability recurs within six months following cessation of benefits, the recurrence will be treated as a continuation, and the elimination period and benefit period do not start over.

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How does Disability Insurance work? Definitions FIRST Definitions FIRST

The Concurrent Disability Clause

This provision says that benefits will be paid for one disabling condition at a time Even if there are multiple causes of disability condition at a time. Even if there are multiple causes of disability, the policy will treat the culmination of causes as one disabling claim.

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How does Disability Insurance work? Definitions FIRST Definitions FIRST

Waiver of Premium Clause

The clause waives any premium due after 90 days of disability.

Note: If client disabled on January 1, they should continue to pay premium that is due each month. Once it exceeds 90 days the insurance carrier will refund any premium paid during the elimination period. f l ’ d l l l HOWEVER, if client’s premium was paid annual, semi‐annual or quarterly and not due during the first 90 days he would not be eligible for a refund.

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Riders Riders

Automatic Benefit Increase Rider (ABIR)

This rider increases the BASE monthly benefit to keep pace with inflation. P t ill ti t i h hil bl d th li Payments will continue to increase each year while payable under the policy until the base policy monthly benefit payment has increased to twice the

• riginal amount.

ABIR is much more important to a client who was permanently disabled at age 26 than it is to a client who is disabled at age 56.

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Riders Riders

Catastrophic Disability Benefit Rider

This rider pays an additional benefit if the insured is receiving total disability b fit d i bl t f t l t t ti iti f d il li i (ADL’ ) benefits and is unable to perform at least two activities of daily living (ADL’s); has a severe cognitive impairments’ or is presumptively totally disabled.

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Riders

Critical Illness Benefit Rider

This rider pays an additional benefit if the insured is receiving total disability benefits and is unable to perform at least two activities at least two activities

• f daily living (ADL’s);

has a severe cognitive impairments’ or is presumptively totally disabled.

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Riders Riders

Guaranteed Insurability Rider

This rider gives the insured the option to increase their base policy monthly b fit b h i dditi l t f i Additi l t benefit by purchasing additional amounts of insurance. Additional amounts will have the same benefit period and elimination period as the policy. Increases do not require evidence of insurability and are based on the insured's current income insured s current income. First available dates is 2 years after policy issue and 2 years in between dates, up to five times total

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Riders Riders

Non‐Cancelable Rider

This provision guarantees that after a policy is placed in‐force, there will be no changes to the premium or to the policy benefits through g p p y g age 65 – regardless of the insured’s working status, health or income level.

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Riders Riders

Residual Disability Benefit Rider

This rider will pay a monthly benefit if the insured is residually disabled and the elimination period has been satisfied. Renewal p premiums will be waived on the first premium due date after the insured has been residually disabled for the elimination period or 90 days.

Example: If disability causes loss of income (commission) then will

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pay proportionately.

Riders Riders

Retroactive Injury Benefit Rider

This rider will pay a benefit if an injury causes the insured to become totally disabled within 30 days of the injury and the insured y y j y remains continuously totally disabled until the end of the elimination period.

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Riders Riders

Return of Premium

This rider will pay a returned premium upon policy cancellation, lapse, death tt i d 65 It i lidi t l d ll b fit id

• r attained age 65. It is on a sliding percentage scale and all benefits paid

are subtracted before a lump sum is paid.

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Riders Riders

Supplemental Social Insurance Benefit (SSID)

If an insured does not qualify for Social Security benefits, this rider increases th thl di bilit b fit d ll f d ll t li it the monthly disability benefit dollar for dollar up to limits.

How long do you think it will be before SS runs out of Disability Income money?

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Types of Policies Types of Policies

• Simplified Disability Income
• Graded Benefit
• Business Overhead Expense
• Individual Disability Income

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Simplified Disability Income Insurance Simplified Disability Income Insurance

• Simple and short application – only a few pages

Si lifi d d i k i

• Simplified and quick issue process
• Two broad occupational classes
• Professional/Office

Professional/Office

• Skilled/Unskilled
• Simplified underwriting

Every 1.5 seconds someone is disabled in the

• No illustration necessary
• No income documentation

disabled in the U.S.

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Simplified Disability Income Insurance Simplified Disability Income Insurance

• $300 ‐ $2,500 (maximum of 60% of income)

$ $ ,

( )

• Elimination 30/60/90/180
• MIB and Rx check
• MIB and Rx check
• Own Occupation

43% of 40 year

• lds will have a

long term long‐term disability before the age of 65!

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Graded Benefit Disability Income Graded Benefit Disability Income

• Most occupations accepted
• Graded benefits
• 1st year – 35%
• 2nd year – 70%

3rd 100%

• 3rd year – 100%
• Designed for the fully employed who may not

qualify for traditional disability because of:

• Current or past health challenge

Can’t qualify for anything else

• Current or past health challenge
• Are newly self‐employed
• Work from their own home

anything else.

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Graded Benefit Disability Income Graded Benefit Disability Income

• Designed for individuals who are unable to qualify for an

g y Individual DI plan due to their current medical condition and/or health history.

• Ages 18-60

Can’t qualify for anything else

Ages 18 60.

• Working full time (30 hrs/week).
• Meet earned income requirements.

anything else.

• Class 4A and 3A- $11,000;

Class 2A- $7,500; Class 1A- $6 000

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Class 1A $6,000.

Graded Benefit Disability Income Graded Benefit Disability Income

Medical Conditions Considered Alcoholism Anxiety Cancer Cerebral Palsy High Cholesterol Coronary Artery Depression Diabetes Angioplasty/By‐pass Heart Attack Hepatitis Intestinal By‐pass Overweight Pacemaker Sleep Apnea

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Business Overhead Expense Disability Income Expense Disability Income

• SMALL BUSINESS OWNERS
• Owned business for more than one year
• Actively working (full‐time) in ownership, management and

administration of the business

• $10,000 minimum net profit for the business for past year
• Benefit either 12 or 24 months

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Business Overhead Expense DI Business Overhead Expense DI

The cost is tax deductible! B i d d t i id

• Business may deduct premiums paid
• Deducting premiums makes benefit payments taxable
• However, business expenses can offset the taxation

However, business expenses can offset the taxation making it a “wash”

IRS Circular 230 Notice: Any federal income tax information contained in this presentation was not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding IRS Code penalties that may be imposed on the taxpayer Such information was provided to support the promotion or marketing of may be imposed on the taxpayer. Such information was provided to support the promotion or marketing of the transaction(s) or matter(s) addressed by such information. Taxpayers should seek advice based on their particular circumstance from an independent tax advisor.

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Business Overhead Expense DI

How it works:

• Insured individual becomes disabled
• Submits expenses incurred

Submits expenses incurred

• Carrier reimburses expenses

A pool of money is used (carry over of

• A pool of money is used (carry-over of

unused benefit from month to month)

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The premium for a client’s Disability Income y Policy should be between 1 to 3 percent of the 1 to 3 percent of the prospect’s annual income income.

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Understand that your prospects y p p are interested in the basics

• f your solution
• f your solution.
• How much will I be paid?

(Benefit Amount)

• When do I get paid?

(Elimination Period)

• How long do I get paid?

(Benefit Period)

• What do I need to do to get paid?

(Definition of Disability) H h ill it t? (l th 3% i )

• How much will it cost?

(less than 3% income)

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Multi-Life Discount Example

40-year-old Male Veterinarian $4,000 Monthly Benefit ($2,800 base and $1,200 SDIR) With $15,000 CI Rider & Own-Occ Rider

Non-Tob 90-Day Elimination

Monthly Premium: $148.62

• Indiv. DI

$102.38

Non Tob., 90 Day Elimination To-Age-65, Occ Class 3A

BOE on the above Veterinarian $5,000 Monthly Fixed Expenses

+

Business DI (BOE) Monthly Premium: $36 42

With the 15% discount, the TOTAL for

$102.38

90-Day Elimination, 1-year Benefit period

DI (BOE) $36.42

32-year-old Female Vet Tech

TOTAL: $185.04

+

the TOTAL for all three policies is $174 63 – that’s

$34.69

• Indiv. DI

32-year-old Female Vet Tech $1,500 Monthly Benefit ($750 base and $750 SDIR) With $15,000 CI Rider

Non-Tob., 90-Day Elimination 10 Y B fit P i d O Cl 3A

Monthly Premium: $37.56

is $174.63 that s $10 LESS than the first two policies!

10-Year Benefit Period, Occ Class 3A

p

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Look at the STATS again…

1 in 1,300 1 in 70 1 in 109

1 in 8 1 in 8

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Are you offering Disability to EVER CLIENT? EVER CLIENT?

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I would like to put together a plan for your review?

What are your monthly What are your monthly expenses for:

• 1. Groceries

2 Auto

• 2. Auto
• 3. Mortgage

4 Electricity (Utilities)

• 4. Electricity (Utilities)

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Types of Policies

BOE 26%

Types of Policies

Individual 53% 26% Graded 10% Simplified 11% 10% GordonMarketing.com 800.388.8342

Protect y Protect your client ur client

Sales going up

2000 2001 2002 2003

Protect y Protect your client ur client

800000

2004 2005 2006 2007 2008 2009 2010 2011

Data from Limra 83% f i t

400000 600000

• 83% of carriers expect

premium growth over next year

• 50% expected growth of at

200000 400000

least 20% in next 5 years

• No companies anticipated a

decrease in overall premium at any duration

Sales (000) GordonMarketing.com 800.388.8342

Ages and Disability Claims

Look at Look at the the

58% 0‐40 41‐50 50‐55 55‐65

Look at Look at the the amount of amount of claims claims for clients under for clients under age 40 age 40 In fact In fact age 40 age 40. In fact In fact 81% of all claims % of all claims are under ages 50! are under ages 50!

23% 10% 10% 9%

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Under nderwriting riting Process Process

Learn about their Place Case AND

Process Process

business AND Ask for Referrals!

Normal underwriting process is 28 days.

Complete Checklist Full Underwriting 28 Days E li i

p y Eapp brings the d iti

p Eapplication 15 Days

underwriting process down to 15 days.

Present a quotation With options Complete Eapplication With options

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95% from

Illness

95% from

Work Related Injury

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Ask Client if they can survive a disability Show them how AFFORDABLE AFFORDABLE Disability Income Clients Can’t Afford NOT to have disability income

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Are Y Are YOU U

• f
• ffering

fering Disability Disability Disability Disability Income to Income to EVER EVERY Client Y Client

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CE OVER

Now onto making Money!

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Successful Disability Income Producer

• 1. Believe in the product
• 2. Own disability insurance on yourself
• 3. Have a story to tell, www.lifehappens.org
• 4. Set a goal and be committed to it

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The Opportunity is HERE!

• Today the DI industry sells less than half the number of policies sold

15 years ago.

• Has the need changed?
• Or have agents become Lazy and selling the EASY order taking sale?
• The agents that SPECIALIZE in the DI market are building their

business business

• Small businesses NEED your help!

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Target Small Business Owners

• Plenty of opportunity
• They understand and openly appreciate face to face meetings
• Department of Labor defines the small business as 100 or fewer

Department of Labor defines the small business as 100 or fewer employees

• They make up 65% of the GDP
• Makes up 70% of employed people
• Makes up 70% of employed people
• Yet only 13% of the people in this group are protected by group LTD
• r individual disability income.

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Leading the way with DI

• Business Overhead Expense – pays most business expenses in the

event the policy holder is too sick or injured to work for a period of time.

• Buy/Sell – provides funds to purchase the policyholder’s share of the

business in the event of a permanent disability.

• KeyMan – provides a monthly benefit to the employer in the event a

y p y p y key employee becomes too sick or injured to work for a long period of time.

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The LTD Gap and The Tax Bite

Just like a regular paycheck, benefits from employer‐provided Group LTD plans are generally taxable.

100% 80%

Gross vs. Net Income (gross less taxes)*

Salary Group LTD

60% 40% 80% Salary Group LTD 20% 0% Gross Net

After taxes, a 60% LTD benefit is actually less than 60% of gross earnings

*After‐tax benefits assume 25% tax rate.

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How does GSI bridge the LTD gap?

120% 80% 100% 120%

Supplemental Benefits Group LTD Benefits Working Paycheck

ng Paycheck

40% 60% 80%

ge of Workin

(does not include bonus income)

0% 20% 40%

Percenta

0%

Gross Net Gross Net Gross Net

After‐tax benefits assume 25% tax rate. GordonMarketing.com 800.388.8342

Overcoming Common Objections

• 1. My spouse and I could survive a period of disability by using the

income of the working spouse.

• 2. I could qualify for Social Security Disability Benefits.
• 3. Our family could survive on our savings
• 4. I have it through work.

5 It is too expensive

• 5. It is too expensive
• 6. Why do I need this coverage? No one has ever talked to me about

it before.

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Why Individual Disability?

• Average monthly Social Security Disability benefit is 2005 was

$1,000 per month or $12,000 annually *SSA January 2006

• Group LTD benefits are taxable if employer‐paid and they have a

cap.

• Savings are quickly depleted
• Most Americans live on two salaries. Losing one of the salaries

Most Americans live on two salaries. Losing one of the salaries would create a financial hardship.

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Why Individual Disability?

• Individual Disability is the only disability insurance that will pay in

the event of a partial disability.

• It will pay in addition to SSI benefits or Worker’s Compensation

received or not received.

• If premiums are paid with taxable dollars, the monthly benefit will

not be taxable at claim time.

• Individual Disability is portable. YOU own it.

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It’s really INEXPENSIVE!

Protecting your paycheck is really inexpensive when you consider the risk involved and compare it to the cost of your home and auto

• protection. The BIGGER question is, if you can qualify.

Please understand, not everyone qualifies for paycheck protection. Before I go an further explaining how you can get paycheck g p g y g p y protection, will you first promise me one thing? If this doesn’t make sense for you I need you to tell me NO! Ok? If this doesn t make sense for you, I need you to tell me NO! Ok? (Hint: If he says NO, them have them sign the waiver and move on FAST!)

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PROSPECTS ARE EVERYWHERE!

SELF‐Employed Anyone who has a mortgage Anyone that needs income has a mortgage to pay for auto

• r food.

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Protect YOUR Paycheck!

Eapp Tutorial Eapp Tutorial Assurity Website

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Protect YOUR Paycheck!

How much do I need? Calculator Some is better than none!

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Quiz

Is DI policy pricing for business owners usually more or less expensive than for an individual client?

• a. More expensive
• b. Less expensive

c About the same c. About the same

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Quiz

Is DI policy pricing for business owners usually more or less expensive than for an individual client?

• a. More expensive

b.

• b. Less expensive

Less expensive c About the same c. About the same Business owners can often upgrade occ classes if they own 25% of the b l h h b d f l l f

• business. Also they can get another big discount if multi‐life

savings is used.

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Quiz

What income documentation is necessary for small‐business owners.

• a. Last year’s tax returns
• a. Last year s tax returns
• b. Two years of tax returns

c. Five years of tax returns

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Quiz

What income documentation is necessary for small‐business owners.

• a. Last year’s tax returns
• a. Last year s tax returns
• b. Two years of tax returns

c. Five years of tax returns Depending on income level. Clients with less than $5,000 monthly benefits are only required to submit one year’s tax returns. l h h h b f l l b f Clients with higher benefit levels must submit two years of tax returns.

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Quiz

If a business owner has DI protection does he/she still need BOE protection?

• a. No – DI is usually sufficient
• b. Yes – BOE is necessary

c. It depends…

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Quiz

If a business owner has DI protection does he/she still need BOE protection?

• a. No – DI is usually sufficient
• b. Yes – BOE is necessary

c. It depends… Each case must be individually evaluated. Two key considerations are the level of income and the amount of expenses that need to be covered should the client become disabled covered should the client become disabled.

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Do you plan on being in the Insurance Industry for over 5 more years?

If so why not sell a product that helps If so, why not sell a product that helps BUILD your agency with RENEWALS! (back to business in the old days, building a renewal base!) g )

**Please see Dawn or your marketer individually for specific commission Please see Dawn or your marketer individually for specific commission questions.

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JUST ASK!

• Do you discuss DI insurance needs with EACH of your clients?
• You OWE it to your clients to protect their MOST VALUABLE ASSET:

Th i bilit t Their ability to earn an income! income!

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Successful Disability Income Producer

If you are SERIOUS about selling Disability Income complete the Goal Sheet in your kit and t rn into Lisa Banning turn into Lisa Banning. W ill b t bilit t W We will be your accountability partner. We are here to help YOU SUCEED!

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Questions? More Q Information?

Dawn Boyer, MBA, Lutcf Executive Vice President dboyer@gordonmarketing.com Lisa Banning Executive Marketing Assistant lbanning@gordonmarketing.com

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