How many times have you been completing a review with a prospect when they tell you they don't need life insurance because they have their mortgage insured through the bank? Upon a little further digging, you also discover that they have “disability” through the bank! Many advisors feel comfortable enough to replace the bank life insurance; however, what do you do about the disability? There is an answer. There are several carriers who offer a disability product which focuses not on replacing the client’s entire monthly income, but rather simply making the mortgage or rent payment each month during a disability. Why would you bring this up to the client? What are the benefits of this type of product?
There are many:
1) This product does not integrate with existing disability plans, whether personally owned or through the group carrier. This is not replacing income, therefore, it doesn’t matter how much disability the client has in place, you can always add this coverage to cover debt.
2) Because the premium is paid by the insured, the benefits are always tax free.
3) This plan is underwritten upfront at time of issue, versus the bank’s coverage, which is underwritten at time of claim! This is important because when the policy is issued, you know exactly what is and isn’t covered by the contract.
4) Your plan is more flexible than the banks (30, 60, 90 day waits, 2,5, 65 benefit period, Premiums can be T5 or level to 65).
5) You DO NOT need income to qualify - you simply need debt! This is to cover mortgage payments (or other similar debt) not replace your monthly income.
6) Can cover any type of loan such as a mortgage, car loan, car lease, line of credit, credit card, student loan and personal rent. Corporate loans can be covered, however, only have a 2 year benefit period.
7) This coverage is FULLY portable. Just like life insurance, it is NOT tied to an institution; therefore, you may switch lenders and keep this coverage in place.
In addition, you can have loans from different institutions all covered under the policy – it is the total amount of debt, not which institution it is taken from.
8) The insured is the beneficiary...NOT THE LENDER.
9) The insured is the owner...again, NOT THE LENDER. You receive your own contract! You are not part of a group where you only receive a certificate as part of the larger group.
10) You can insure a spouse who isn’t currently working (has to be 90 day wait and 2 year benefit)
11) Your plan is tailored based on your age, gender, smoking status, occupation.
12) Finally, you will generally find that personally owned insurance is cheaper than bank coverage when comparing similar structured policies. For instance, most banks offer a 2 year benefit, 60 day wait, and a 5 year term when calculating the premium.
Since I have arrived at QFS, many advisors have heard me say that less than 10 % of brokers are selling disability. By presenting this option, this is a great way to separate yourself from your competition. You are replacing the inferior bank coverage which they already have inforce with a more comprehensive plan, thus better protecting your client. You are able to save the client money at the same time! You are more referable as you provide more than just life insurance, and...you get paid commission! What a win/win opportunity for you and your client. Should you uncover any scenarios like this, please feel free to contact me at any time to discuss the case and review various solutions. Happy selling!
Jeffrey P. Wright, BA, CFP, RHU
Business Development Specialist