For Disability Insurance Awareness Month, we're publishing a weekly roundup of DI FAQs. Follow Max on LinkedIn to get these in real-time!
Q: How do I get started with DI?
A: Here’s one question to initiate the convo.
“Does your family depend on your income?”
If it’s a no, then respond with a soulful congratulations on winning the rat race! I’m sure you can find something else to discuss. Maybe even get some pointers.
But if it’s a yes, then it’s quite easy to continue.
“Do you have a disability income plan already in place?”
If it’s a yes, you can either drill down on the details (definitions of Total/Partial Disability and Covered Income, taxability, portability, etc.) in an attempt to gather more data.
If it’s a no, then the follow-up is simple:
“Would it be crazy to look at a few plans and see what it would cost for you?”
This is what’s known as a “no-oriented answer.” It allows the client to indulge in their Zone of Resistance. By saying “No” they actually say “Yes.”
And now you have a prospect.
Q: What’s an effective strategy for starting the DI conversation
A: Ah, the fresh smell of potential. We use agricultural tropes all the time in this business.
(You might need a group therapy session if you’ve ever asked, “Would you rather be taxed on the seed or the harvest?”)
We’re trying to help our clients see the forest through the trees on a multitude of fronts as it’s easy to get lost in the daily myopia.
One of my favorites is the concept of a “forest of lifetime earning potential” versus “monthly nut.”
People get lost in their monthly budgets without ever grasping the concept of losing their earning potential—a surefire way for a client to end up behind their financial goals.
No, never heard of it? Probably because I just made it up. But how did it land?
Q: Why is DI so expensive?
A: It’s all based on the risk. There are three main components: 1) Complexity, 2) Aggregate Value, and 3) Rate of Incidence.
1) The risk is complex
Risk—and therefore pricing— varies by gender, age, occupation, and income. On top of that, an individual applicant has a unique health history that will result in a greater or lesser risk compared to the median risk.
[This is not the same risk assessment as insuring a home.]
2️) Benefits may be indefinite
For a 30-year-old earning $100k/year and no raises, we are looking at cumulative earnings of over $3.7 million by the time they reach Social Security Normal Retirement Age. That’s a significant amount of benefit that the insurance carrier would have to pay out in a worst-case scenario.
[Compare lifetime earnings to an auto or home policy where the value of the property is easy to quantify.]
3️) It happens …a lot.
Everyone knows someone who has fought cancer. Many people know someone who has had a stroke. There are more who have had major organ transplants. And some have suffered blindness. Beyond that, there is an innumerable number of mental disorders, autoimmune issues, and illnesses that attack our nervous systems like Parkinson’s, MS, or ALS. And despite all that, musculoskeletal issues still are the number one reason for claiming on a DI policy, with back and neck issues leading the top reasons.
[One in four houses is not going to burn down.]
DI is expensive because it is valuable.