The below post is presented in collaboration with Meghan Cormany, DI sales development specialist at Ash Brokerage.
Pick an average client and think of her greatest asset. Is it a 401(k)? An IRA? A brokerage account? For many individuals, their greatest asset isn’t listed on their balance sheet. It’s their ability to get up and go to work every day. Your clients’ ability to earn an income is what makes everything possible. If that income is disrupted, even for a short time, forget about having them save for long-term financial goals. It becomes increasingly difficult just to pay day-to-day bills.
We can’t change our clients’ fate, but we can change how prepared they are to deal with what life throws their way. Disability insurance works for your clients when they can’t; it lets families retain their houses, keeps children in school, and allows financial plans to stay in motion. But a recent survey by the Council for Disability Awareness (CDA), “10 Million Single, Female Workers at Extreme Financial Risk From a Disability,” shows that women, especially single women, are “extremely unprepared” for a work absence. Why are women so reluctant to insure their paychecks?
In part, it starts with denial. No one thinks it will happen to them, even though the statistics say otherwise. In fact, out of today’s 20-year-olds, one in four will become disabled before they retire, according to the same CDA study. That’s a quarter of your potential clients.
Simplify the Conversation
If you’re not sure where to start when talking about disability insurance, you’re not alone. But by asking the right questions, you can help get the conversation going—and, ultimately, the need for paycheck protection will start to become clear to your clients.
Wondering whom you should be talking to? The short answer is anyone who relies on income from a paycheck. Women are often particularly underserved, yet they have a greater risk of becoming disabled. According to a Journal of Financial Planning article on women and disability, in the 10 years ending in 2009, social security disability insurance applications for women increased 72 percent, while applications for men grew 42 percent. With more and more women providing the primary income for a family, the question becomes less about whom you should be talking to and more about how you should be talking to them.
The best advice? Simplify. You don’t need to know the intricacies of the product to have a productive conversation. You just need to be prepared to ask questions.
Ask the Right Questions
Here are five open-ended and thought-provoking questions to help keep the conversation on target.
1) Look at the future. “What will happen to your future plans if your paycheck stops because of a disability?”
Help clients see beyond their day-to-day needs. Identify and discuss plans that assume the paychecks do keep coming, whether it be sending the kids to college, affording family trips, or building up retirement savings. These goals show how disability insurance can be truly invaluable.
The idea is to move away from presenting financial planning and insurance as products and numbers and help clients see what they’re really about: life event planning. You are in the “paying for my daughter’s wedding” business. The “sending the kids to college” business. The “giving to others” business. The “owning my own business” business. These are real-life events that need protection.
2) Discuss assets. “If your paycheck stops, how long will it take before you exhaust your savings and can’t pay your bills?”
The average individual disability insurance claim lasts nearly three years, according to the CDA, and the potential consequences can be devastating on finances. By insuring investable assets, your clients can designate their use toward positive life events rather than having to use them up when a negative event occurs.
3) Paint the picture. “Is this a risk you’re willing to take when your family’s security is on the line?”
Tell a story illustrating the reality—that with no plan for disability, the odds aren’t in your client’s favor. Front and center, conversations need to include a discussion around how much risk to assume and whom to risk-share with. Not every client may need disability insurance coverage, but they do need to know what the strategy will be when certain life events happen. If insurance is an afterthought in a planning conversation or is only discussed when the client brings it up, it’s probably too late.
4) Be prepared for some pushback. “Do you think your reduced income will still be enough if your monthly expenses increase due to disability?”
A common response from clients is the dual-income rebuttal: If one spouse becomes disabled, the other can continue working and the couple will try to “get by” on one income. But an illness or injury tends to lead to an increase in daily expenses. And the spouse may step away from the career to take on the additional responsibilities involved in doing daily chores and trying to maintain the couple’s “normal” way of life.
5) Address other options. “Is the coverage from other programs enough to meet your needs—that is, if you qualify?”
You can be up front about other sources of disability insurance coverage, but social security, workers’ compensation, and some employer-sponsored plans can be difficult to qualify for or may come with a significant reduction in monthly income. Moreover, funds from these sources may be limited for your female clients in particular. Many women temporarily leave the workforce to raise their families at some point, which means they may have a smaller pool of social security funds to access. The most flexible and reliable source of coverage is an individual disability insurance policy.
Lead the Way
Every client is different. How you deal with your clients depends on whether they’re in a blue-collar or white-collar profession, a certain income bracket, and a particular family status, among other factors. Every stage of life will have different concerns and priorities—so tailor your questions accordingly.
Then listen. Hear them out on what’s happening in their life right now. Wait before reacting. Be authentic. Yes, this a challenging conversation, but it taps into the raw emotions of what your clients really value. For some, they may have other priorities, and it may not be the right time to continue the conversation. For others, they may want the protection now and need you to guide them through the process.
Don’t let your clients underestimate the importance of paycheck security. It’s the driving force behind every spreadsheet, every balance sheet, every basis point. Disability insurance keeps income moving forward.
