If you’re searching for lucrative insurance sales opportunities, you might have considered disability insurance. You might have also ruled it out because disability insurance has a reputation for being confusing. If that’s the case, here are some important considerations.
It’s true that income protection coverage CAN be confusing, especially when compared to products like life insurance. However, once you understand the nuances, sales come easily. After all, you’re selling a product that almost all working people need, and that very few agents offer. Below you’ll find information to help you cut through the confusion, and get started in the lucrative career of income protection sales.
Confusion #1: Disability Is Tricky to Define
Life insurance provides financial protection against an unexpected death, whereas disability insurance provides financial protection against a disability. The two products involve similar concepts, but there are key differences. One issue is that death is straightforward to define. There may be some debates involving brain death and vegetative states, but, for the most part, we can all agree on what it means for a person to die.
The definition of disability, on the other hand, is not so simple. People can probably agree that someone who is blind or who needs to use a wheelchair qualifies as disabled, but what about someone who has a bad back or severe anxiety?
Whether someone is considered disabled comes down to the definition and criteria used. This can be a high-stakes matter, as illustrated by the high rate of Social Security Disability Insurance (SSDI) claim denials. The Social Security Administration (SSA) denies the majority of SSDI applications, often for medical reasons – people don’t meet the SSA’s strict definition of disability or don’t provide enough evidence to prove that they do.
What does this mean for disability insurance? Disability insurance policies include a definition of disability, with some definitions stricter than others. Under an own-occupation definition, a person is considered disabled if a disability prevents him or her from carrying out the duties of his or her normal job. Under an any-occupation definition, a person is considered disabled if a disability prevents him or her from working in any suitable job. This difference may not matter for some workers, but it can be critical for highly-specialized workers like doctors. Plus, pilots may benefit from coverage with loss of license benefits because even relatively minor health issues can prevent them from working.
Confusion #2: Recovering from Disability Can Be Complicated
Death is permanent. Disability, however, is often temporary – many people recover. Nonetheless, recovery may not be complete. For instance, there may be an extended period of time when a person can and wants to work but is unable to do so on a full-time basis.
What does this mean for disability insurance? When comparing policies, the length of the benefit period is key. With some disabilities, a quick recovery may be possible, meaning a short benefit period is unproblematic. However, other disabilities may last for much longer or recovery may never be possible, meaning a long benefit period will be a lifesaver.
In addition, some disability insurance policies only offer benefits in the case of total disability, whereas others also have benefits for partial or residual disability. The way these terms work may vary. For example, a policyholder may need to qualify for total disability before he or she will qualify for residual benefits. Plus, the amount of the benefits may be based on how much the policyholder can earn or, in the case of partial disability, be a percentage of the full benefits.
Another issue pertains to own-occupation disability insurance. Imagine what would happen if a surgeon was to recover from a disability enough to work as a teacher but not enough to practice surgery again. The surgeon may want to work, but this will involve a pay cut. A modified own-occupation policy would stop paying benefits, but a true own-occupation policy would continue to pay.
Confusion #3: Some People Don’t Believe They’re at Risk
Death is inevitable, but not everyone becomes disabled. Given this, you might think that life insurance is critical but disability insurance is something extra. However, for working-aged individuals, disability is more likely than death.
According to the Social Security Administration, a person who was 20 in 2023 has a one-in-eight chance of dying before reaching normal retirement age but a one-in-four chance of becoming disabled.
In other words, disability is a much bigger risk than death for working adults. If you’re selling life insurance but not disability insurance, you’re leaving your clients exposed to an even bigger threat to their family’s financial stability.
Have you ever heard that income protection is the icing on the cake? This implies that disability insurance is a product to be enjoyed once other basic financial steps have been taken. However, this thinking is flawed. In reality, income protection is NOT the icing on the cake. Rather, it is the cake plate. It is the foundation that makes all other financial progress possible, and “the cake” quickly crumbles without income.
The average person depends on their paycheck. Without it, the entire financial situation begins to crumble. Don’t let this happen to your clients. Share our “Cake” handout.
Can You Succeed in this Underserved Market, Ripe with Insurance Sales Opportunity?
Disability insurance may seem complicated, but that’s because disability is complicated. All those nuances exist to help people secure coverage customized to their needs. Once you learn the basics, you’ll find it’s not that hard to offer clients the financial protection they need – and you can earn lucrative commissions in the process.
Income protection is a coverage that most working people need, and that very few agents sell, so for advisors who are willing to learn the ropes, the sky is the limit.
Are you ready to tackle disability insurance? Here are some resources to help you get started:
- Why Sell DI?
- How to Get Started – Broker Kit and Co-selling Guide
- Disability Insurance Crash Course
- Why Work with a Wholesaler?
- Should Agents Cross-Sell? What Clients Prefer
