Affordability is often cited as the biggest reason prospects postpone the disability insurance purchase.
In fact, according to the Council for Disability Awareness (CDA), 41 percent of workers would consider buying disability insurance if it were less expensive. Without another frame of reference, prospects expect monthly premiums to be between $50 and $60. In reality, the average premium for an individual disability insurance policy is between one and three percent of gross income, so someone earning $5,000 per month should expect to pay a monthly premium of $50 to $150.
Fortunately, those figures are not terribly far apart. You can easily overcome price objections by presenting the clients with options. Once you’ve established the need for paycheck protection, put the client in the decision-making driver seat to design a plan that provides financial security and fits into their budget.
1. Cost of disability insurance option 1: Extend the elimination period.
Many consumers understand that when they increase their auto insurance deductibles, their auto insurance premium is significantly less. Similarly, increasing the elimination period on a disability insurance policy will reduce the monthly premium. A longer elimination period of 180 days rather than the more common 90 days is an option to consider. This means that your prospect will need to rely on his or her emergency savings to replace lost wages for the first six months of a disability, and the paycheck protection benefit will kick in at the 180-day mark. This option appeals to clients who feel confident about covering short-term expenses with emergency savings.
2. Cost of disability insurance option 2: Reduce the benefit period.
The Cadillac of disability insurance plans is a benefit period that lasts through the insured’s working years. Here’s the reality: Not everyone can afford a Cadillac. Likewise, not everyone can afford disability insurance that covers a disability until age 65, 66, or 67. Choosing the most affordable benefit period can make the difference between affording disability insurance and going without. According to the Commissioners’ Disability Individual Table A, the average duration of a disability claim is less than five years. Your client may be more comfortable with disability coverage that provides a five-year benefit period than with no coverage at all. This option is an easy solution for anyone who objects to price.
3. Cost of disability insurance option 3: Adjust the benefit amount.
DIS Sales Strategy #3 deploys the “unit selling method” in which a unit is equal to $1,000 of coverage. In essence, you find out the price for a unit ($1,000) of coverage and then you offer the client the number of “units” that coincide with his or her target income protection level and budget. Those who use this technique recommend presenting the prospect with three options.
One last word of warning: A confused mind never buys!
Presenting the prospect with choices can be a double-edged sword. The last thing you want to do is to confuse or overwhelm the prospect with too many options. With this warning in mind, proceed slowly while carefully listening to your prospect’s feedback and body language.
Get a feel for where the client is leaning and then begin to introduce variables to reduce the cost of disability insurance. For example, if your client tells you he doesn’t maintain a six-month emergency fund; don’t even mention option #1 of extending the elimination period. Instead, start with option #2 and explore benefit period options to see if that helps close the sale.
For yet another premium positioning idea, download DIS Sales Strategy #1, the “High-Low Method.”