Offer more than the internet, and enhance your clients’ disability options
by Breanna Scott
Ms. Scott is product and service management director with the Standard Insurance Company. She guides the strategic development of its product portfolio, including market analysis and product positioning, and leads the group insurance product team responsible for creating and refining its employee benefits and voluntary product and service offerings. Visit www.standard.com.
Technology and social media have brought about big changes in the insurance industry. Even if your customers aren’t purchasing insurance online, they have instant access to information to research and plan their buying decisions via the internet.
Unfortunately, the information they find may be incomplete, inaccurate and likely not tailored to their company’s specific needs.
That’s where you come in – especially when it comes to selling disability insurance. As a broker, you are in the best position to provide detailed information and consultation to help employers tailor attractive benefits packages for their employees. Your consultative skills can help you forge stronger connections that lead to customer loyalty and repeat sales.
Why offer enhanced benefits?
Long term disability insurance is often considered a “base” benefit, meant to financially assist an employee who is unable to work due to an illness or injury. Your clients may not realize the advantages of going above and beyond this base coverage by selecting enhancements to protect employees facing serious medical conditions or disabilities.
By recommending provision enhancements, you can help your clients offer richer disability coverage that can help create a strong financial safety net, and help retain employees, as strong benefits packages make companies more attractive to potential job candidates.
To do that, some carriers offer two options — a provision that provides lifetime income and a provision that increases the benefit payout amount — which can be particularly attractive for companies considering enhanced coverages. Remember: such provision enhancements are likely not available for policies purchased on an exchange. This gives you an opportunity to position yourself as a trusted, knowledgeable resource and gain incremental business.
Lifetime income benefit
Most employees know that long term disability coverage is designed to protect them financially if they incur a serious injury or illness and are unable to work.
But very few people understand that long term disability benefits often end at normal Social Security retirement age, typically around age 65. That situation could bring about a financial crisis for a severely disabled individual and his or her family, especially if he or she depends on the disability payments to make ends meet. In many cases, a severe injury or illness may have prevented the individual from saving enough money to ensure financial security in retirement.
This is where a lifetime income provision can be of assistance. A lifetime income benefit supports a disabled employee by extending traditional long term disability payments beyond the regular maximum benefit period. By adding this provision to its group long term disability plan, a company can help protect an employee into his or her retirement years, if their disability makes them unable to perform duties associated with daily living, such as eating, bathing or dressing.
With a lifetime income benefit, a severely disabled individual would continue to receive monthly payments in the amount that is in force at the maximum benefit period, until he or she passes away or is no longer eligible.
Here’s an example of how a lifetime income benefit would help a severely disabled employee:
A 45-year-old employee is diagnosed with a disabling disease, such as Parkinson’s, which can affect muscular, cognitive and speech functions, among other symptoms. Typically, this employee would receive benefits within a traditional long term disability benefit plan until age 65, or normal Social Security retirement age.
Unfortunately, this employee lost 20 years of earning potential — years when a healthy person would have been able to save for retirement. Therefore, retirement savings may be inadequate for the care the employee needs. A lifetime income benefit would continue monthly payments to help sustain the disabled employee during his or her retirement years.
Additional income benefit
An additional income benefit is another way employers can provide more robust support to an employee who incurs a severe injury or illness. A severely disabled employee is one who incurs a severe injury or illness, one that makes the person unable to perform tasks of daily living like eating, bathing or dressing.
This enhanced benefit increases the amount of money that a disabled employee receives during the benefit period. Most long term disability policies pay an employee 60 percent of his or her income, before taxes. The additional income benefit provision can increase the percentage of income replacement, in most cases, to 80 percent of the insured’s pre-disability earnings. Plus, the payment is not affected by any additional deductible income, such as Social Security disability payments.
This example illustrates how a lifetime income benefit could support an employee who suffers a severe injury:
A 30-year-old worker is seriously injured, perhaps in a car accident, and cannot return to work. Most long term disability policies would pay the employee 60 percent of her pre-disability income, before taxes. Although these payments will help, the amount represents a significant income reduction compared with what she was making prior to the accident.
Considering utilities, mortgage, car payments and daily living expenses, this could put her family in a financial squeeze. With an additional income benefit provision, the payment may increase to 80 percent of pre-disability earnings, helping offset the loss of income and allowing her to better support her family.
Demonstrate your value
Today’s savvy customer doesn’t want a sales pitch. They want information to help them make a buying decision that is applicable to their business. While some clients may look to the internet to try and find information on strengthening or updating their benefits packages, take it upon yourself to listen to their needs and provide counsel to them during your client meetings.
You have a great opportunity to educate employers on the nuances of disability coverage and what a more robust offering could mean to their employees’ overall financial health. This is especially true as many cost calculators and other information that your clients could find when doing online research may not take into account the needs of their employee population. Presenting enhanced disability provision options, and helping clients understand what these would mean to their employees, are important ways you can demonstrate your ongoing value as a trusted resource.
When targeting companies for enhanced provisions, consider that add-on benefit provisions are popular among employers with a paternalistic culture and/or those in higher-paying professions, such as attorneys, dentists and physicians.
These optional provisions often can be sold together.
Adding a lifetime income benefit increases the duration of payments, while an additional income benefit increases the amount of payments. Together, these provisions make a group long term disability policy extremely differentiated and robust by taking coverage further than typical long term disability insurance policies.
Questions to ask employers
- To help position enhanced provisions, ask your clients these questions:
- What is your policy’s maximum benefit period?
- How would an employee on a long term disability claim make ends meet if his or her disability benefits end at retirement?
- Do you know that by adding benefits to your existing long term disability plan, you could help ensure a better quality of life for an employee dealing with a severe illness or injury?
- How would a disabled employee feel about you and your company if his or her disability payments end and they find themselves in financial distress?
Often, when employers think about the answers to these questions and receive a thorough explanation of the available options, they will come to the conclusion that providing an additional safety net for disabled employees is simply the right thing to do – for their companies as well as for their employees. That’s because a lot of the answers to these questions can’t be found on the internet. ◊
About The Standard
The Standard is a marketing name for StanCorp Financial Group, Inc. and subsidiaries. Insurance products are offered by Standard Insurance Company of 1100 SW Sixth Avenue, Portland, Oregon, in all states except New York, where insurance products are offered by The Standard Life Insurance Company of New York of 360 Hamilton Avenue, Suite 210, White Plains, New York. Product features and availability vary by state and company, and are solely the responsibility of each subsidiary. Each company is solely responsible for its own financial condition. Standard Insurance Company is licensed to solicit insurance business in all states except New York. The Standard Life Insurance Company of New York is licensed to solicit insurance business in only the state of New York.