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Don’t Waiver. Earn More.

Steve Schreiber
Assistant Vice President 
of Advanced Design

What is your greatest opportunity over the next year? What is the biggest threat to your business over the next year? How can FHC add value and better partner with you going forward? These are 3 extremely critical questions to ask yourself as you continue to grow your business over the next year. These questions are what lead to us coming up with a sales idea that has led to an incredible amount of success. In fact, First Heartland was even invited to an industry event this year where ideas are shared and with this idea came in first place. Here is a review of this sales strategy and how it can potentially help you grow your business.

What is your greatest opportunity over the next year? Our advisor answered life insurance for a variety of reasons. For the purposes of keeping this as concise as possible we will not get into those complex reasons. If you see life insurance sales as something that can benefit you in the next year, pay attention!

What is the biggest threat to your business over the next year? With good reason, the answer to this question is something every advisor should at least have some kind of concern about. The chronic and / or critical care needs of either the advisor or his clients is what he sees as the biggest threat. At any time his top 1 or 2 (or even more) clients could have an event that causes a disability or a long term care situation which would cut into their assets and cripple the advisor’s business. He would love to protect those top clients in some way but doesn’t want to have the clients tune him out by talking about disability or LTC coverage.

How can FHC add value and better partner with you going forward? This is where the idea comes into play. The advisor gave us one of his clients and told us what he was about to present to the client. It happened to be life insurance and wanted to see how we might be able to bring disability into the picture without adding too much premium to the sale.

The case study we will work on is for a 45 year old male. This client is a preferred risk and has 2,000 per month in premiums he would like to set aside to build a tax free bucket for income in 20 years. The advisor was preparing to present an indexed UL that ultimately will provide 74,324 in projected income. In addition, to protect against some type of disability event, this advisor added a waiver rider on this policy to make sure he covered his client in case something happens to cause a disability. We ended up showing the advisor a new quote putting 1,930.54 into the same life policy with the same death benefit and 69.46 into a true disability policy for a benefit of 2,000 per month. This generated a lower income amount of 72,457 which is 2.51% less than the initial projection. Is the benefit and value of the new IUL with a disability policy worth 2.51%? We would like to think so but let’s dive into the added benefits of that policy to show you why we think that.

The IUL policy has a waiver of monthly charges rider which is not nearly the same as a disability policy. With the waiver on the IUL the client must qualify under the definition of total disability which is extremely strict. If you are not familiar with the definition of total disability, you can do a quick internet search on the Social Security definition of disability and you will find extremely similar wording between that and a waiver of charges rider on a life policy. In short, it is pretty tough to qualify. Most clients will not have a disability event to cause total disability. In addition, there is a 6 month waiting period on the IUL we were reviewing. That can be extremely detrimental to a cash value life policy that is driven from premiums being paid to complete the plan. If there is a policy anniversary within that 6 month period the premiums will not be considered to be paid on time and the charges could affect a guarantee that is built in. In addition to all of this, when the waiver is utilized the policy doesn’t actually continue to be funded. No premiums are completing this plan. What totally disabled client is going to continue to fund their IUL in order to maintain projected values? I would take a wild guess and say none.

With a true disability policy, the client has many ways to qualify for a benefit. There is only a 90 day waiting provision but you could match it up to be 6 months if you want more of an apples to apples comparison. For this projection, we preferred to use a 90 day wait and provide a better benefit. There are also some added benefits such as presumptive disability and future benefit increase options that are built in. Additionally, with the true disability policy a client’s life insurance can continue to be funded as projected. This is extremely crucial because with a waiver rider on the IUL if this client were to become totally disabled and not pay premiums into the contract the income drops 37.45% using the same projections. Funding the policy is very important in maintaining the plan for income.

One more big reason why to sell the IUL with a separate disability policy is to be paid more. The client benefits from having a better contract provision but it also pays to sell both. With the disability policy being sold in addition to the IUL the first year compensation went up 5.8% and the renewal compensation went up 12.2%! Disability policies pay advisors extremely well when they are renewed. If the client has a disabling event, the IUL with a disability policy will continue to pay renewals on the IUL because that policy is continuing to be funded. If someone with a waiver elects the waiver due to total disability there is a high likelihood that premiums will cease and thus renewals will cease.

Ultimately, the advisor ended up starting the conversation about disability by introducing a waiver rider on an indexed UL contract. This made the conversation much easier to get into which then allowed for an upsell to purchase even more disability coverage. The advisor started the conversation by letting the client know that the IUL with a disability policy does not cost any more in premium and that helped to sell the concept. His clients end up buying more disability when they go through this exercise because they understand the benefit and see how inexpensive it can be. This increased compensation even more for the advisor and he is having his best year yet. Give us a call to get a quote today and we can walk you through how this idea works and why we think you should never waiver!

Steve Schreiber | Assistant VP of Advanced Design   636.695.2824   sschreiber@FIRSTHEARTLAND.COM

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