There are always plenty of variables when it comes to insurance, and disability policies are no exception. Ratings, in particular, can add complexity. Without experience, explaining the complicated nature of ratings to clients can be challenging for advisors.
Corry Collins, CLU, CH.F.C., a 20-year MDRT member from Halifax, Nova Scotia, Canada, has specialized in these products for close to 30 years and knows what to do when disability policies are issued with ratings (a higher-than-standard premium), exclusions (meaning some items are not covered) or limited-period riders (certain items are not covered for a defined amount of time). It starts with asking for detail when completing the application.
“Full disclosure gives the underwriter a chance to say yes, rather than no,” he said. “When a health issue arises, explain to the client that with a known illness, the underwriter may rate the premium.”
If that happens, Collins explains, one of three things eventually will happen:
- Your health improves, and you can reapply to have the rating removed.
- Your health issue continues, and the rating is justified.
- Your health gets worse, and you are happy you got the insurance, regardless of price.
If a client objects that this coverage is too expensive, help them understand the value by calculating how much they will earn throughout their career, and show that this is what the policy is protecting. “If the client understands this,” Collins said, “The premium becomes less significant.”