Why you can’t take clients’ word for what they already have

***This item comes from MDRT’s most-popular podcast of 2018: “A mistake I made in discussing income replacement coverage.” Listen to it here.

Sometimes you may ask a client about the income-replacement plans they have in place, and they will tell you about their existing coverage. You could leave it at that. But Dana Mitchell, CFP,  CLU, has learned that you shouldn’t.

“People often won’t know exactly what they have, especially if it’s offered by an employer,” said the four-year MDRT member from Toronto, Ontario, Canada, adding that the first time this was shown to her, the premium seemed way off from what coverage should cost.

In fact, when the plan was shared with her, it wasn’t even income protection; it was an accidental death and dismemberment program that Mitchell said would be very difficult to make a claim on. “When I explained that plan with them, it turned out they weren’t covered,” she said. “I think that happens more than we would like to imagine. When someone says they’re covered, take a look at it.

“If they’re covered, great. But more often than not, I think you’ll see a lower amount of coverage, a tighter definition or possibly a product they think is what you’re asking about but really is something else.”