Avoiding Missteps In Advising Clients On DI Coverage & Claims

Keeping clients fully informed will help agents avoid mistakes when selling and assisting in filing claims and ensure the client has security and peace of mind.

By Frank Darras

Clients trust their agents with their long-term health in finding the right insurance products. Consider how special the agent-client relationship is, particularly when it comes to individually purchased disability insurance. People can go anywhere and choose any agent — but once they select you, their life and their family’s financial stability are in many ways in your hands.

I have seen some agents make missteps along the way when advising consumers on the right coverage to buy as well as when the client is making an insurance claim. By the time these clients reach me to help resolve their questions and concerns, they are entirely turned off by the claims process and unhappy with their agents and may already have made fatal claim errors.

Consumers must understand what they are buying and how their policy features will allow prompt payment of their monthly disability benefits. Keeping clients fully informed will help agents avoid mistakes when selling and assisting in filing claims and ensure the client has security and peace of mind.

Individual Disability Policy Highlights

Let’s review some of the best features of individual disability policies. » Individual disability coverage can provide monthly tax-free disability benefits so long as the insured pays the premiums. » Coverage is portable and not dependent on your employer. Private disability coverage travels with you when you change jobs or companies. » Individual disability insurance can also offer occupation-specific coverage if you are unable to perform the important duties of your occupation, even if you can do some other occupation for which you are trained, educated or suited. » Today, most individual policies offer benefits to normal retirement age, and some can last for a policyholder’s entire life. » All companies offer cost-of-living adjustments to keep pace with rising inflation, which is a huge concern today. ey also offer future increase options, so more monthly disability benefits can be added if you earn more money after the policy is issued, even with declining health. » Individual disability policies can also provide residual disability benefits if the insured can perform some occupational duties but suffers a 20% loss of earnings or more.

Di erences From Group EmployerSponsored Disability

Employer-sponsored group plans are in stark contrast with some of the features above. Below are some key ways in which they differ. » Taxability of the benefits is based on who pays the premiums. If the employee pays the premiums using after-tax income, the benefits should flow tax-free. However, if the employer pays the premiums, benefits are taxable. If the premium costs are split, so is the tax liability. » Coverage ends when a client changes employers, or when the employer no longer offers the coverage as a group benefit or on a voluntary basis. » If the employee is unable to perform the important duties of your occupation, benefit payments may not begin if they are deemed able to perform any occupation they are adequately trained, educated or suited to do. » Most group policies contain self-report, musculoskeletal and mental/nervous caps on monthly benefits as short as 12 months.

Further, where most group plans require a 180-day period before benefit payments begin, individual policies can be as short as 30, 60 or 90 days before benefits begin accruing.

Considering Mental Wellness

Mental health and wellness have become more prominent issues in recent years. e National Alliance on Mental Illness reported that one in five U.S. adults — 51.5 million people — experience mental illness each year. e numbers are expected to rise, and there are several factors you need to be aware of when advising potential clients.

Some individual and group disability plans offer mental health benefits to age 67 and others for as short as 12 months, so be careful what you are selling. Also, some group policies say that if your mental condition contributes to your disability, benefits may stop at 12, 18 or 24 months.

So if your client has back surgery and they are depressed because they still have a limited range of motion, the claim would be capped at 12, 18 or 24 months. Depression in itself is a recognized mental disability and, in this case, it is occurring after the fact and may impair the claimant’s ability to work.

Be sure to explain how your plan acknowledges and covers mental disabilities that are “caused by” or “due to” or a policy that has “contributed to” language.

Furthermore, some experts believe the mental health impact of the COVID-19 outbreak will have a ripple effect throughout society for several years to come. Mental health issues are complex, and insurance companies often make the insured jump through various hoops with frequent delays and multiple denials, hoping your client will just give up. Despite the efficacy of the vaccine rollout, COVID-19 still impacts

The Impact Of COVID-19 On DI Claims

Milliman conducted a survey of 13 disability insurance carriers to determine the impact of COVID-19 on DI claims. Some highlights of the survey include: • Six companies agreed that new claims from COVID-19 will increase significantly, three companies disagreed and four were unsure. • All 13 companies agreed that high unemployment and other economic issues due to COVID-19 will reduce recovery rates among open DI claims. • Eight companies agreed that recovery rates on open individual disability insurance claims will decrease as a result of COVID-19. Several companies attributed lower recovery rates to claimants’ inability to schedule the medical procedures they need or from fear of returning to work during the pandemic.

The volume of new DI claims will increase significantly over the next 12 months 5

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professionals and individuals every day — physically and mentally. Explain how your plan specifically addresses COVID19-related mental health claims to limit surprises from the outset.

A Day In Court

Perhaps the biggest advantage to individual insurance policies is that the coverage provides terrific consumer rights and remedies. ese include your client’s right under the Seventh Amendment — the right of trial by jury — and other consumer remedies if the carrier wrongfully denies or unreasonably delays paying. Remind clients of these safeguards and protections offered by individual policies over employer-sponsored ones.

Employer-sponsored group policies are governed by the Employee Retirement Income Security Act (ERISA). If someone has insurance through their employer, then ERISA will generally prevent their right to a jury trial should a claim be denied.

Individual policies afford the client their rights under the Seventh Amendment of the U.S. Constitution. A claimant may file a lawsuit and present evidence in front of a jury of their peers. Witnesses — medical, occupational, vocational or financial — may come to court to testify about your client’s work ethic, medical condition and how hard they tried to recover. e state of our world and public safety since 2020 has firmly positioned health care on center stage. With so many risk factors at play, there has been a renewed focus on insurance and the relationship between an agent and their clients. e trust and confidence, along with any piece of mind, any client has in an insurance agent is sacred, and we must help them by keeping them informed about the true benefits of their disability plans from the outset. If you can demonstrate where and how your guidance helped them avoid mistakes on their insurance claims, let them know. ey will appreciate a humblebrag that ends with: “… and your payment is on the way.”

Frank Darras is founder of DarrasLaw in Ontario, Calif. He may be contacted at frank.darras@ innfeedback.com.

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42% Cried Over Money During The Pandemic

Money woes stemming from the COVID-19 pandemic drove many Americans to tears. Stress over finances made 42% of Americans cry during the past year and a half, according to a LendingTree survey.

What made people weep? Job loss or financial loss was the top reason, cited by 42%. Not being able to afford family wants or needs was the second most cited reason at 33%, while debt was a close third at 31%.

Not all the crying came from sadness, however. More than one-quarter (26%) said they cried happy tears when receiving stimulus money.

In addition, the survey found that nearly one in 10 Americans cried tears of joy over being able to pause a student loan payment (9%) and find a new job (8%).

Workers Worry Over Their Retirement Money The retirement years are often called the golden years, but many workers fear they won’t have enough gold to sustain them

Those with through that period. Three-quarters (76%) of >$100K have more American workers have financial concerns over savings regret. retirement. The workers’ concerns are: running out of

Those with money (40%), loss of income (18%) and being incomes >$100K unable to afford medical expenses (18%), regret not enjoy- totaling 76%, according to the ninth annual ing life enough. American Century survey of retirement plan

SOURCE: participants, compiled by Mathew Greenwald

American Century and Associates. They admitted not saving more money earlier in their career, with 60% saying they saved less than they should have in the first five years they worked. And although only about a third expressed regret about not saving more for retirement, it was still by far the top regret, said American Century senior retirement strategist Glenn Dial.

Financial facts and fgures powered by AdvisorNews.com

Americans Shifting To Financial Recovery Mode Americans love a good comeback story, and it appears they are looking forward to bouncing back from the pandemic’s economic effects. More than half (58%) of U.S. adults said they are in financial recovery mode, and among them almost nine

out of 10 (89%) express confidence that they will ultimately achieve a full

financial comeback.

According to the Northwestern Mutual 2021 Planning and Progress Study, which showed optimism for a financial recovery after an uncertain year:

F 34% say they’re in “late-stage recovery,” meaning while losses were suffered, these individuals have mostly or fully recovered to pre-pandemic levels and have confidence they’ll be able to achieve longterm financial security.

F 47% say they’re in “mid-stage recovery.” They suffered losses and have begun to make up ground but have not yet reached pre-pandemic levels, yet they remain optimistic about achieving longterm financial security.

F18% say they’re in “early-stage recovery.” They suffered losses, are still in decline, and are unclear how they’ll achieve long-term financial security.

How Spenders Turned Into Savers

Although Americans may be known globally as ravenous consumers, they are more likely to call themselves savers, a title they earned over the pandemic, according to some reports.

The Federal Reserve confirmed in its latest report that Americans have been saving buckets of cash since the start of the pandemic, often related to federal stimulus infusions. From the end of the Great Recession to February 2020, the personal saving rate averaged 7.25% until the beginning of the pandemic. The

rate has shot up to 17.9% since then.

The Fed noted that families might be saving as a precaution in uncertain times, but much of the saving has to do with the inability to spend during the lockdowns. In fact, the rate has been dropping since

March, when the savings rate spiked to 26.9% and has since dropped to 9.4%, which still exceeds the pre-pandemic average.

Not Your Everyday Insurance Credit Line

For clients looking for extra money to meet their needs, their whole life insurance policy may be the answer. With an Investors Insurance Credit Line, it’s easy to borrow against the equity in their policy. Unlike similar products that can call for repayment or a change in terms at any time, ours is locked in for a 7-year term. It’s one more o ering that can help build stronger relationships with your clients.

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* Policy must be in effect for at least 12 months at the time of credit application. Insurance policy must be issued by one of the following approved insurance providers to be eligible for IBLOC collateral: Guardian, MassMutual, Northwestern Mutual, NY Life, MetLife, John Hancock, Penn Mutual, Ohio National, Brighthouse Financial, Lafayette and Ameritas. Other restrictions may apply.