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. They 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.
Differences From Group Employer-Sponsored 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. The National Alliance on Mental Illness reported that one in five U.S. adults — 51.5 million people — experience mental illness each year. The 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 professionals and individuals every day — physically and mentally. Explain how your plan specifically addresses COVID-19-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. These 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.
The 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.
The 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. They will appreciate a humblebrag that ends with: “… and your payment is on the way.”