Risk Mitigation Strategies for Attorney Clients Income Protection & other Disability Insurance Contracts

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1 Risk Mitigation Strategies for Attorney Clients Income Protection & other Disability Insurance Contracts Attorneys provide a multitude of opportunities for Insurance because they know the importance of understanding the Contract. First and foremost Insurance is a Contract between an Insured (&/or Owner) and an Insurance Carrier. It is the language inside that dictates how a policy will pay (or will not). Also Attorney s are always interested in a Guaranteed Contract so the ability to offer a Non-Cancelable & Guaranteed Renewable insurance policy is generally well received. Attorneys are some of the most affluent and educated individuals in our society. They have dedicated their lives to a career assisting others and many of them are business owners as well. They assist others in negotiating contracts and navigating the legal system as a whole but many do not know how to protect their income or their businesses by using Insurance contracts. A requirement of an Attorney s career is constant education to legal advancements and this approach towards education is the way Attorneys connect with products and services they purchase for themselves. Attorneys do not want to be sold they want to be informed. According to US News & World Report the average income of an Attorney is just north of $130k per year. Assuming age 40, the aggregate income at the age of 65 assuming a modest 3% annual increase is $4,739,704. That is a pretty significant asset worth protecting and without it the overall financial plan has little chance to succeed. We do an excellent job educating Attorney Clients about investing their money to create wealth and future income at retirement. But are we doing enough to help them Mitigate their Risk? What happens to the Financial Plan you created for them if they no longer have Income to support it?

2 We often think that having Life Insurance is enough but Income is the essential component to any Financial Plan especially in the age we live in. How many clients do you have that would not be affected if they became Injured or Sick and could no longer work? Studies show that an individual is 3 and half times more likely to become disabled than to die and through medical advancements diseases that used to be a death sentence are no longer. As the following chart illustrates, deaths have decreased while disabilities are up dramatically. For example, the numbers of deaths due to hypertension have decreased by 73%, yet disabilities due to hypertension have increased 70%. Cause Death Disability Hypertension down 73% up 70% Heart Disease down 28% up 44% Cardiovascular down 48% up 36% Diabetes down 27% up 36% All Four down 32% up 55% No one wants to think about their risk of becoming disabled but very few would argue the need for Guaranteed Income if they were injured or sick and unable to work. The Contract Attorneys are interested in understanding the components that make up the best available contract and ultimately dictate how and when the policy will pay. Understanding the term of insurance and renewability provisions are the first step in differentiating an Individual Disability contract from any other. Currently the best available contract terms are Non-Cancelable & Guaranteed Renewable to Age 67. This level of guaranteed contract ensures that the policy can never be modified, canceled, or become more expensive over the course of time. The ONLY way this type of contract can be canceled is failure to pay the premium. Non-Cancelable & Guaranteed Renewable contracts provide piece of mind that the policy will be there if they ever need it.

3 How NonCan/GR Income Protection Contracts work Simply put! An Individual Disability Contract is designed pay 3 ways. 1) Total Disability unable to perform the material and substantial duties of Regular Occupation (including Occupational Specialties ie. Litigation) 2) Residual or Partial Disability unable to perform some but not all of the material and substantial duties of occupation and suffering a loss of 15% or more prior income 3) Catastrophic Disability unable to perform the material and substantial duties of Regular Occupation (including Occupational Specialties) and be unable to perform 2 of 6 Activities of Daily living, or be Presumptively or Cognitively disabled The Definition of Choice Because Attorneys are highly educated and motivated the Definition of Disability is another essential contractual component. What we often refer to as True Own Occ or Own Occ Specialty is the best available definition for Total Disability. Due to injury or sickness, unable to perform the material and substantial duties of Your Occupation. period! There are no offsets for income derived from another occupation, investments, real-estate, social security or alternate source/program. Consider this example a successful Trial Attorney making $250k per year who owns a $10k per month IDI contract (with 90 day elimination period and max benefit period to age 70 ) suffers a significant back injury and is no longer able to perform his occupational duties associated with Litigating in Court. After being totally disabled for the 90-day elimination period he begins to receive $10k per month on a tax-free basis. And for the next 3 years the client receives $10k per month tax-free benefit as his back injury continues to prevent him from going back to work as a Trial Attorney. He then receives an offer to join a Technology company as an Executive Officer making $500k per year. Because his Individual Disability Insurance contract includes a True Own Occ definition of disability this client will continue to receive 100% of the monthly benefit ($10k per month) regardless of his new income as long as he continues to be unable to perform the material and substantial duties of his occupation at time of claim Trial Attorney. This is just one example of how Non-Cancelable / Guaranteed Renewable contracts with True Own Occ definition of disability provide the highest Guarantees available. There many other real life examples available that illustrates the importance of these 2 contract provisions, which are exclusively available on Individual Disability Insurance contracts.

4 Other Disability Risk Mitigation Contracts Attorneys also offer the unique opportunity to discuss Risk Mitigation strategies for their business-owner clients such as Buy-Sell Agreements, Keyperson Needs, Business Expense Overhead, Loan Indemnification and more! What is in it for you? As a successful Wealth Manager or Financial Planner providing valuable coverage to your most important clients helps solidify your relationship as a trusted advisor. In addition to differentiating your practice from other Advisors these contracts also include generous first year commissions starting at 50-60% first year and 10 or more years of renewals ranging from 5-15% or more. And many carriers also offer bonus comp based on both new business and retention. One of our favorite parts of being specialists in Disability Insurance is the opportunity to work with young professionals that will have increases in income over their career and will need to have their plans reviewed on a regular basis to ensure coverage amounts meet their specific needs. Current products have available riders that allow a client to increase their benefit based only on increases in income without the need for medical underwriting (also providing first year commission + renewals each time coverage is increased). This Future Insurability contract feature is the perfect forum for not only following up with a client to discuss increases in Income but also creating a reason to connect so you can be there to provide other financial or insurance support. Nothing like being at the right place at the right time! Common Objections 1) Too Expensive a very common objection for any product that provides benefits for an outcome that no one wants to experience. For that reason we implement a strategy for creating the best available contract for the least possible premium. Sales tip An investment of 2-6% of income allows you to provide protection up to 65% of income on a non-taxable basis (and up to 100% for Catastrophic Disabilities). Since premiums are age banded the younger a client decides to protect their biggest asset the smaller the premium commitment.

5 2) Other coverage Benefit amount limits have continued to increase over the last 10 years so even clients that have older insurance contracts are likely eligible for additional benefits based on current Issue and Participation Limits. In the current market clients should be educated to the fact that they can protect up to 65% of their income on a non-taxable basis regardless of how high it may be. 3) It Won t Happen To Me This is one of the most common & naïve objections but those in Medical Professions see on a daily basis how small, seemingly benign medical conditions can interfere with the ability perform occupational duties. Or how major injuries of sicknesses can devastate a family s financial security. As mentioned previously the statistics are clear. Just over 1 in 4 of today s 20 year olds will suffer a disability over the course of their career and currently there are over 50 million people in the US classified as disabled, and the numbers are rising. The Fortify Insurance Group Solution Fortify Insurance Group has established a process for supporting efficient education, underwriting, implementation and policy support for Income Protection policies. As dedicated Consultants supporting all available Disability Insurance contracts our goal is to provide services that are an extension of your practice allowing you to focus on your core business while protecting your most valuable clients by implementing an Income Protection Plan. FIG has access and experience to solutions that can be secured without any medical underwriting (Guaranteed Issue), minimal underwriting with no examination or APSs (Simplified Issue) as well as fully underwritten solutions to help maximize a client s Income During a Disability. Talk to a Fortify Insurance Consultant today to see how easy it is to add Disability Insurance Risk Mitigation planning to your practice! How to get in touch with a Fortify Consultant? info@fortifyinsurance.com