Tips on how to sell income protection

A blog aimed at financial planners

For intermediaries hungry for a new revenue stream, there is a major opportunity to target self-employed individuals such as professionals, contract workers, business owners and farmers, as well as top-up cover for salaried employees.

Income protection is a “high-advice” area and the role of the knowledgeable intermediary is crucial. Through careful planning, it is possible to achieve significant savings for the client, while still meeting his needs in full, for instance by considering the various waiting periods and funding plans on offer, as well as to effectively combine his income protection with his lump sum disability benefits.

Key considerations:

  • Does the client prefer a sickness benefit approach, an indemnity benefit approach, or a benefit that offers the best of both?
  • Does the benefit cover the client’s own occupation throughout the term? Some benefits assess a claim based on the client’s ability to use his qualifications in a similar profession after two years.
  • Does the benefit cover other claim events apart from occupational disability, such as impairment and illness?
  • How robust is the calculation of partial claims? Does the client have certainty that the payout will match his actual loss of income?
  • Does the policy wording provide the life company with wide-ranging discretionary powers or are the benefits and premiums contractually guaranteed?
  • Does the policy offer any premium guarantee?
  • Are there any exclusions on the policy? Some companies exclude back and mental disorders on certain benefits.
  • Are payments made retrospectively from day one? Some companies pay retrospectively for all conditions, while others pay from day eight for certain conditions and from day one for others, and yet, others only pay after one month for certain conditions.
  • Does your client want to share in the investment returns and profits of the life company, or rather pay a lower premium?
  • Are the premiums fully tax-deductible?
  • Which waiting period would provide an optimal solution? Does your client really need a seven-day waiting period, or would, for example, a one-month waiting period, which is on average 30% cheaper, also address his needs?
  • Does the client have the flexibility to select an appropriate level of cover on permanent disability (for instance by taking into account his lump sum disability proceeds), or is the level of cover determined by the amount of cover on temporary disability?
  • What funding plans are there to choose from? Some clients may prefer to maximise initial affordability by choosing a compulsory increasing premium pattern instead of a level premium pattern.
  • What is the rate of increases while the policy is in claim? Some benefits offer above-inflation increases to match salary increases.
  • Does the benefit offer a guaranteed insurability feature?

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