Disability Income Insurance – Three Underwriting Secrets

After securing an appointment, you presented your case for disability income insurance and overcame price objections. Finally, you submitted the application. The only thing left is to wait for the commission. Hopefully. Many agents find that submitting an application is just the beginning of a series grueling underwriting steps. These end up with lengthy and confusing conversations with clients about premium hikes, class changes, and exclusions for disability income insurance. What does a hardworking agent do? Provide underwriters with what they need

What do disability underwriters really want?
It’s really easy. They need accurate information in three areas.
1. Current income
2. Classification of the occupation
3. Medical history

Secret #1 – Ask the right questions about income and then manage your disability income expectations.
For determining the amount of disability income benefits, a good rule of thumb is to use 60% of a client’s gross income. The gross income level might not be as high as it appears. Ask your client these questions and they will be more likely to show up to the appointment.

1. Are your self-employed, or do you work for another person?
2. If your job is for another person: What percent of your income comes from base pay? What percentage of your income comes from bonuses or commissions?
a. If you receive 100 percent of the base pay How much have your gross earnings been for the past six month? You can either get one pay stub showing six months of history, or multiple paychecks to document six months. You may also use the W-2s and 1040 forms from last year.
b. If you have a mix of commissions, base pay and bonuses, What did your 1040 tax return show about your last year’s earnings? This information is usually reported on page 1 as W-2 earnings.
3. If you are self-employed, what did your 1040 Tax Form show regarding your NET annual earnings, as reported on Schedules C and E plus W-2, if any? What about the previous year?

To estimate the amount of disability income benefits, use the W-2 last year as the gross salary. If the client makes $75,000 per annum, then the monthly gross income would be $6,250. The 60 percent range would be around $3,750. Explain that every carrier will apply maximum disability income benefits levels based on the client’s medical history and occupational class. This example shows that most disability income insurance companies would offer a maximum benefit amount amount of $2780 and a SSI Rider of $1,170, resulting in a total disability benefit amount amount of $3,000. That’s close to the 60% mark. This assumes that the client is a typical occupational class and has a good medical history. It’s best not to discuss your client’s actual earnings until you have received the information.

Secret #2 – Get a clear understanding about the client’s job duties.
Many disability producers simply write down the job title of the client without asking about the duties performed. The occupational class and premium are determined by the duties performed, not the job title. One agent applied for the position of Oil Company Owner. Initially, this would have suggested a 5A classification with the best rates. After learning about the job duties, however, the underwriters discovered that the applicant was actually an owner-operator of a gasoline station with an A classification. This occupational change has more than doubled insurance plans for disability income!

The lesson learned: Look at the tasks, not the title.

Secret #3 – Be thorough with your medical information.
Do not be timid. It is important that your client discloses all medical information. You can ask the client directly or use the telephone application option. The carrier will then be able to access the client’s medical information. It is best to be aware of any medical impairments so that we can search for carriers that will cover you.

Not Recommended:
* Copies of medical information from medical examinations that were performed in the past.
* Assume no changes in medical history without asking specific questions.
* Only the last name of doctors to whom you have consulted, without a phone number or address.
* Not providing any details about treatment dates, prescriptions or recovery/resolution.

Highly Recommended:
* Explain to your client that it will save you weeks of underwriting time if you take five minutes to record current medical information.
* All questions on the medical section of your application should be asked, even if you are being examined.
* We can cut down the time required to obtain an APS. All the information needed upfront, without waiting for the exam.
* If a question is answered “yes”, include the date treatment was given, the prescribed medicines and the resolution. Include the contact information and name of the practitioner you consulted.

Three Secrets to Disability Income Insurance Underwriting Success
There are no shortcuts when it comes to making friends in underwriting. All three secrets share one thing in common: Accurate and thorough information. Increased preparation results in higher disability income insurance approval rates. Ask your clients for all the documentation they need. It can be difficult. They provide much more information when they apply for a loan. It’s worth it considering the risks and potential benefits.