Critical illness insurance: Get in on the ground floor of this new opportunityArticle added by Wilma G Anderson on December 7, 2009
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Wilma G Anderson

Joined: August 21, 2010

It's time for a sales wake-up call as we head into 2010. Selling this little-known product can boost your income by $60,000 or $70,000 a year. It's an easy-to-sell policy that helps you both make new clients and serve your existing ones even better than your competition -- it's called critical illness insurance.

Relatively new in the U.S., this insurance product is common in Britain and other countries because it fills a critical insurance gap. Consider that most long term care and disability policies have been sold with a 60- or 90-day elimination period. Let's say your client, Dr. Jane Jones, has a heart attack and now can't work during her recovery period. Where does she get the money to tide her over for her living expenses or her business expenses until her disability policy starts paying benefits? Another client may face paying $30,000 in out-of-pocket costs until his long term care policy starts paying. Where will the money come from?

Enter critical illness insurance. Here's how it works: All critical illness policies are designed to pay the policyholder after the first diagnosis for the most common big illnesses: cancer, heart attack, stroke and/or Alzheimer's disease. There isn't any treatment plan or continued claim forms that you or your client's doctor have to submit. The policy is easy to use and will appeal to all of your clients and prospects who are more than 35-years-old, whether they're single or married, business owners, medical professionals, or just worried about what happens if they become too sick to work.

When a qualifying event is diagnosed, the insurance company pays the policyholder a lump sum. That first diagnosis by the client's doctor will trigger the payment to your client. Your clients never have to worry about an insurer determining that they aren't truly disabled or that they don't need long term care. The payment they receive from the insurance company can be used for anything they need as they're recovering.

To help your clients and prospects decide how much coverage they might need, ask them how much they would need for three months of living expenses (or operating expenses if your client is a business owner.) Most people will need somewhere between $25,000 and $150,000 to pay their bills for the first 90 days after they become ill. The minimum benefit for a critical illness policy is $10,000; the maximum coverage can be $500,000 (or occasionally $1 million).

Just five carriers dominate the U.S. market. While underwriting isn't as exhaustive as it is when applying for an LTCI or DI plan, critical illness policies are always underwritten. Underwriters ask applicants if they've had any immediate family members who've had a heart attack, stroke, cancer, etc. Most companies require applicants to be under the age of 64 when they apply. Some insurers will keep the policy in force for your client's lifetime, but their policy benefits may be cut in half after age 65 or 70, so be sure to check each company's policy; one insurance company maintains the full benefits in a policy until the policyholders' death.

Who buys it and why? Insurance professionals know the value of long term care and DI for their clients, but those products can be a tough sell. Selling an LTCI policy to people younger than their mid-60s is particularly challenging, and even selling it to older folks often takes real skill in order to overcome their denial. Most people think, "It won't happen to me." People don't like to think about going to a nursing home. It's an area fraught with emotion.

But many people who aren't ready for LTCI are open to considering critical illness insurance. Ask your clients if they know someone in their family who's had a heart attack, cancer, or a stroke. Then ask them if a check for $50,000 would have made a real difference in their peace of mind as they saw the effect of their illness on their family. That check from the insurance company could mean that they don't have to worry about how to pay their bills during their recovery period, and that's priceless.

There's also less sales resistance, because critical illness premiums might be lower than LTCI premiums.

It's hard to stand out from the crowd unless you have something different to offer. Critical illness insurance gives you a unique product that meets a real consumer need.

Remember when long term care was in its infancy in the 1980s? Agents who got in ahead of the mob profited mightily. There's a similar opportunity with critical illness insurance. Take advantage of this opportunity now, before everyone else gets on the bandwagon.

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