CI critical part of financial plan

While some clients already have critical illness insurance as part of their financial plans, many more don’t. The reasons abound. They don’t need it because they are already wealthy. They don’t believe they’ll qualify. Like some advisors, they wonder why there are no standardized medical definitions. Or, they simply can’t afford the monthly premiums.

The last point is also of concern to Dr. Marius Bernard, who developed the first CI product in South Africa in 1983. “We must develop a product that is affordable for everybody,” he told attendees at the 4th Annual World Critical Illness Conference in Victoria last week. “Going forward, we have to look at adding more benefits, reducing claims and reducing the premiums.”

CI pays out a lump sum to the insured in the event of a serious illness, namely a heart attack, stroke or cancer. But some clients also have difficulty understanding the importance of the product. For this, Keith Leech blames the manufacturers, distributors and marketers and he should know — he used to be one of them.

“We have let you down about how this product fits into a client’s portfolio,” says Leech, now a living benefits advisor at Context Planning Ltd. in Vancouver.

The biggest marketing error? Scaring clients into buying CI by offering the usual statistics such as one in three people will contract cancer in their lifetimes, and one in four is likely to have a heart condition. The strategy backfired for two reasons: clients don’t want to consider depressing information and more important, they’ve heard the stats many times before — and not from their advisors. What needs to be emphasized is the fact that more people survive these diseases nowadays.

“CI is not a bad news story. If you have a choice between dying and living, people will choose surviving,” Leech says. So, here’s one positive stat: 80% of heart attack victims survive, according to the Heart & Stroke Foundation.

Another no-no is not offering the product to all clients. Leech notes TD Bank is the leading seller of CI insurance, with 3,000 policies sold weekly. He attributes this to the fact they consistently ask their customers for the business. “The likelihood is some will buy if they are shown the product.”

There could also be liability issues to the advisor, if the client ends up with a critical illness but was never offered any CI insurance. To cover your bases, Marc Halpern, a CFP and founder of illnessprotection.com Inc., suggests having clients sign a waiver that says you told them about the product.

Halpern’s radio advertisements in Toronto emphasize CI insurance, yet the product only makes up one-quarter of his practice. When prospects hear his ad, phone and ultimately come in for a meeting to discuss that product, CI isn’t mentioned until much later in the process. That’s because Halpern emphasizes comprehensive estate planning and will deal at length with other issues first such as wills, powers of attorney, probate taxes, cash management and debts and liabilities.

Only then will he asks the question, “What would your spouse need to get by if something happened to you?” which leads to a discussion turn to income replacement vehicles. “There was no selling, there was wisdom, sharing of knowledge and a sense that he cares for me,” he explains. “What comes out is a tremendous peace of mind.”

Another strategy to explore is to tie CI into mortgage advice, Leech suggests. If your clients are negotiating a mortgage, point out that while mortgage insurance takes care of your mortgage if you die, CI can pay your mortgage if you get diagnosed with cancer, heart attack or stroke.

Leech recommends asking more questions that get clients thinking. “Do you know someone who had a critical illness?” “Was there unplanned emotional or financial strain on their household or business?”

Or ask pointed questions to a client’s situation, such as: “Would you like a policy that provides a year’s after-tax income for a spouse?” “Would a policy that paid a year’s mortgage payments help you recover faster?” The answers can help determine the right amount of coverage for clients.

As for those clients who feel they don’t need the money, Leech points out that people who receive money from an insurance company will spend it differently than their own money. Leech’s own father had cancer, no CI policy and is well off. Yet he refused to spend more money than he absolutely had to — just out of principle. Had he received a lump sum, Leech believes things may have been different — he may have loosened the purse strings a bit more. “There is no amount of money that makes getting a critical illness a good thing but cash may have helped lessen the burden.”

Filed by Deanne Gage, Advisor.ca, deanne.gage@advisor.rogers.com