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A Sure-Fire Way to Lose A Paycheck Protection E&O Claim

Posted by Dan Steenerson on Tue, Nov 27, 2012 @ 11:11 AM

What’s the surest way to lose a paycheck protection E&O claim?

Lately, we’ve seen a few financial advisor E&O claims in the news. If you are ever slapped with an E&O lawsuit, one thing is a game changer. That one thing is documentation. Lack of documentation is a guaranteed losing proposition.

Therefore, when offering paycheck protection and presenting disability insurance quotes, it’s vital that you protect yourself by making sure all communication with your customers is clear and adequately documented. Typical scenarios involving lack of documentation include failure of an agent or CSR to…

  • Secure the signature of the insured/applicant on a new business application, renewal application, or policy change request (even requests to increase coverage).
  • Maintain copies of proposals and quotes that show additional coverages and higher limits were offered, with pricing.
  • Make and retain notes, including details of all telephone conversations and meetings with clients.
  • Have the client sign a DI Waiver of Liability stating that the client was informed of the need for disability insurance but chose to decline the coverage.

As an insurance advisor, DI just might be the most important coverage you can offer and the most important offer you can document. After all, if your customers aren’t protecting their paychecks, they may end up without a home, vehicle or anything else to insure. By giving your clients solid facts and statistics, you can show them that disability insurance is more important than life insurance for most workers.

When you communicate the options to your clients, thoroughly document everything, not only in your agency system but in writing. As an insurance advisor, it’s your obligation to inform your clients of available coverage and protect them with the best available options. Just make sure that while you’re protecting their paychecks, you’re also protecting your professional liability.

What your clients need to know

While it’s common for people to prepare for death by purchasing life insurance, many of those same people fail to prepare for life by protecting their paycheck with disability insurance. And yet statistics clearly show the chance of suffering a disability is much greater than the chance of dying, as much as 6.5 times greater according to the National Association of Insurance Commissioners. Statistics also clearly show that a disability can lead to financial ruin. It's the number one cause of personal bankruptcy and nearly half of all mortgage foreclosures.

Why some clients say “NO” to a disability insurance quote

Some cling to the notion that “it can’t happen to me.” For others, the premiums are just too high. Others assume they have adequate coverage through Social Security or their employer’s long-term disability (LTD) plan. But even with employer-provided long-term disability coverage, many disabled workers find themselves with income gaps as wide as 72 percent.

These sales barriers are not as formidable as they seem. The Disability Insurance Services sales team can help you create disability insurance quotes for every budget (remember that some coverage is better than none) and they can help you create an effective sales presentation to address common sales objections.

How to protect your professional liability

When a client suffers a disability and finds out he is not covered, he will be angry, scared, and looking for someone to blame. The financial advisor or insurance broker is the most obvious target. Be ready for this scenario by taking the following steps with every client. 

  1. Inform every personal and business client about the need for income protection. If you haven’t already done so, download the Wealth Preservation Plan sales script, so you know how to effectively present the coverage.
  2. If a client declines to receive a disability insurance quote, have him sign a Waiver of Liability (included in the Wealth Preservation Plan Sales Script).
  3. If a client agrees to receive a disability insurance quote, keep the quote and notes about your follow up actions on file.
  4. If a client ultimately chooses a smaller amount of coverage for budgetary reasons, maintain documentation on that as well. If you are signed up as a Disability Insurance Services broker, our innovative Agent Portal will maintain some of this documentation for you for easy reference.
  5. Even after a client declines paycheck protection, continue to remind him or her of the need several times a year – in your customer newsletter, quarterly account reviews and personal conversations.

By consistently offering paycheck protection, you can ensure your own professional liability protection … but only with the right documentation. If you haven’t heard, disability insurance claims are on the rise, older workers are the new norm and retirement income is scarce. It’s the perfect paycheck protection lawsuit storm, so prepare now … before it’s too late.

Need the DI Waiver of Liability Form? Download the Wealth Preservation Plan Sales Script today – the waiver is included for your convenience.  Need disability insurance quote? Our online quote engine is ready to help.


Topics: disability insurance, paycheck protection, disability insurance quote, income protection, disability insurance quotes, DI broker, insurance advisor