Many small-business owners today are inundated with cold calls from insurance agents ready to sell them the hottest insurance product. The property and casualty insurance industry is in the middle of a soft market, meaning premiums are low and competition is hot. Unfortunately for the business owner, some vital areas of concern are being overlooked -- namely, the need for business life and disability insurance.
Business owners don't fully understand the exposures they face in life, disability, and long term care needs. They are overly focused on their business' property, liability, auto, and workers' compensation exposures. These tend to carry the largest premiums and often are government mandated.
Property and casualty agents are generally specialists who don't understand business owners' needs in other areas of financial exposure. If they do recognize the need or are asked about other coverage by the owner, these agents will often turn the life and health leads over to another agent in their office. Many times, these leads fall away without follow-up. Aggressive marketers in the life and health field, however, can make big inroads in the small-business market.
Talk about buy-sell agreements
The next time you're in front of a business owner, ask them, "How is your buy-sell agreement funded?" Business life and disability insurance fund buy-sell agreements, which are required to be covered by insurance.
The partners put a lot of time, money, and effort into determining the value of their business. The next step is to use their crystal ball to guess the future value and buy life insurance. When you ask them how their buy-sell agreement is funded, expect a curious look. Then, they'll either say, "I don't know what that means" or, "It's on my 'to-do' list."
Offer to give them a complimentary quote. Make sure you run at least one permanent life insurance option. Don't take too much time in the process because they will get overwhelmed and frustrated. Keep it simple. And don't forget to show them at least one disability quote. Explain that they are more likely to be disabled before age 65 than die.
You can also show them on their own agreement where they are supposed to insure for death. Most agreements require that, since they were written by attorneys and ignored by business owners.
Educate them on long term care
If your business owner clients and prospects are in their 50s, they are prime candidates for a discussion on long term care. Why? Because the cost of nursing homes and advanced care isn't going down. They may be taking care of their own parents and know all too fully the financial burden this can create. Ask them if they want their children to face an even bigger problem. The younger they buy, the less expensive it is.
Perhaps more importantly, if they wait too long and develop a health issue, they could become permanently uninsurable. I recently had a client tell me, "Dan, my mother is 62 and in great health. I'm trying to talk her into long term care because I've seen the results of not having money to cover nursing home costs. I want her to buy it now before she becomes uninsurable." This is your opportunity to show them how their business pays for long term care insurance just like it does life and health.
Develop strategic partnerships with CPAs
Some of my best referral sources are accountants. Accountants deal with estate planning with their business clients and generally bring up these concerns. They understand the exposure and will be a great referral source if you become a trusted advisor. Let's face it -- business is still about relationships. If you are referred by a CPA to a business owner, that is golden. You will find little to no competition from their business insurance agent.
The opportunities abound for life and health insurance agents in the small-business market. This group is often overlooked as too small, but the reality is that their lives and businesses are important, too. Now, you have the opportunity to help improve their lives and build your business at the same time.
Dan Weedin is owner of Toro Consulting Inc. He can be reached at dan@toroic.com or 360-697-1058.
