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Creating a healthy safety net for your clients

Why it’s important to have the living benefits conversation.

A unique situation is developing in Canada as people are living longer and more of us are gravitating toward self-employment. Separately, these may seem like a couple of interesting tidbits about how our society is evolving. But seen together, these shifts have significant implications for living benefits insurance coverage.

Life expectancy for the average Canadian is now 82, with positive factors such as advancements in health care, living conditions and earning potential all supporting this longevity. While there’s much to celebrate about living a long life, the reality is that Canada is aging quickly. The 65 and over demographic is growing four times faster than the overall population, and now accounts for nearly one in six Canadians.[1] 

And living longer doesn’t necessarily translate into living healthier. Despite ongoing public awareness initiatives, risk factors such as smoking, inactivity, unhealthy eating habits, stress and high alcohol consumption continue to have a large impact on the population. One in five adults has a major chronic condition such as cancer, diabetes, heart disease and respiratory illness – conditions that account for 65 per cent of all deaths in Canada each year.[2] 

Now, let’s consider the working population. Over the years, the number of Canadians who identify as self-employed has steadily increased, peaking at about 2.9 million in early 2020 just as pandemic restrictions began. COVID-19 has taken a toll on small business, shifting this figure down to about 2.6 million by the end of 2021,[3] but this is still a large number of people who are working without the safety net that full-time employees may enjoy, such as paid leave for illness and injury. The flexibility of self-employment may be nice, but there is financial risk if you’re suddenly unable to work. 

Are you having the living benefits conversation with your clients?

Ginny O’Leary and Vanessa Scott are national living benefits sales consultant with Manulife Canada who consult regularly with advisors from coast to coast. When asked if they think the living benefits conversation is happening enough between advisors and clients, they note that there is definitely room for growth, even as more Canadians are realizing the importance of this type of coverage.

“What we do hear from advisors frequently is that they have a bit of trepidation about adding this kind of additional protection into their client conversations,” says Vanessa. “There’s always that concern of rocking the boat or upsetting the client if you don’t get a perfectly standard offer back from underwriting. Or that they may be opening themselves up to scrutiny because they haven’t had this conversation with a client earlier.”

“Because of the global pandemic, there’s more motivation than ever to have the critical illness/disability insurance conversation, and an advisor’s knowledge of this type of coverage is going to determine how proactive they are going to be,” says Ginny. “We definitely see more advisors coming forward and wanting more targeted training on how to work within this space.”

Identifying the why

Living benefits protection is designed to help bridge the income gap if illness or injury interferes with a person’s ability to earn a living. As an advisor, you understand the risk, but it’s not always easy for a client to fully understand or appreciate the potential for hardship. A meaningful discussion with a client can help them fully realize the long-term peace of mind this type of coverage can provide.

“It’s important for advisors to help their clients understand the ‘why’ for living benefits,” says Ginny. “It can be as simple as asking a client, If you were sick or hurt and couldn’t go to work for a period of time, what would be the financial impact? What plan do you currently have in place to weather the hardship – and is that plan truly going to be enough to cover the bills, buy groceries, support children and any other expenses you may have?”

Vanessa adds that an advisor shouldn’t assume that a client isn’t interested or already has coverage in place. 

“We need to let the client say no – it’s incumbent on us to let the client look at something and decide for themselves if it’s a fit for them or not,” says Vanessa. “I always think about when you buy a vehicle and the salesperson asks if you want various extras such as undercoating and floor mats. They ask about everything and let you say yes or no based on what’s important to you and your budget.”

Taking a proactive approach in discussing coverage options can also be a perfect opportunity to clear up any misconceptions.

“I think people tend to wait for an advisor to bring up critical and disability insurance in conversations, and some people don’t realize that there’s an insurance solution like this. Others may be under the impression that it’s coverage that they can’t afford,” says Vanessa.

Reviewing the plan

How long has it been since you’ve reviewed a plan with your client? 

A lot can happen after the time an advisor first meets a client and deals with their basic investment and insurance needs once they’ve landed their first big job. Marriage, kids, a home purchase and maybe even a business start-up can mean the initial plan will need to be tweaked. Given the potential for any number of negative events, such as job loss, a critical illness, divorce or a market downturn, the plan for a comfortable retirement can start to feel out of reach. 

During times of illness or injury, a client may be tempted to consider dipping into their savings and investments to help fund their recovery. But if investments are already being affected by a market downturn, the financial impact on long-term growth can be severe. 

Laying out the implications for ‘what if?’ can help a client to better understand the power of living benefits protection. 

Consider these two examples:

Chart. Comparison of two living benefits policy holders, premiums and payments.

Getting the conversation started

Integrating living benefits solutions within a financial plan is all about protecting the client, their retirement dream, their family, their business and whatever else may be important to them.

Consider two points of focus:

  • What’s the plan?
  • What hurts the most?

Has your client considered a safety net if something were to happen? When, on average, Canadians have a 50/50 chance of developing cancer in their lifetime, having no plan at all may not be the best strategy.

“A client may say that they have some savings set aside, but is it enough? What does that look like if you can’t work for six months? What happens if it lasts for six years? By having the ‘what if’ conversation and really testing the plan that a client has in place, it can show the gaps in coverage,” says Vanessa.

Has your client considered what would hurt most if illness or injury impacts their earning potential? Would it affect post-secondary education plans for their kids? Would it mean selling the family home? Talking through the emotional impact of financial difficulties can help a client to connect with their why.

Their concerns might be very specific, such as “cancer runs in my family,” in which case critical illness is a good starting point. If they are more concerned about a car accident, then income replacement or disability insurance might be more logical. 

Identifying opportunities

When looking at your block of business, determine who’s an employee and who owns a business.

“An employee may initially push back saying they don’t need this income replacement stuff because they are part of a group plan. However, most of your clients likely know more about their prescription and dental coverage than they do about this really important income replacement portion,” says Vanessa.

By offering to read through a client’s group benefits coverage, you can help identify potential gaps. Consider this example: 

An employee earning $100,000 a year feels quite confident about the income replacement coverage offered through the company group benefits plan. However, upon reading the fine print, you discover that the plan only covers for accident and illness. It does not cover for injury. If their job is labour intensive with the potential for repetitive strain injury, this gap can provide a great opportunity to start the conversation.

“When someone has coverage in place with an existing group plan, there is the potential for referrals. Your efforts to analyze and identify gaps in coverage can be a source of interest for other employees under the same plan,” says Vanessa.

For a business owner, the risk of being unable to work for a period of time carries even greater risk as it can affect the company’s finances, stability for employees and obligations to customers. This client’s focus may not be critical illness insurance or disability insurance, but rather business continuity. Along with setting up living benefits coverage for an owner, it’s important to ask how business continuity would be maintained if something were to happen. Who would handle day to day logistics, manage client expectations and handle financial obligations? Is there a business continuity plan in place?

Support for advisors

If living benefits are new to your scope of business, or you’d like a refresher to learn how to raise the topic with your client base, know that there is a solid support system available.

Naturally, your insurance wholesaler is a first point of contact, followed by the living benefits section of Advisor Portal. Here you can find several resources, including brochures and handouts, calculators, social media templates and shareable articles and videos that can make it easier to connect with your clients. 

And then there is the living benefits training school hosted by Vanessa and Ginny. Over the course of several months, advisors are guided through an intensive deep dive into Manulife’s disability and critical illness products, as well as sales coaching and application support. Upcoming training dates are communicated to advisors via email invitation.

“Going through the living benefits training program builds confidence,” says Ginny. “The training takes the advisor through all aspects of the products, things to consider from an underwriting perspective, and an overview of the claims process. Advisors learn about the entire process from submitting an application to making a claim.”

Additional training is also available through Manulife’s Continuing Education Centre, where you can earn credits while learning the ins and outs of living benefits. Visit the CE Centre at www.manulife.ca/advisors/training/ce-centre (CIAM login required).

Living benefits coverage is a key part of a complete financial and insurance plan. Don’t miss out on an opportunity to have this important discussion with your clients. 

[1] [2] How Healthy are Canadians? - Canada.ca

[3] Self-employment decrease – CBC

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