Strategy Over Outcome: Using Cognitive Dissonance in Disability Conversations

March 1, 2022 | Written by Samuel Newland CFP

A good financial plan is evaluated based on evidence and a sound strategy – not by looking back at the 1-, 3-, or 5-year performance and comparing it to other portfolios. Just because some people win the lottery, does not mean that buying lottery tickets is a good strategy.

The same can be said about insurance policies that protect clients where they cannot self-insure themselves – such as health, life, and disability insurance. While clients buy health insurance without a thought or life insurance without much convincing, disability insurance tends to take on a different feeling for clients feeling like they need it – even though they likely clearly do.

Some disability fast facts:

    • One in 7 workers can expect to be disabled for five years or more before retirement. – “Commissioners Disability Table, 1998,” Health Insurance Association of America, the New York Times, February 2000
    • Disability causes nearly 50% of all mortgage foreclosures, 2% are caused by death.Health Affairs, the Policy Journal of the Health Sphere, 2 February 2005
    • A new study from academic researchers found that 66.5 percent of all bankruptcies were tied to medical issues —either because of high costs for care or time out of work” and that “that their health insurance may not be enough to protect them” from bankruptcy

All these stats are simple ways to show that disability is much more likely to cause financial hardship than premature death (i.e., life insurance), and yet people tend to be much more reluctant to purchase disability insurance. The real way to protect against the leading cause of financial problems in America is by combining health and disability insurance together.

Typically, the leading reason for rejection is because it is considered expensive. “How much does it cost?” The real question should be, “How much value does it provide?”

Breaking down this rebuttal can be done simply with a number of methods such as those described in past blogs. For example, tell the familiar story of people doing everything right – college, buying a home, getting a good job, saving for retirement – and then going bankrupt and losing the home because they did not have disability insurance. These are not fictional stories. I, myself, am living proof of it. My family’s financial situation radically changed due to an unexpected disability.

One way to open the door to a disability conversation with a relatively young and healthy client is asking them to defend why they waste all their money on health insurance, which is almost always significantly more expensive than a disability policy. Ask them, “If you are perfectly healthy this year and do not use your health insurance, are you going to regret having health insurance this year as if you wasted money? Why or why not?”

Inevitably, your client will defend the purchase of health insurance because they 1) cannot predict the future of their health and 2) cannot afford millions of dollars in medical bills. When asked this question, your client must now confront the logical inconsistency between thinking that a more expensive health insurance policy is not a waste of money, but rather a less expensive disability insurance policy that protects against home foreclosure and bankruptcy.

After having your client defend health insurance, you can ask them if they know that disability and medical bills are the leading causes of people losing their homes or declaring bankruptcy. You can begin your anecdote about how people like them lost everything. You can even ask them from a happy frame whether having a little bit more in retirement is worth risking losing everything or not having enough because you’re not purchasing a disability policy.

At the end of the day, disability insurance is priced fairly. The carriers compete with each other to bring the cost in line with the true value provided like any other product or line of insurance. It costs more than life insurance because the carrier is more likely to pay out. The price of the policy is priced in line with the risk associated with the occupation of the client.

All your clients justify their largest monthly expense – their rent or mortgage – because it aligns with their values. Price does not matter. Value-based purchases do matter. Most people agree that spending a little more every month to protect against a very probable event of losing everything is worth it. Your clients are already willingly doing it with their health insurance premiums.

Set your clients up with a sound strategy for success with disability insurance rather than looking back and assessing that strategy based on whether they became disabled or not.

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  • Have any specific questions about the concepts or ideas in this article series or do not think it would be a bad idea to learn more about how to have better conversations
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