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Episode 83: Importance of Disability Insurance with Rick Cordaro
243 Plays4 years ago
Importance of Disability Insurance
You may already have car insurance, home insurance, life insurance, etc. Why give another thought to adding disability insurance? Our guest Rick Cordaro takes us through how disability insurance can help you capitalize on and protect your future earnings. Rick has been in the IDI Market for 40 years and is passionate about matching people and their situations to their insurance needs.
What you’ll learn:
- What disability income replacement looks like
- Common pitfalls people fall into in regards to insurance
- Time & duty vs. loss of earnings
- Why having an advisor is key
Recommended
Transcript
New Book Announcement
00:00:00
Speaker
As many of you know, we've been working on a book for the last two years. It is finally done. We hope you enjoy it. Go to www.uncommonwealth.com and click on resources and underneath the resources tab, it'll be a book where you can buy your own. Hope you enjoy it and hope it helps you get down your uncommon path yourself.
Podcast Introduction
00:00:21
Speaker
Everyone dreams about living an uncommon life, but how we define that dream is very different for each of us. And for most, it's a lifelong pursuit. Welcome to the Uncommon Life Project podcast. We're going to introduce you to people who are living that life or enjoying the journey to get there. We're going to also give you some tools, tricks, and tips for starting or accelerating your own efforts to live an uncommon life.
00:00:46
Speaker
A life worth celebrating and savoring. Please welcome your hosts, Brian Dewhurst and Philip Ramsey. Welcome, everybody, to another episode of your favorite show.
Meet Rick Cordero
00:00:57
Speaker
My favorite show, Brian's favorite show, The Uncommon Life Project. Come on. Well, I'm your host, Philip Ramsey. And I am Brian Dewhurst. Thanks for tuning in. All right. We got a guest. We got a bio. We're going to jump right into it. I'm excited.
00:01:10
Speaker
Let's go. Rick Cordero, who is he? Why is he here and what's he going to teach us? All right. Rick has a dedicated career to the IDI market, which you will learn about what that means here very shortly for close to 40 years. He's also kind of a mentor to Philip and works at Principal Financial Group here in Des Moines, Iowa. So welcome to the show, Rick Cordero. I'm very happy to be here. Thank you very much.
00:01:36
Speaker
This is Rick's first podcast.
Mentorship Experience
00:01:38
Speaker
Am I right, Rick? Absolutely. And he's got a nice microphone. He sounds amazing. He's ready to teach us. I'm just going to say the first thing first, disability insurance is like what Rick is passionate about. And I'm going to throw a plug in. So I started at Principal Financial Group.
00:01:56
Speaker
lasted three and a half months. But Rick sought me out early on. He was like, hey, Phillip, you're going to make it in this industry. I would love to mentor you through this because it's just a tough industry. And he's like, I would love to be able to work through some of these things with you and help you kind of advance your career. And he's done that. He's always been there and he's been a trusted friend and mentor in my life. And so thank you for believing in me because there's not a lot of people that actually make it in this industry. So
00:02:24
Speaker
I was telling Brian the other day when we were going to have you on like it's fun to have you on and kind of edify like you saw something in me that I don't know if you saw in a lot of people and so it's fun to be here nine years later. Well actually what you said it was three and a half months so they told me I'd get a bonus if I can keep you three months.
00:02:42
Speaker
Yeah. I said, excuse me, we got to keep this guy around. Yeah. So you made that cut off barely.
Rick's Career and Passion
00:02:52
Speaker
Yeah, really. So let's talk about disability insurance and how you got to where you're at at principle. You can go back as far as you came out of your mother's womb and whatever you want to start talking about, we want to hear it. We want to hear your story. Well, I was actually when I when I grew up,
00:03:10
Speaker
In my family, you either wanted to be a priest, a teacher, one of those two things. Those are the two choices in our family. And I was the youngest of six, and I said I wanted to be a salesperson. I wanted to be in sales. Why? Because everybody that I knew in sales, I grew up on the south side of Des Moines. They all had really nice Cadillacs, and they had their golf clubs in their trunk.
00:03:38
Speaker
and you know which which is I'm thinking these guys golf a lot they're driving really nice cars so I said that that's what I want to do so I actually started selling when I was 19 and I was in the real estate business for almost five years and for any of your people on the podcast remember 1981
00:03:59
Speaker
the interest rates were like 18%. Yeah, they're a little bit different. And so I couldn't sell a thing if I wanted to. And the funny thing was, for whatever reason, I went out and was buying more life insurance. I mean, I don't know what that meant, but maybe I had plans. And the guy who sold me the life insurance said, hey, you'd be really good at this business. So two weeks later, I'm in the insurance business.
00:04:28
Speaker
And the funny thing is I started selling, you know, this is back when we had no computers. Everything was rate books and you had to calculate the benefits and everything by hand. And I would, I sold a lot of disability income insurance at the time and a lot of people would say, hey, you know, why are you doing that? And I said, because you're not.
00:04:50
Speaker
And so I said, well, I'm going to do this. And so I became kind of that guy, you know, that when anybody mentioned disability, they came to me and said, what are these people talking about? So I did that and I did rather well. And then eventually I did. I did. Somebody talked me into going to management, which was the biggest mistake I ever made in my life.
00:05:15
Speaker
And so after that, I left management. And then I started working in distribution on the other end of the disability market. And as opposed to being an agent, being an individual who promoted product through the brokerage community. And my first brokerage job was with Paul Revere, a company out of Massachusetts, and terrific company. And then I
00:05:41
Speaker
They got bought out by a company, Provident, and then I went on to The Guardian, a big company out of New York, and I worked five years for them, and then Principal had called me. About 23 years ago, Larry Relitz first contacted me and Brian Lauber, and they started telling me about this concept of doing more distribution with their product. They predominantly did most of their disability with their career distribution model.
00:06:10
Speaker
And it pretty much was, you know, proprietary, they would said that we really want to do a different job on this. And so I said sure I you know I close my eyes and said why not. And so, where we are today as I manage the distribution within five states for principle.
00:06:26
Speaker
and got a great team that I work with. Not only am I passionate about it, I eat, sleep, and drink it every day. My wife, she always tells me, I'm just going to talk about disability income with you instead of the kids because you don't want to talk about anything else. I said, fine, that's good. But here I am. I've had a great career and I truly love working with the principal.
00:06:55
Speaker
They're really a forward-thinking company and they've given me enough rope to hang myself a few times, but it's been a great relationship and I've loved it. Along the way, I have acquired a lot of great friends and that's the neat thing. That's where I am today. I want to just talk about it real quick. Salesmen, you know you're a good salesman if you say, hey, do you want to buy that house? Let's put it on a credit card.
00:07:23
Speaker
That's right. Holy cow. You found your niche. Okay. So I want to take a quick step back. Tell us what disability insurance is. Some of our listeners may not even know what that is. So let's start there. That's a good question and why we call it disability income insurance. I'll never know why.
00:07:42
Speaker
Because it brings on a negative connotation, you know, it's just like life insurance is death insurance. I mean, you got to die to get it. Right. And but but with disability income, we prefer to call it income replacement. And fundamentally, what it says is if I can't work, and I'm under the care of a doctor, as a result of a sickness or injury, then I'm going to be, you know,
00:08:09
Speaker
given money to provide for my family's well-being, you know, whether it's my, and it really don't, we don't care where they spend their money, but it pay their house payment, car payment, their medical insurance premiums, you know, continue to pay their kids college education. I mean, you know, whatever that money, that stream of income, imagine tomorrow, if I were to tell you,
00:08:32
Speaker
You know that, hey, you know, hey, Brian, you're not going to work. You're not going to be able to go to work tomorrow.
Why Disability Insurance Matters
00:08:40
Speaker
And on average, it's going to be probably 31 months. That's what an average duration of a claim would last. So are you prepared to take 31 months off without pay?
00:08:50
Speaker
And, you know, without a paycheck. I mean, this is paycheck protection. And when you think of the odds of this, you know, a lot of people say, well, you know, everybody buys life insurance. Obviously we own homeowners insurance. We have car insurance, right? We have all these insurance products to transfer the risk of something happening to it. But when you look at the number, let's just think about the numbers. The likelihood of a person dying
00:09:18
Speaker
before they reach age 65 is one in 106. And the likelihood of a home catching fire is one in 88. And then you have the likelihood of being involved in an auto accident is one in 70. But the likelihood of becoming sick or hurt prior to age 65 today for a working individual is one in seven.
00:09:47
Speaker
So when you think in terms of the odds, I'm not making these up as most cells may think we do, but this is from the Society of Actuaries and the National Safety Council. These are pretty legit numbers. When you think of the risk that we face every day, everything we're going to have in the future
00:10:07
Speaker
You know, whether I want to own a business, whether I want to retire comfortably, whether I want to send my children to school, whether I want to save for a vacation, whatever I want to do in the future is dependent on my ability to get up every day and go to work, okay? Because everything I'm going to have in the future is going to be dependent on my ability to earn a paycheck. And you take that out of the equation, then we got some problems.
00:10:36
Speaker
I heard when I got into this business and I kind of came up in the Guardian before going independent.
00:10:44
Speaker
But it was, yeah, they had that conversation of like, you're more likely to have a health incident, you know, if you rank the insurances in the order of like what the probability that something's gonna happen, you know, and taking kind of property and casualty out of it. But, you know, health insurance is kind of the first, like something's gonna happen to your health before now in 65. And then second was disability. And then third was life insurance. And then I think fourth is long-term care or something like that. So,
00:11:12
Speaker
When you look at it that way, I think there's a lot of impetus for importance put on the life insurance component, but it's actually statistically less likely than the disability event. Can we talk about that or do you want anything else? I want to say this because in our philosophy, our number one thing we like to tell people is that they are their best asset. No one's going to put more money in their pocket than themselves.
00:11:37
Speaker
Now, if you, if you get sick or something's going on, like you're now in him, right? Like it's one of those things, like if something were to happen to your cashflow, things like you were talking about, Rick, go away pretty quickly. And so disability to ensure that it's one of those things. Once, like once something happens, you want more of it, right? And this is one of those things that can help you protect you, which is your best asset, right?
00:12:04
Speaker
True. When you take a look at income, one of the problems I think advisors should look at is taking future earnings and capitalizing it and creating and really calling it an asset, put it on their balance statement. When you compare assets, let's say you may have a car worth 36,000, you're going to insure that. You may have a home worth 300,000, you're going to insure that.
00:12:30
Speaker
But you have future earnings. Let's take a 35-year-old who's making $75,000 a year. That's just under $5 million. So when you take a look at what do I really want to protect that creates the car, the home, everything else like this, you would think income would be important. I do. When you see the different legislative things happening,
00:13:00
Speaker
not to get political, but the whole, you know, let's raise the minimum wage to $15. And you're seeing a lot of these other things happen legislatively as it relates to employment. You know, it's really forcing a lot of business owners to do contract work. And then when you look at the lifestyle, the younger generation, they want freedom, they want to work out of a RV, you know, they want to travel, you know, we kind of say the new employee benefit is time and flexibility.
00:13:28
Speaker
And you look at that generation is changing jobs quite a bit. It puts a lot of that pressure on income and protecting that income back to the individual where I think largely over the last 30 years, maybe the employers sheltered some of that risk or made a group product available. Can you kind of talk about just the landscape of the marketplace that you're seeing and how to ensure that risk through your employer and then vice versa, ensuring that risk on your own?
Employer-Provided Disability Insurance
00:13:53
Speaker
Yeah, you know, there's a number of ways to protect your income. And fundamentally in our marketplace, you have you have three different core areas that people, you know, rely on. Number one, a lot of people have a lot of a lot of trust and faith in the Social Security.
00:14:13
Speaker
you know, aspect of this. However, there's a problem with that. The fundamental problem with Social Security is that the vast majority of those claims initially will be denied. Okay, and I'm not, I don't want to badmouth Social Security. It's a terrific vehicle and tool for people.
00:14:34
Speaker
in particular in the right retirement arena. But the disability income, the fundamental problem with that is, and they will tell you, you guys ever hear the story about, there's two fundamental problems with going to Disney World. Number one, it costs so much and it's so crowded. Well, that's an oxymoron. I mean, it doesn't cost too much because it's crowded, people are going. The same thing can be said for social security disability. People are becoming sick or hurt.
00:15:04
Speaker
at a rapid pace. And a lot of people are filing for Social Security and they're being denied benefits in the most part. The fundamental problem is it's not that they're not becoming sick or hurt. It's not that they don't qualify for it. There's two problems. Number one, there's no money. And there's not enough people to manage that
00:15:26
Speaker
you know, the onslaught of people becoming disabled. So what does that tell you? Then you can't really avoid it, but the problem is this is something you really don't want to rely on. There's really no guarantees with that. The other thing is if you're an employer or if you have a small employer group or if you work for an employer, many times that employer will offer you a benefit and it's called group long-term disability income. It's considered a wage
00:15:53
Speaker
agreement, a wage continuation agreement. Fundamentally, it says if you become sick or hurt, we're going to continue a portion of your income based on the terms and conditions of this policy that you can help support your family. Now, that is good. There's a good side and a bad side. Number one, you're going to get in, it's going to cover you, and you're going to get a benefit that may or may not cost you anything, most generally doesn't. The bad side of it is,
00:16:19
Speaker
that when you receive the money, it's going to be taxed as ordinary income. So many cases, these plans are designed with a 60% replacement. Now, I'm not a brain surgeon or rocket surgery. I don't do rocket surgery. But I will tell you this, you go from 100% of your income to 60% of your income,
00:16:42
Speaker
and both of those being taxed, your net take-home pay is going to be significantly less than it was before. Then you add on to that. A lot of people don't understand the consequence of becoming sick or hurt with a group plan. Number one, you're going to get a level of income that's far less than what you had, but you also have to pay for your health insurance. You see in the state of Iowa, after a certain number of weeks, the employer is allowed to
00:17:07
Speaker
terminate their employment agreement, which means now there's two things that happen. Well, three things. Number one, I lost my income or it's been greatly reduced. My health insurance premium now for me and my family becomes my burden. And number three, my retirement plan, typically my 401k or any type of qualified plan is frozen in time.
00:17:31
Speaker
Okay, so a lot of people don't understand the consequence. Now, the biggest thing in dealing with people who are business owners, maybe high income earners, because of the inherent caps on these benefits, where they limit the amount of benefit that you can get, most generally, we see like a $6,000 monthly benefits, you have an individual making
00:17:52
Speaker
$20,000 a month, they're not getting 60% of their income back. They're getting 30% of their income covered, which a lot of times, I would say 90% of the times when I'm meeting with through my brokers and they're visiting with their executives, they have no clue. Why? Because we all understand health insurance because that represents 90% of employee benefit cost. The other 5% is coming from the retirement plan. This is like you ever gone to McDonald's and they say, would you like fries with that order? Oh yeah, throw some disability in on that.
00:18:22
Speaker
You know what I mean? So, you know, when you look at the time element involved and the consequences of it, they say, hey, we got a disability policy. Well, yeah, you do, but you don't. OK, and this is really people need really need the an adviser to help them do that. The importance of the adviser is is paramount. OK, because it's people like you that really have people question this. What's going to happen? Let's find out today. What would happen if you became sick or hurt?
00:18:51
Speaker
It's
Role of Advisors in Insurance
00:18:52
Speaker
like a person says, well, well, I don't know how much life insurance I have. And I said, well, good. Here's the deal. We can find out one of two ways. We can look at it and see how much you have today or we're just going to wait till you die and see how many people just curse your name and just you find out who your friends are and who your friends are not. OK, so now's the time to find out and do that analysis of what's going to happen if you became sicker today. OK.
00:19:18
Speaker
What pitfalls do people, like we usually like to give people pearls or nuggets, whatever you want to go with, of they can look at their policy if they have one now, or even the benefit that their employer gives them. What are some pitfalls that you see in the industry that like people fall into, they either buy something that really isn't going to protect them. Talk about those things for our audience.
00:19:41
Speaker
Well, fundamentally, the biggest pitfall I see is you don't buy, an individual buys a product that is not appropriate to them and their occupation and what they do. Now, if you could take the industry, let me first of all say that the industry is alive and well. When I started in the business, there were over 400 companies manufacturing
00:20:06
Speaker
disability income products. Today, there's about 26. And of the 26 that are remaining, there's not a bad one in the house. I will say that much. We have an industry that is very unique in that we're very close-knit. I know most of my competitors very well. I know one time I had a group of them over at my house and my wife, by the way, is the best Italian cook in the world.
00:20:30
Speaker
I'm full blooded Italian and she's full blooded Italian and and I don't have to go far to get the best Italian food ever. OK, so I'm I'm I'm we had him over and they're all sitting at her dinner table and she's overhearing the conversation.
00:20:45
Speaker
And after they leave, she goes, none of these are your brokers. What is the deal here? She goes, what was the deal? I said, well, yeah, they all compete with me. And she goes, why are we feeding them? You know what I mean? Did you want me to put arsenic in the food? I said, no, these are my friends. And actually, we all have the same goal in mind to bring awareness to this industry and to the product and how important it is.
00:21:11
Speaker
But, but that being said, you know when you look at the industry, there's two fundamental contracts or two approaches to income replacement. One is dealing with time and duty, and the other is dealing with income, time and duty would be a product that is for a person who has a high degree of manual duties, labor.
00:21:31
Speaker
you know, these type of individuals. The loss of earnings individuals are the individuals who typically are, you know, the CPAs, attorneys, surgeons, the doctors, the physicians, that their incomes derive from their ability to get up every day and do something, okay?
00:21:47
Speaker
as opposed to the time of duty, they're punching a time clock and it's based on time. Now that being said, instead of playing blue collar, white collar, I've come up with the phrase and I say, well, when did your customer take a shower? Do they take a shower before they go to work or when they get home from work? And once they can answer that question, then I could say,
00:22:08
Speaker
this product may be appropriate, this one more appropriate for them. But fundamentally, there's really not a lot of difference. What I think though, the most important element of this purchase is going to be that advisor.
00:22:23
Speaker
And I always go back to the advisor. They are the ones that are most important in what they do. And Phil, you know this, I have not been my own advisor. I did not even sell myself my disability income policy. I did not sell myself life insurance. I learned early on that I'm going to be my worst customer.
00:22:45
Speaker
Okay, well, I'm cheap, number one. And I just didn't want to, so what I did is I hired an advisor and said, listen, you keep all the commission, you do it, but do the right thing for me and my family. And if I become sick or hurt, I want you making that phone call to my wife and telling her everything's going to be okay. If I die, I want you calling her and telling her everything's going to be okay. And that's what I, that advisor is key in this whole equation.
00:23:12
Speaker
And so what you want to do is, you know, you know, find that advisor who is well bred well and has a good understanding of the product and the need of the customer. That's good. That's good.
Aflac's Marketing Impact
00:23:25
Speaker
Let's talk about
00:23:27
Speaker
the duck. We all hear Aflac, the marketing. How does that fit into all this? I love the duck. Like the short term disability. I love the duck. Let's talk about it. If you were, you know, if we were doing this at my office at home, I have a huge duck head sitting at behind me. And that duck, it's actually a cover for my golf clubs.
00:23:49
Speaker
But it's a it's a big duck head. Right. And it's the Aflac duck. And I will tell you this. I love the duck because because the duck has brought awareness. I mean, he's doing all the advertising for people to become aware of of of income. You know, hey, something bad is going to happen if you become sick or hurt. Right. But we don't we don't compete with the duck.
00:24:12
Speaker
Right, it's a different market. We're not in that same space. They are a name peril type of cancer, heart disease, you know, broken foot, broken leg, you know, type of thing, you get a check, you know, I people, you know, people go, well, should I bike Aflac? I said, well, if you get cancer, you want a bonus check? Well, sure, get a bonus check. You know what I mean? But I say if you get cancer and you can't go to work, how about a paycheck?
00:24:33
Speaker
And this is what we do. We cover that paycheck, that long-term paycheck. And like I say, the Aflac, I love it. And actually, some of my better brokers are affiliated with Aflac. And like I said, if I were home, you would see this big duck sitting behind me. And I'm a big fan of the duck. But we're not talking about the same thing.
00:24:55
Speaker
Right. Yeah. And that's what I wanted to kind of cover is it is it's a different coverage. And I think it is confusing for a lot of people. They're seeing these things marketed on TV. Right. I spent in in my consulting days, I spent a lot of time at Geico Insurance. And so, you know, Gecko brought a lot of awareness to property and casualty insurance. Sure. And kind of the same thing with the duck. But, you know, I think people are looking for like, how do I fit all this together and actually still retain a portion of my paycheck?
00:25:24
Speaker
But when something goes wrong and I have the proper coverages in place, and I kind of hear you saying that's obviously our role as the advisor, but I think it's also the industry coming together to put products together that can fit and complement each other too.
00:25:38
Speaker
Right. And a lot of things, you know, when you took those incidental, you know, they're not incidental, but I mean, these these accidents and type of things, you know, a lot of that can, you know, the cover your deductible, that should be, you know, that should be fundamental planning with an advisor. Right. But there's one thing you can't really cover is that long term income loss, you know, with, you know, it's estimated about 28% of the people who do become sick or hurt today.
00:26:03
Speaker
it's going to be a career-ending disability. They'll never go back to work. That's a big number. That's something that the duck is not going to be able to, there's no quack in that deal. They're not going to do it. I'm sorry. Let's talk about owner occupation, like your own occupation. Why is that important? Talk through the specifics with that.
00:26:25
Speaker
Well, you know that that's that's been a battle we've had for 40 years since I've been in the business, it's not really a battle but it's it's something that's interesting is that definition of disability. Okay. And, and you have three, you have three fundamental levels of definitions. Let's go to the lower one which would be, hey, if you can't do your occupation, we're going to pay you a benefit but after two years, it's going to be
00:26:50
Speaker
It's going to go to an any occupation definition, meaning, you know if your doctor tells us you can do any occupation based on your education training and experience. You got two choices, either stop getting a benefit from us or go to work so they're compelled to go back to work. Okay. The other one is what we call a modified.
00:27:09
Speaker
own occupation definition says, hey, listen, we'll cover you and your occupation. And if your doctor tells us you cannot do that, we will go ahead and pay you the benefit for as long as you have the policy. However, if you choose to go back to work,
00:27:25
Speaker
then we're going to stop paying you. It would be more of the customer's choice. The third says, hey, if I can't do my occupation, I want to be covered basically specifically in that occupation. If I go into another occupation, regardless of what it may be, I want to be able to collect from both. When you look at the numbers and you look at what's appropriate for the customer,
00:27:49
Speaker
A lot of people, let's take the best scenario, that would more or less apply to an individual who has a postgraduate degree, who has a highly specialized, maybe board certified surgeon, or this type of thing, where it's very, very defined. And when we talked about these individuals who go to work every day,
00:28:13
Speaker
And they're not getting paid by the hour, they're getting paid by what they do. These people code these functions for insurance and what have you with a certain code. And when you look at that code and that represents that particular function of their occupation represents 70% of their income, that would be that whatever that occupation or
00:28:39
Speaker
duty was would be an ideal situation to cover. But then you get people who are maybe an executive or a business owner and they do everything. They do hiring, firing, bookkeeping, sales, inventory. Taking out the trash. That definition would never apply for them. Let me go back to the first case scenario.
00:29:01
Speaker
of those true own occupation definitions, less than 2% of those claims are ever ever paid based on that definition. Because it's a very, very hard to do. Let me tell you if I you know, and it was funny, I had a visit today with a with an individual who's an eye surgeon, okay, this morning. And we had this conversation. And and I said, Well, listen, how quickly do you want to get out of the eye surgery business? And he goes, never. I mean, he goes, I took me eight to nine years to get here through my
00:29:29
Speaker
medical school, my residency and internship, along with a bill of hundreds of thousands of dollars. No, this is my lifestyle. This is where I want to be. And so I said, well, you'd pretty much do anything to be in that, even if you could only do one surgery a week as opposed to 10 that you do now. He was absolutely. And there you go. I mean,
00:29:52
Speaker
it would be very difficult for an individual who would knowingly get out of their profession because that one eye surgery, he could make more money there than he could do 40 hours of consultation. It's just all common sense. But it does happen. I'm not saying it doesn't, but it really depends on the individual. Is it appropriate? Does it make sense? Yeah.
00:30:16
Speaker
Is there a fourth level like you know when you hear these like celebrities like I think David Beckham insured his right leg you know he's playing soccer and making a hundred million dollars like is that kind of the next level beyond disability when you get really specific?
00:30:31
Speaker
Yeah, and that would be something that is covered by a company that is in the non-domestic market. The domestic market would be your principles, the mass mutuals, the standard guardian, these type of carriers that are domiciled in the US. Those type of risks are covered by a company called Lloyd's in London.
00:30:56
Speaker
and Lloyd's of London is a company that, you know, they go back to the shipping days, okay, they're very old, they've been around a lot, and they basically, it's kind of like a, it's like going to a bedding house, okay, literally, where you have individuals who will be willing to put up money, okay, or take on a risk,
00:31:20
Speaker
based on a certain, you know, condition. It could be a professional athlete. It could be a singer. It could be, you know, Liberace, you know, covering his fingers. You know what I mean? And what they do is they just tally up, you know, who wants to share the risk. And the term underwriter, you've heard that term before, right? That term underwriter. Well, let me go back. The Lloyds of London was called Lloyds Coffee House.
00:31:46
Speaker
in the early days and that's where they where they got together and they had all these individuals who had desk and these desk would would contain certain syndicates that would would say okay i'll be a part of that risk you know i'll take on a part of that risk so if that ship goes down or that whatever i'm willing to give x amount of you know
00:32:09
Speaker
dollars to cover that loss. And so they would write their name under the risk. They would sign their name under the risk hence under writer, the term under writer. And so as as Lloyd's of Lloyd's of the Lloyd's coffee house evolved that became Lloyd's of London and
00:32:27
Speaker
Obviously, it's a global company dealing with all kinds of peril. And they don't sell insurance. What they do is they basically sell risk. And within the United States, within the domestic market, they have what's called cover holders. And some of the most popular one I work was as Peterson International, and they're out of California.
00:32:51
Speaker
And every state has to approve them being in the business. And Iowa just probably five years ago finally approved them to be in the state of Iowa as an excess carrier, meaning whatever the domestic market can't do, they can do above it. And so that's another level of protection. And really, what are their limits? Whatever you're willing to pay in premium.
00:33:16
Speaker
They're able to quantify it to take your money. Yeah, exactly. They're just, you know, there's not a risk they haven't seen that they couldn't charge enough for. And, you know, and they don't call it they have, they have a life. They have a policy that looks like a life insurance policy, but they cannot call it a life insurance policy. And so what they call it is failure to live policy.
00:33:38
Speaker
So you failed to live. And so, you know, that's how they do it. And it's kind of cool, you know what I mean? But they're great. And these people are good friends of mine. I've come to know them over the years. And, you know, we, you know, there's just, there's nothing they can say no to. Okay. Well, that's medical condition or whatever. They're just, there's always the right premium that somebody will need to cover a risk.
00:34:00
Speaker
Well, I want to pivot. Go ahead. Yeah, no, go for it, man. Well, I want to pivot just a little bit because it's on that vein, though, is I don't think a lot of people understand the insurance world. It's kind of like this behind the scenes opaque, but it's one of, I think, the most important industries in our country and has allowed us to have such economic expansion because we have had a robust insurance market to offset risk.
00:34:24
Speaker
And with that though, each carrier is different and they're looking for kind of that type of business or risks they're willing to underwrite and get comfortable with. Can you kind of talk about that within kind of the disability world? It sounds like it's a pretty tight knit group, but there's carriers that are looking for, you know, maybe the shower before you go to work and then there's carriers that want to, you know, ensure the shower after you go to work. Can you
Principal Financial Group's Focus
00:34:50
Speaker
kind of share on that?
00:34:51
Speaker
Oh, absolutely. A lot of times you know if the carriers and simply in the disability income product arena. There's not a lot of them, but if there are, you know they have a particular way that they manufacture their product to attract
00:35:08
Speaker
certain type of customers. And those type of things, they're either going to be in that blue collar market or the white collar before or after shower. Fundamentally though, what you find is, it's interesting that it's not so much about the product, a lot of it's about the distribution. How do we distribute our product? Do we simply do it with our proprietary distribution?
00:35:34
Speaker
that would be like your Northwestern Mutual, or do they offer to anybody who wants to sell our product through various different channels? That could be through a broker to general agencies, it could be through IMOs, it could be through wirehouses, it could be through a banking network. There's a lot of different ways. That fundamentally is the most popular. There's very few companies that just keep it to themselves. I mean, there's a couple, but the rest of it, they spread it wide and clear they want to
00:36:03
Speaker
they broaden that net way out there. You really don't see within the marketplace, most of the advisors that are doing this understand the market enough to know who to call on when they need a particular
00:36:18
Speaker
Okay, now it goes beyond that I could speak to principle principle is a company that for decades has been focused on that small to medium sized business. Okay, so knowing that we want to be able to manufacture solutions that are consistent with our message. Okay, and our message has always been that small to medium sized business.
00:36:41
Speaker
and all the perils that small business owners face. So we not only have that individual disability. If you become disabled, we're going to cover your home paycheck. We have overhead expense policies. We have disability buyout policies. We have key person policies. We have loan protection policies. So if you have a long-term loan, we'll protect that. We have retirement products that if you can't work anymore and you lose your retirement plan, we'll help and fund the balance of that through the rest of your working years.
00:37:09
Speaker
And then we offer various different discounts and underwriting programs, in particular, ours are focused on that small to medium sized business you know up to 200 300 employees. And so, that's our focus and that's where we, that's our, you know, that's we're really good at. Okay. And so that's, that's where our focus has been but a lot of times it depends on, you know,
00:37:30
Speaker
the company and how widespread they want to be. For principle, we are the only company that does manufacture every product in the marketplace today, every solution, where if you went to another company, you'd have to maybe get a couple products from one company, then you have to go to another company to get another couple products. So we're fortunate to say that we
00:37:53
Speaker
We see our customers as predominantly professionals and small business owners, so our product is catered toward that. Our underwriting is catered toward that, especially in today's world where you have a lot of non-traditional employers, non-traditional people out there, the entrepreneurs that I think are very important, and we're seeing a lot more of those people.
00:38:18
Speaker
We've got products and we got services that are product appropriate for them and we're able to underwrite them successfully. It was interesting. We had a guy like that say a little bit hybrid entrepreneur and in a day job.
00:38:32
Speaker
We did a call with you and you did a great job just asking questions, understanding his, you know, professional career, his income, you know, so that the underwriting process would be accurate and tailored. And I just, I really appreciated that because, you know, there are so many different, you know, people out there making money in different ways. And you really took the time to kind of make sure the fit was right up front. And then the cost expectations were,
00:38:58
Speaker
you know, we're aligned. Yeah, I come with the attitude, I'd rather I'd rather irritate you now than later. You know what I mean? And I've always you know, it's a Colombo approach, I keep on asking, I ask a lot of questions. And the reason I do that is because, you know, when we when we put together a proposal or an illustration for an individual, we want to feel 99% sure that we can fulfill on that. Okay.
00:39:23
Speaker
Another situation to come up, you know, hey, I forgot about the open heart surgery I had last week or something like that, you know, which we were gonna like, what? But, you know, but I mean, you know, things like that. But, you know, the disability can be complicated. So my role is to make it really easy for an advisor to have that conversation with their customer.
00:39:45
Speaker
Right. I mean, I think honestly, like, let's be honest, Rick Cordero was probably the best thing to happen to me at principle. But also like disability principle does a great job in disability. And like, that's one thing that I'd be confident and we have in the past sold that to our clients. And we're really confident. That's why we wanted to have Rick on the show.
00:40:05
Speaker
I think kind of just wrapping up, where are you headed? How can we help you? How can our listeners hear more about you? Get in contact with you if you need to. Obviously they can call us. We can call you. I want that Italian dinner. That's what I want. I want the Italian dinner. And then I want to know, do you shower before or after work? I shower all the time, man. It's just dirty. I tell you, I'm a blue collar guy in a white collar business. I love to get my hands dirty. I love to get out in the yard.
00:40:35
Speaker
and tinker with things. Unfortunately, when I do tinker too much with things, it costs me way too much money because then I have to hire somebody who does that for a living. But where do we go from here?
Final Thoughts on Disability Insurance
00:40:49
Speaker
I think the important thing is to give you guys a call and have that conversation and just simply ask if I were not able to work tomorrow because tomorrow is not guaranteed to anyone.
00:40:59
Speaker
If I'm not able to work tomorrow, I need to know what, what my, what it's going to look like going forward. Okay. And that's really the bottom line. And then, then we just work together and we say, okay, we'll piece all the parts together. We'll understand what the consequence financial consequences are of you becoming sick or hurt.
00:41:16
Speaker
And then your customer makes a decision, okay? And our job is to give them facts that they can work with. I really wanna know what's gonna happen. And number two, I want some good solutions to it, okay? And that's how this, I mean, it's really not hard, okay? But we need to do a really good thorough job of understanding what all the options are.
00:41:45
Speaker
Awesome. Man, I mean, out of anybody in the world to make disability insurance, awesome. Rick Cordero, everyone. Isn't it crazy? Because nobody else wants to do this. And so, you know, I learned long ago that you want to know something, you want to know it well, and then you want to know you know it. And then you just got to go out and find people who know that you know it. So you can tell them.
00:42:07
Speaker
And that's been my deal for years. And as I get older, I kind of forget all that stuff I learned early on, which probably is a good thing. But I got a few years left in me. My wife won't let me stay home.
00:42:23
Speaker
Are the golf clubs in the trunk? Yeah. You know what? I just bought a, I bought a new, uh, pull cart brand new for here on port. I'm going to start walking these courses. I need my exercise. So I, you know, and it's got a room for beer, uh, you know, for everything, all the necessities of a golf golf, you know, returning. Too many people are on their carts, but they have a dusty treadmill at home. Like,
00:42:47
Speaker
Don't do that. Like, just get the pull cart. Let's walk. Yeah, we got one of those real fancy things, you know, the stepper things, you know, and you know, I can I can hang four suits on that. And it really works well, I tell you right. Peace. Yeah, it's a great hanger.
00:43:03
Speaker
Rick, thank you for your time. If you have any questions about the show, Brian and I are always available. Obviously you can look at principle.com and look up Rick Cordero. He's basically the spokesman of the principle. So thanks for your time, Rick. You've been listening to the Uncommon Life Project. I've been your host, Phillip Ramsey. And I am Brian Dewhurst. Till next time, go be uncommon. Thanks everybody. Thank you.
00:43:25
Speaker
That's all for this episode of The Uncommon Life Project, brought to you by Uncommon Wealth Partners. Be sure to visit uncommonwealth.com to learn more about our services. Don't miss an episode as we introduce you to inspiring people who are actively pursuing an uncommon life.