Business Reducing Term DI Backs Loans When Firms Change Hands

Many business reducing term buyers also buy overhead expense coverage. If a client has an overhead expense policy with a monthly benefit of $30,000, adding business reducing term coverage could increase total monthly benefits to $52,500 for the duration of a 5-year loan, LeBourdais says.

The newer policies are more flexible than the older policies. In the past, Berkshire Life says, it paid a flat, maximum benefit of $10,000 per month, regardless of the size of the obligation being insured.

In theory, anyone using a loan to buy or build a business or professional practice could use business reducing term to beef up the maximum disability benefit payment. In practice, dentists and other health care providers tend to be especially good prospects for business reducing term, as they are for other disability insurance products, because "they're already keenly aware of the importance of income protection," LeBourdais says.

Benefits from some business reducing term policies go straight to the lenders. The insurers who write those policies are somewhat less concerned about the possibility of receiving questionable claims than they would be if the benefits were going to the insured, Loyall says.

Lenders usually want to see that borrowers have life insurance and disability insurance.

Loyall also looks to see if clients have adequate overhead expense insurance, malpractice insurance, and an awareness of the need to talk to other advisors about other planning and insurance needs.

For Loyall, common marketing tools include letters, the Web, and attending events aimed at dentists.

Clients and prospects "need to see you all the time," Loyall says. "It's important to be consistently reinforcing your branding."