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  • Variable disability insurance rates

    Hi all, I have a few questions regarding disability insurance and was hoping to seek the group's guidance. I have obtained quotes from different agents and received variables rates for the same amount of benefit. For example, one agent's quote was $234 premium for $5000 monthly benefits from Ameritas while another agent's quote was $214 for the same benefit from the company (same riders in both quotes: FIO, partial disability,etc.) .

    1. Can these policies be different in their foorprints or do companies have a standard policy and language for all? If they are indeed the same, should I just go with the cheaper quote then?

    2. Are the insurance companies different when it comes to collecting disability? Do some have stricter rules in approving disability claims? Assuming two policies from two different companies are identical, I do not mind paying a little extra if I know company A has a better reputation for approving disability claims down the line while company B is known to have the highest claim rejection rate. If such a difference exists between companies, which disability insurance company do you recommend?

    3. What happens to my policy if the company goes bankrupt or does not exist in 10-20 years? Is there a more stable company to go with?

    I appreciate your responses in advance.

  • #2
    If you are sure the features, occupation class, state of residency, benefit amounts, riders, age, and definition of disability are all exactly the same then it would seem the to me the agent with the higher price does not have access to the extra discount of the less expensive reps offering.

    1: The plans can be changed by the rep or the client to fit what the client wants to acquire, there are about 7-10 things that can be done within a policy to customize it for the client.

    2: The more constraints you put on a policy from the client side the easier it is to justify claims from the carrier side. Where things go wrong are when a product is built with low quality terms which then don't meet the clients expectations, sometimes this is the fault of the rep but sometimes this is the direction of the client wanting to drive the price lower. Buy the contract built with the right terms to meet your expectations but don't have performance expectations of the policy that you did not buy/install in the contract.

    3: In theory you would not have a policy if the carrier were insolvent. The reality is every carrier that has ever had a problem of this nature has had their blocks of business bought by another carrier and the coverage has continued. Most carriers are in really good shape financially, COVID is not much of a concern to 'Long Term' disability carriers because win or lose is typically going to happen before 90 days are up.

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    • #3
      Thanks for your clarification

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      • #4
        Scott's very knowledgable in this area, so there's not much I can say that he hasn't, but one thing I would add is to make sure they quoted you the premium on the same payment schedule. I.e. you get a discount for paying your annual premium all at once vs. paying your premium monthly. For my quote, it would be $150 per month if I paid monthly or $1750/yr if I paid annually (~$145/month).

        Also, make sure the benefit period is the same. For example, one agent may have quoted $5k/month until age 65 while the other agent may have quoted $5k/month until age 67.

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        • #5
          Originally posted by Scott at MD Financial Services View Post

          3: In theory you would not have a policy if the carrier were insolvent. The reality is every carrier that has ever had a problem of this nature has had their blocks of business bought by another carrier and the coverage has continued. Most carriers are in really good shape financially, COVID is not much of a concern to 'Long Term' disability carriers because win or lose is typically going to happen before 90 days are up.
          Hey Scott, I have a couple of questions about this. Let's say someone bought a policy at age 30 with a level premium and the disability company goes out of business 10 years later and another company buys their policy. Would you expect the client to continue paying the level premium for the age of a 30-year-old, or would the company adjust their premium as if they bought the policy at age 40?

          Second question, what happens if someone was disabled, receiving benefits, and their company goes bankrupt? Would you still be receiving benefits from a different company, or would you just be kinda screwed?

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          • #6
            Originally posted by Romberg45 View Post

            Hey Scott, I have a couple of questions about this. Let's say someone bought a policy at age 30 with a level premium and the disability company goes out of business 10 years later and another company buys their policy. Would you expect the client to continue paying the level premium for the age of a 30-year-old, or would the company adjust their premium as if they bought the policy at age 40? I would expect it to be the same rate because the carrier bought the block does not mean they can change the terms of the contract when the contracts state they can not be changed, it has always been handled this same way in the past.

            Second question, what happens if someone was disabled, receiving benefits, and their company goes bankrupt? Would you still be receiving benefits from a different company, or would you just be kinda screwed?
            They should be moved to over to the new carrier with the new carrier assuming the claim payment, the acquiring carrier gets the good with the bad but keep in mind that bought that business 'on sale' so they will make out just fine typically. In addition, if you have questions that drill down deeper you can look at your individual state guarantee pool which is a safety net that all carriers pay into which is kind of insurance for the insurance company and the individual insureds. Think FDIC for banks, not the same but similar.

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