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Disability insurance question

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  • Avatar TheHandGuy 
    Participant
    Status: Physician
    Posts: 4
    Joined: 12/08/2018

    I have been looking into disability insurance and per my agent the best policy is through Ameritas for $10,000 monthly benefit for about $2,400 annual premium.
    Riders:
    Enhanced residual disability
    Future increase option up to $15,000
    Guarenteee renewable

    For an added cost of about $400 more per year I can add a noncancelable rider. I’ve been assured by the agent that I don’t need the noncancelable rider as premium changes haven’t happened in decades and that the only added benefit to the policy being noncancelable is to prevent this possible change, which is so rare.

    My hesitation is that everything I’ve read suggests not to even consider a policy that is not both noncanceable and guaranteed renewable. Should I pay the added cost? Is it worth it?

    I appreciate the help.

    #205572 Reply
    DK Unger DK Unger 
    Participant
    Status: Website Sponsor, Insurance Agent, Small Business Owner
    Posts: 104
    Joined: 01/08/2016

    Disability insurance pricing has been stable and predictable with the exception of some issues with medical occupations. Increasing the rates on guaranteed renewable only policies isn’t as easy as flipping a switch. The insurance company has to demonstrate a higher than expected claims experience to the state insurance department and the state insurance department would have to approve the increase. If you have a budget and risk tolerance that allows you to account for any potential rate increases, and believe that $400 could be used “better” elsewhere, then by all means keep the policy guaranteed renewable only. If you would prefer to have the premium guarantee, and prefer to “set it and forget it” then add the non-cancelable rider. No one can predict whether the insurance company will experience a higher than expected number of claims warranting them to increase the premium rates. One thing to consider when making this decision is how long one will be holding the policy. If one will be holding the policy for 10-15 years then the premium guarantee may not be as compelling.

    #205580 Reply
    Scott at MD Financial Services Scott at MD Financial Services 
    Participant
    Status: Website Sponsor, Insurance Agent, Small Business Owner
    Posts: 381
    Joined: 01/14/2016

    I have been looking into disability insurance and per my agent the best policy is through Ameritas for $10,000 monthly benefit for about $2,400 annual premium.
    Riders:
    Enhanced residual disability
    Future increase option up to $15,000
    Guarenteee renewable

    For an added cost of about $400 more per year I can add a noncancelable rider. I’ve been assured by the agent that I don’t need the noncancelable rider as premium changes haven’t happened in decades and that the only added benefit to the policy being noncancelable is to prevent this possible change, which is so rare.

    My hesitation is that everything I’ve read suggests not to even consider a policy that is not both noncanceable and guaranteed renewable. Should I pay the added cost? Is it worth it?

    I appreciate the help.

    Click to expand…

    Ameritas offers a 16.7% premium reduction for taking the GR contract over the non-can so not a bad premium savings.  At the premium rate you are mentioning it means you are freshly out of training or maybe just finished since it is priced at $24 per month per $1,000 of benefit so you have potentially 30-35 years of holding that contract in front of you.  So really consider that amount of time/exposure too.  The other thing you may want to look at in increasing that FIO because where $10k or even $15k capacity today seems like a good bit 15-20 years from now (based on inflation) that is going to feel like $5-$7,500 of benefit in today’s dollars.  Being that you can buy the Options to increase for about $2 per $1,000 of benefit with Ameritas it might be wise to have $8k of FIO instead of $5k and be sure to have the AIR on the policy so it would give you max contract capacity.  Just a few thoughts for you.

     

    S. Scott Nelson-Archer, CLU, ChFC with M. D. Financial Services, Inc.
    Direct Phone 713-966-3932, Email [email protected]

    #205591 Reply
    Michael @ BattDouglas Michael @ BattDouglas 
    Participant
    Status: Financial Advisor, Insurance Agent
    Posts: 78
    Joined: 04/13/2018

    Thank you for sharing your question.  Locking in a guaranteed renewable, non-cancellable policy creates a “known” premium.  If your budget permits the additional premium, you will have secured this premium for many years.  Allowing for variation is adding risk.  If you consider long term care policies or health care policies (even though they are different types of insurance) you can see that dramatic rate changes have happened.  As they say in investing “past performance is not a guarantee of future results.”

     

    We are here when you need us.

    Michael Douglas CLU, CHFC, CFP with the BattDouglas Financial Group
    Direct Phone: (216) 470.2728, [email protected]

    #205739 Reply
    Avatar TheHandGuy 
    Participant
    Status: Physician
    Posts: 4
    Joined: 12/08/2018

    Thank you all for your input it is greatly appreciated.

    #205899 Reply

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