[Editor's Note: This is a guest post from Lawrence B. Keller, CFP®, CLU®, ChFC®, RHU®, LUTCF, a frequent contributor and advertiser on the blog. This is Part 11 in his long-running series updating you on some of the intricate details of the disability insurance marketplace. This post deals with recent changes with Principal, MassMutual, Standard, and Ameritas.]
Principal
Principal no longer offers unisex rates to Medical/Dental Students or Residents/Fellows as of Monday, February 6, 2017. Originally, this was changed to a 10% discount off of gender distinct (male/female) rates to those institutions that have an existing discount plan in place or for new ones that are established. However, as of yesterday, January 22, 2018, Principal has increased the discount for Medical and Dental Residents/Fellows to 20% off of gender distinct rates.
If you are a Medical/Dental Student or Resident/Fellows that purchased a Principal policy that was applied for in January, 2018, and the policy was issued with the 10% sex-distinct discount, it can be adjusted to the 20% sex-distinct discount.
Unisex (gender neutral) rates and a 20% Multi-Life discount continue to be available to Attending Physicians and Dentists working for employers or institutions that have an existing discount plan in place or for new ones that are established.
The occupation class for several occupations/medical specialties has also been downgraded (causing an increase in premium rates compared to their previous occupational classification).
- Pharmacists (downgraded from 5A-Select to 5A)
- The following occupations have also been downgraded to 3A-M (from 4A-M)
- Dentists, including all dental specialties
- OB/GYNs
- All surgeons with the exception of Cardiothoracic Surgeons and Neurosurgeons
- Pain Management Physicians
- CRNAs
Fortunately, as a result of this change, all 3A-M occupations now qualify to purchase the Regular Occupation Rider (“Own-Occupation” definition of total disability), with the exception of those in occupation classes 3A-M and 4A-M in the State of California (this remains unchanged). This change is beneficial to Podiatrists and CRNAs who could not previously purchase this rider due to the occupational classification previously assigned to their occupations.
The limit for the Future Benefit Increase (FBI) Rider to be included on a policy has now been increased to $14,000 (up from $13,000). This Rider allows insureds to increase their monthly benefits 4-10% based upon changes in the Consumer Price Index, regardless of their earned income and/or other disability insurance inforce (individual, group or association) for the first six policy years. The limit is different for those policies written prior to the introduction of the 700 policy series.
The Issue Limit for all 3A-M occupations has now been increased to $17,000 month (participation with other individual disability coverage to $25,000 month or up to $30,000 month with group Long-Term Disability coverage).
MassMutual
MassMutual introduced their Radius Choice policy series which now includes a “to age 70” benefit period along with a choice of two increase options – their usual Future Insurability Option (FIO) Rider and their “new” Benefit Increase Rider (BIR).
The Future Insurability Option (FIO) Rider provides insureds the ability to increase their coverage each year to age 60, regardless of their health, as their incomes rise. Since the insured pays for this rider, they can either choose to exercise it or not based upon their individual needs, goals, and budget.
The Benefit Increase Rider (BIR) is very similar to Principal’s Benefit Update (BU) Rider which provides insureds the ability to increase their coverage, every three years, to age 55. Analogous to Principal’s Benefit Update Rider, certain requirements must be met in order for it to be included and maintained on the policy.
As long the insured purchases at least 75% of what they qualify for based upon their income and other disability insurance inforce, the BIR is included on the policy at no additional cost. Most other companies charge for their increase option and use a multiplier (typically 2-4X the base policy) in order to determine the amount of additional coverage that can be purchased in the future (up to the individual carrier's maximum issue limit). Under the BIR, MassMutual allows insureds to increase their coverage to the maximum monthly benefit, subject to their maximum issue limit consistent with the occupation class in which the policy was issued.
Under this rider, every three years the insured will then have the ability to increase their coverage. However, unlike the other companies offering an FIO Rider, the insured must “check-in” with MassMutual every three years in order to keep the BIR on the policy. If an insured does not send in the application to increase their coverage, after multiple attempts, it will be removed from the policy permanently.
Lawrence Keller, CLU, CHFC
If an insured does send the form back (as they should) and does not qualify for additional coverage, they will be declined from a financial underwriting perspective, the BIR will remain on the policy, and they will go through the same process three years later. If, however, an offer is made for additional coverage, the insured must purchase at least 50% of the eligible amount or, again, the BIR will be removed from the policy permanently.
Unfortunately, MassMutual’s BIR does not allow for “off anniversary” increases. Therefore, for example, if one completes their training and their income rises substantially or they change employers and lose their employer-provided group LTD coverage, it does not allow them to qualify for an increase in coverage at that time. As a result, their income may far exceed their ability to protect it if they are “off cycle” (not in sync with policy year 3, 6, 9, etc.) when these changes take place.
Additionally, when the BIR is exercised, it is based upon the occupation class at the time of the exercise. Meaning, if the occupation class has been downgraded (become less favorable) by MassMutual since the original policy’s purchase, causing an increase in premium rates for new insureds, they would be subjected to the premium rates for the increase associated with the less favorable occupation class.
The Future Increase Option (FIO) Rider does not work like this. The occupation class for additional coverage will be based upon the class at time of the FIO exercise, unless the occupation class at time the original policy was issued was more favorable.
“Off anniversary” increases are also available due to certain life events which include marriage, birth or adoption of a child or children, purchase of a home, a change in employment that results in a loss of group long-term disability insurance, or other similar life events, subject to underwriting approval.
MassMutual now uses an occupation class “modifier” to create additional price points between existing occupation classes. This allows occupations to be more appropriately classified based on their expected morbidity. In some cases, this is beneficial and in other cases, it is not. It all depends upon the occupation class previously assigned to one’s occupation and/or medical specialty.
The occupation class of Physician Assistant has been upgraded from 3A to 4A. This provides a premium savings to those in that occupation.
The new Student Loan Rider (SLR) allows an insured to purchase a rider for $100-$2,500 a month for the purpose of paying student loan debt incurred by the insured with either a 10 or 15-year term from the policy date. Keep in mind that the term begins from the policy’s effective date and may not pay benefits for the full 10 or 15 year period.
As of the time of this writing, the Radius Choice policy is NOT APPROVED in California, Connecticut, Florida, Montana, New York, and Puerto Rico.
Standard
Standard introduced their Platinum Advantage policy series with includes a Benefit Increase Rider (BIR) that provides insureds the ability to increase their coverage, every three years, to age 55, without medical underwriting, to keep pace with income increases. This rider is included with eligible policies for no additional premium, providing vital protection of future income for consumers.
As long the insured purchases at least 75% of what they are eligible for, the BIR is included on the policy at no additional cost. Insureds age 50 or younger can also qualify for accelerated increases before the three-year anniversary if earnings have increased by at least 30% since the policy effective date or the last option date, whichever is most recent or experienced an involuntary loss of group Long-Term Disability (LTD) insurance.
Residents/Fellows can purchase anywhere from $1,000-$5,000 of base benefit during their residency/fellowship. The 75% acceptance of eligible benefit requirement to include BIR will be waived for Residents/Fellows when using Simplified Underwriting. Meaning, a Resident/Fellow that qualifies for $5,000 under Resident/Fellow limits can purchase as little as $1,000 of base benefit and still have the Benefit Increase Rider (BIR) included in the policy.
This is extremely beneficial for those physicians that need to minimize their initial premium outlay and/or are not so much concerned about being insured today but, rather, want to protect their future earnings.
Another important application of this would be for a physician looking to “stack” policies and purchase two different policies from two different companies (with increase options included on each) simultaneously. This strategy allows physicians to potentially reach $25,000-$30,000/month of individual coverage compared to the $15,000-$20,000/month of individual coverage that any one carrier would issue on their own.
Finally, Standard also introduced a Student Loan Benefit Rider available to physicians and dentists with a 10 or 15-year term. Under the Student Loan Rider, Standard will reimburse the insured for the amount of monthly student loan expense the insured pays under a student loan agreement from $500-$2,000/month, depending upon the amount of the rider purchased.
As of this writing, Standard’s Platinum Advantage policy is NOT APPROVED in California, Connecticut, Delaware, the District of Columbia, Florida, Montana, New York, North Dakota and South Dakota.
Ameritas
Effective October 2, 2017, the occupation class for Obstetrician/Gynecologists will change from 5M to 4M (increasing the premium rates) and the maximum discount available for General Dentists, including Dental Residents, will be 10% (from the previous 20%). Discounts available to 5M dental specialists remains unchanged.
What do you think? How will some of these changes affect you? What new features are you most likely to add to your current policy? Have you had to use your policy? What company did you end up going with? Comment below!
What is a good source to learn more about what occupational classification implies and how it works? Thank you.
Actually, WCI did a post on this subject. You can read it here https://www.whitecoatinvestor.com/disability-insurance-occupational-classes/
I purchased a disability policy in 1995, my first full year in practice. It has a $9000 monthly benefit. I have never upgraded it. I always figured if I was disabled, I’d be damn near dead or so severely disabled I’d also qualify for SSD…in Psych, if you can’t work, you must be pretty bad off…
Back then, I had one child (now 4), my basic bills were less than half what they are now, and my salary was about $180,000 a year. My federal tax bill back then was about $40,000 (now $83,000). My salary has not doubled, but with side money, my total income has more than doubled. My basic bills are Noel 1.5 times the disability amount, but it’s untaxed money and now I have a seven figure retirement portfolio.
The policy has level premiums of $2400 a year. I guess I’ve paid about $55,000 in premiums.
At this point, with SSD (assuming I’d qualify) and that policy, I’d get $12,000 a month, $9000 of which is not taxed (I think). Most of my career I’ve also had some disability insurance provided by my employer, but not at present.
It would have been prudent to pay the increased premium fee to get the benefit to $10,000 but I never did. I have only missed about 10 days of work due to illness in 30 years (primarily viruses). Of course, I could have had a stroke or been in an MVA or who knows what, but I’ve been lucky and am in perfect health with only Nexium in the cupboard.
Hey Lawrence,
Thanks for the update!
As someone who screwed up disability insurance royally by trusting a friend’s brother in medical school (wrote about it here: https://thephysicianphilosopher.com/2017/11/21/disability-insurance/) ….I am curious to know what you think about less commonly used products such as the one offered by Lloyds of London for those of us that are difficult to insure because of prior mistakes? Some of their policies work in a very different manner (lump sums at various disability time intervals such as 6, 12, and 18 months following disability).
I realize this is a specific question, but thought it might be helpful for others in a similar situation. Fortunately, I wanted to work in academic medicine and have a fantastic group policy, which is one of the reasons I work where I work.
Lloyd’s of London policies are primarily used to increase the ratio of one’s income that can be replaced when it comes to disability insurance as they will typically insure up to 65% of income minus other disability insurance inforce (individual, group or association coverage).
This replacement ratio is much higher than “traditional” carriers at higher income levels. They offer several products including a “High Limit Physicians and Surgeons” plan, an Accelerated to age 65, 67 or age 70 plan – where benefits are payable for 10 years and if the insured remains disabled, a lump sum (in the amount of what would have been payable to age 65, age 67 or age 70) is payable, a Permanent Total (PTD) plan where benefits are payable in a lump sum after a one year waiting period if the insured cannot return to their medical specialty or a combination of some of these plans.
The other place they may fit well is if one is uninsurable according to the guidelines of traditional carriers. This might be a result of too many exclusion riders (where the policy will not pay benefits to a specific conditions or conditions or for specific body parts) due to pre-existing conditions.
In this case an Accident Only policy may be available or a policy with a 5 year benefit period (benefits payable for 5 years per disability) with a 5-Year Term and, after the term expires, the policy may not be renewed, renewed with different premium rates or renewed with different policy provisions.
Guaranteed Standard Issue (GSI) policies may be available at specific hospitals with certain insurance companies. The availability of them changes constantly. One of the requirements (by the insurance company) for a GSI plan to be maintained is that a certain percentage of those that are eligible to purchase the GSI plan actually do. If this percentage in not met, the offering will likely be terminated by the insurance company. While, this does not impact those physicians that already purchased the policy, it does does mean that it will no longer available to “new” buyers.
You are correct, if one has been declined, a GSI plan is typically “off the table”.
Therefore, it is a very good idea to either lock into the GSI policy first (and then shop to see if you can do better elsewhere) or have an agent/broker do an informal inquiry to see what the likely outcome of medical underwriting would be based upon your medical history. Having medical records reviewed is also a good idea and would provide more definite results (short of lab tests being abnormal, if required or other findings resulting from an application or telephone interview).
The key is working with someone that is familiar with the marketplace, knows of the availability of GSI plans, and can provide you with this information – even if they cannot sell the policy directly to you – but can refer you to the “endorsed” agent or agents that can make it available.
Hope this helps.
MassMutual’s Radius Choice policy has now been approved in Florida, Montana and New York.
So what does that mean? What’s so special about Radius Choice?
It is just an update as at the time of this guest post, the product was not yet approved in these states. In the MassMutual section above, I discuss some of the specific differences between the Radius Choice and their prior Radius policy.
How do you determine occupational class if you are in a residency program that starts with a preliminary year in internal medicine (e.g. ophthalmology, PM&R, and neurology)?
You might be able to work that into a cheaper rate. Then later, as an ophthalmologist, you’re still specialty-specific own occupation but have that cheaper rate. Discuss with the independent agent you’re buying the policy through for further information.
I have a physicians own occupation policy through Lincoln which never converts to any occupation policy for the duration of the policy.
I began working part-time in another profession from home, and because I am self-employed I incur various business expenses to generate this income. Do insurers only look at the gross income earned to determine loss income or do they consider net income when you are self-employed?
My policy has the following clause regarding
PARTIAL DISABILITY MONTHLY BENEFIT will replace the Insured Employee’s Lost Income; provided it does not exceed the Total Disability Monthly Benefit, which would otherwise be payable during Total Disability without the Partial Disability Employment.
Thus, the amount of the Partial Disability Monthly Benefit will equal the lesser of A or B below.
A. LOST INCOME: The Insured Employee’s Predisability Income, minus all Other Income
Benefits (including earnings from Partial Disability Employment).
B. TOTAL DISABILITY MONTHLY BENEFIT otherwise payable:
1. The Insured Employee’s Predisability Income multiplied by the Benefit
Percentage (limited to the Maximum Monthly Benefit); minus
2. Other Income Benefits, except for earnings from Partial Disability Employment.
The Partial Disability Monthly Benefit will never be less than the Minimum Monthly Benefit. The Benefit Percentage, Maximum Monthly Benefit, Minimum Monthly Benefit, and Maximum Benefit Period are shown in the Schedule of Benefits.
They look at personal income, not business income. So, if self-employed, income net of business expenses = gross personal income.
I have a Principal policy from residency and I recently got a pay bump to $400k as a new attending. My employer provides their own LTD that pays up to 60% of my income up to 180k/yr. I will be exercising my future benefit update option soon but how much can I likely expect Principal to increase my DI benefits (currently ~60k/yr)?