Larry Keller

[Editor's Note:  Like most industries, the disability insurance market has frequent changes.  In this guest post, Lawrence B. Keller, CLU, ChFC, CFP® updates us on some recent changes with MetLife and MassMutual, two of the “Big Six” companies offering specialty-specific individual disability insurance.  We still have no financial relationship.]

Since my original guest post and my last update MetLife has made additional changes to their first year resident and starting practice limits and MassMutual has made enhancements to their policy by using a combination of techniques including occupational class upgrades and rider enhancements.

MetLife increases benefits

MetLife increased the monthly benefit available to first year residents from $3,500 to $5,000.  Additionally, all physicians in their last six months of training through their first year in practice now automatically qualify to purchase up to $7,500 month.  However, while this is true regardless of employer provided group LTD for residents and fellows, first-year physicians that have other group disability insurance in force will be subtracted from these limits.

MassMutual introduces new occupational class upgrades for non-invasive physicians

Twenty medical specialties have been upgraded from occupation class 4P to occupation class 5P.  This results in a rate reduction of 12%.  In addition, five medical specialties have been upgraded from occupation class 3S to the new 5P occupation class, resulting in a 20% rate reduction.  They are neurologists, pulmonologists, hospitalists, nephrologists and occupational medicine physicians.

MassMutual upgrades occupational class for 2P physicians

While this upgrade took place last March, this one now allows MassMutual to be more competitive.  Those specialists in the 2P occupation class (anesthesiologists, emergency medicine physicians, neurosurgeons, orthopedic surgeon and thoracic surgeons) have been upgraded to occupation class 3P, resulting in a rate reduction of  approximately 35%. Additionally, this upgrade also allows them to purchase the “Own-Occupation” Rider (not available in California)and to qualify for enhanced issue & participation limits.  MassMutual will now issue these specialists up to $15,000 month (up from $10,000) and participate with another carrier up to $20,000 month. Now let’s look at some of the policy enhancements that were just introduced (November 19, 2012). 

MassMutual enhances extended partial disability benefits

The loss of income requirement has been reduced from 20% to 15%, which now matches Berkshire’s (Guardian) ProVider Plus and Ameritas’ (Union Central) policies. It is now easier to trigger the rider and can be done in one of three ways.  During the first 6 months (including the elimination period), the insured must be working and due to sickness or injury must:

  1. Be unable to do one or more of the main duties of his/her usual occupation; or
  2. Suffer a loss of time of at least 15% from his/her normal work schedule of main duties; or
  3. Has a reduced capacity to perform his/her usual occupation that results in at least a 15% loss of earned income.

There are also three ways to calculate the benefit amount for the first 12 months of partial disability:

  1. A guaranteed minimum of 50% of the extended partial disability benefit (this is standard with most companies).
  2. The insured would be reimbursed based upon actual loss of income (dollar for dollar) up to their full partial disability benefit (like Guardian’s ProVider Plus “flagship” policy).
  3. If the insured has a greater than a 75% loss of income, then 100% of the partial disability benefit would be payable.

MassMutual introduces a graded premium rate

A graded (annually increasing) premium structure has been introduced.  This is similar to Guardian’s graded premium structure and MetLife’s term premium structure.  It is designed to allow young professionals to reduce their initial premium outlay.  However, it is only available to those insureds age 35 or younger and must be converted to a level premium by age 40.  Otherwise, the premium will continue to increase annually until age 50 when the premium automatically becomes level for the duration of the policy.  [Editor's Note:  I've written about graded premiums before.]

MassMutual has a new guaranteed insurability option for permanent life insurance As part of the base policy, the GIO for life insurance guarantees the insured the right to purchase a new permanent life insurance or add additional coverage to an existing permanent life insurance policy, without having to do an exam, blood or urine test, or answer any medical questions (as long as they are not disabled) at specified dates in the future.

On set option dates, the policy owner may purchase $25,000 of permanent life insurance. The option dates occur every three years between the insured’s ages 25 and 46, on their policy’s anniversary. The insured can also accelerate an option after marriage or the birth or legal adoption of a child.

Since the amount available is small and the Waiver of Premium Rider is not available when using GIO to purchase a new permanent life insurance policy, while unique, I don’t see this providing much value to policyholders.  It is also only available to those insureds that purchase their policies at age 35 or younger.  [Learn more about the downsides of permanent life insurance.-ed]

Finally, remember that all these rider enhancements are subject to state availability.

Lawrence B. Keller, CLU, ChFC, CFP® is the founder of Physician Financial Services, a New York- based firm specializing in income protection and wealth accumulation strategies for physicians.  He can be reached at (516) 677-6211 or by email to [email protected] with comments or questions.

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