Larry Keller
[Editor's Note: This is a guest post from Lawrence B. Keller, CFP®, CLU®, ChFC®, RHU®, LUTCF. We have no financial relationship.]
Since my last disability insurance update, Berkshire has increased their Issue & Participation (I&P) Limits and introduced their broader ProVider Plus product offering (which includes the ProVider Plus Limited) in California. MetLife has also introduced their Income Guard policy in the majority of states.
Berkshire
Berkshire increased the monthly benefit available to First and Second Year Residents from $4,000 to $5,000. Additionally, the maximum issue limit for physicians and dentists has increased from $16,000 to $17,000 month. The maximum participation limit with other individual disability insurance has also increased from $20,000 to $25,000 month (with the exception of the State of California).
In California, rates have increased across the board. When combined with the new Mental and/or Substance-Related Disorders Limitation Discount (10%), sex-distinct level rates will generally be 4.25% higher.
A new occupational classification for all dentists and dental specialists (3D) has been created. As a result, rates for males will generally be 4.25% higher and female rates (especially for those female dentists under age 40) will be substantially higher (compared to the current 3M rates).
Perhaps, one the biggest changes is for those insureds that elect a graded (annually increasing) premium structure in order to minimize their initial premium outlay. The initial graded premium rate has increased substantially. So, for those looking to purchase a policy with a graded premium structure, the lower the initial premium rate, the better!
Rates have also been increased for all ProVider Plus products in the State of Arizona. There is still time to lock into the “old” rates in both Arizona and Florida. Applications submitted on or before May 24, 2013 will receive the “old” rates. Beginning May 25, only the new rates will be available.
MetLife
Medical and Dental Specialty Language Introduced
Metlife will consider the material and substantial duties they were performing, including those of a professionally recognized specialty in medicine or dentistry immediately prior to the start of their disability to be the material and substantial duties of their regular occupation.
Tail-End Waiver of Premium
If premiums are being waived and benefits have been payable for 12 months or more, MetLife will continue to waive any premiums due during the first 90 days after disability ends.
Residual Disability and Residual Disability with Recovery Benefit Riders
MetLife now offers three Residual Disability Riders (Basic Residual, Residual with Recovery and Enhanced Residual with Recovery). All of them provide benefits if disability causes a loss of earnings of 15% or more (reduced from 20% under the Omni Advantage) compared to the insured’s pre-disability income. The addition of a recovery benefit extends the period that benefits are payable under the rider to include a period after total or residual disability where the insured has returned to work on a full time basis, performing all of the material and substantial duties of the his/her regular occupation, but continues to have an income loss due to the condition that caused the disability. Under the Omni Advantage, recovery benefits, if elected, were limited to a maximum of 24 or 36 months. The Enhanced Residual with Recovery Rider also modifies the time or duties requirement within the definition of residual disability. Finally, the riders that include recovery benefits also state that, during the first 12 months in which residual disability benefits are paid, the minimum monthly benefit for residual disability will be 50 percent of the monthly benefit for total disability.
Mental Disorder and/or Substance Use Disorder Mandated for Certain Specialists
Under the current Omni Advantage policy, disabilities due to a mental disorder or a substance use disorder are payable for the entire benefit period. However, with Income Guard, those in occupational classes 5D (the new occupational class for Dentists) and 4M (Orthopedic Surgeons, OB/GYNs, Psychiatrists, Anesthesiologists, Emergency Physicians, Interventional Radiologists, Interventional Cardiologists) will be issued policies that include a mandatory rider which limits the maximum benefit period for disabilities caused by mental and/or substance use disorders (MDSUD) to 24 months over the life of the policy, unless the insured is confined to a hospital, when the “specialty your occupation” language is included. A 10% premium reduction will apply with the inclusion of this MDSUD Rider. However, it will only apply to certain elements of the premium and not the entire premium. As a result, there is a huge incentive for Anesthesiologists and Emergency Physicians to purchase the “old” (Omni Advantage) policy while it is still available as the only other company that combines a true “Own-Occupation” definition of total disability with full coverage for mental and nervous conditions (for those specialties) is Standard Insurance Company. Unfortunately, in most states (with the exception of California, Florida and Vermont), Standard places Anesthesiologists in their 2P occupational classification (unless they are Pain Management Physicians) and, as a result, are subject to a 25% surcharge compared to all other medical specialties. Once the Omni Advantage is no longer an option, Standard will be a more viable alternative for Emergency Medicine Physicians (compared to Anesthesiologists), due to the more favorable occupational classification (3P) that they are assigned.
Limited Benefit Period While Outside the United States
Currently, under the Omni Advantage, claims are paid outside the United States with no limitation. Under the Income Guard, while an insured is outside the United States, its possessions and Canada, benefits will be paid for a maximum of 24 months for all periods of disability combined during the insured’s lifetime. This means that after the July 31st deadline (for those states in which Income Guard is already approved), in most cases, MassMutual will be the only company providing an insured the ability to receive benefits outside of the United States with no restrictions.
Introduction of the 3% Compound Cost Of Living Adjustment (COLA) Rider
This Cost of Living Adjustment (COLA) rider increases the monthly benefit payable for disability by 3% of the monthly benefit payable from the previous year.
Introduction of the COBRA Reimbursement Rider
This rider reimburses the insured for COBRA premiums paid while the insured is disabled, not to exceed the monthly maximum (Up to $2,000 per month for a maximum 15 months per disability). The only other company that offers a similar policy provision is Ameritas, which has it built into their contract at no additional cost.
For states in which MetLife Income Guard is currently approved on May 6, 2013 (currently all but California, Colorado, Connecticut, Florida, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, North Carolina, Ohio, Rhode Island, South Carolina, Vermont, and Virginia,) the last day an Omni Advantage application will be accepted is July 31, 2013. Finally, remember that policy provisions are subject to state availability. Also note that the descriptions above are intended as brief summaries of actual policy provisions and you should refer to a specimen policy for complete policy terms and provisions.
In the market for disability insurance? Recently bought some? Which policy did you buy? Comment below!
Thanks for the information. Very nice.
Another fantastic post – thank you WCI and Mr. Keller for the concise yet detailed information. I wondered if either of you have any thoughts on the “benefit update” that Principal offers (as a future purchase option). I’m shopping around for IDI in MA and having a tough time finding a truly “independent” agent but seem to be narrowing it to Principal vs. Guardian. Guardian has a better policy (IMHO), but at a significant cost…the biggest differences seem to be in residual disability and in the specific language of the future purchase option (or “benefit option). Any help much appreciated!!
David-
Thank you for the kind words!
Depending upon your medical specialty and hospital/medical association affiliation, you may be able to find both of those policies with discounts (Principal’s for sure).
The Benefit Update Rider has both positives and negatives. The positive is that as long as you purchase at least 75% of what you are eligible for (there are several ways to meet this requirement), the Benefit Update Rider is included in the policy at no additional cost.
Every three years you will then have the ability to increase your coverage to the maximum that Principal will offer based on their Issue and Participation (I&P) Limits. However, unlike the other companies, you must check-in with Principal every three years in order to keep the BU Rider on your policy. If you do not send in the application to increase your coverage, after multiple attempts, it will be removed from your policy permanently.
If you do send the form back (as you should) and do not qualify for additional coverage, you will be declined from a financial underwriting perspective and will go through the same process three years later. If, however, you do qualify for additional coverage, you must purchase at least 50% of the eligible amount or, again, the BU Rider will be removed from your policy permanently.
Those are the negatives of the BU Rider but if you know that this is how that contact works, and understand the reasoning behind it, it should not be a major issue.
On the positive side, Principal does not issue a new policy when you increase your coverage. As such, all of the policy provisions and the rate book that you locked into when you purchased your will remain the same (but you will pay the rates based on your then current age for the additional coverage) and should Principal increase their limits, in the future, you can take advantage of them as there is no predetermined increase option (dollar amount) stated in their contract.
Yes, Berkshire is a stronger contract overall but one must look at both the cost vs. benefits, determine what is most important to them, and then make a well-informed educated decision.
Hope this helps. If you would like to discuss your situation in detail, I would be happy to chat with you.
Great post Lawrence. It seems that the income guard policy by MetLife compares very favorably to guardian provider plus now. What would be the key differences?
Yes, it is now very similar. The key differences are as follows:
1. Berkshire will reimburse a Residual Disability cliam on a dollar for dollar basis for the first 12 months. MetLife will pay no less than 50% of the monthly benefit for the first 12 months.
2. Berkshire will not pay claims outside of the United States or Canada. MetLife will pay up to 24 months outside of the United States or Canada over one’s lifetime.
3. When the Guaranteed Insurability Option Rider is exercised, MetLife guarantees the original policy’s contract language and rates (they simply amend the schedule pages of the policy), inlcuding any applicable discounts.
Berkshire can add to the existing policy or issue a new policy that is most like the policy that was originally purchased. In order to receive a discount on the FIO policy, you must still have affiliation with a medical society or employer that has a discount plan in place.
4. Depending upon medical specialty, MetLife’s policy may have a 24-Month limitation for mental and nervous conditions.
Berkshire only has this limitation for Emergency Medicine Physicians, CRNAs, Anesthesiologists and Pain Management Physicians (except for insureds that purchased their policies in Florida and California where all policies have this limitation) or for all insureds that purchase the ProVider Plus Limited policy. Policies issued in Vermont do not have this limitation.
5. MetLife requires a complete, irrecoverable and irreplaceable loss of the use of both hands, both feet or one hand and one foot; the sight of both eyes; speech; or hearing in both ears in order to be considered presumptively disabled.
Berkshire would consider an insured presumptively disabled immediately and even if the insured is expected to recover and even if he or she is full employed and earning an income despite their condition.
6. Bershire’s Future Increase Option is available evey year up to and including age 55. One can exercise the full amount up to age 45. After age 45, one can exercise up to one-third of the original FIO amount (or the remaining FIO amount if less than $1,000).
MetLife’s Guaranteed Insurability Option is available every year up to age 51 (in $1,000 increments). If all or part of a unit of increase is not used as of any option date, it can be carried forward and applied for on the next option date; However, it many not be carried forward past the next option date. A unit carried forward can only be used if you also apply for all of your current unit of increase.
The Advanced Option Benefit allows an insured to apply for any amount of increase up to the maximum total increase until the later of the third option date or the insured’s 40th birthday. This is a major advantage compared to some of the polices MetLife issued many years ago.
7. If the Berkshrie policy includes a COLA Rider, should the insured recover, they automatically retain the increases, free of charge, until age 65 or 67.
MetLife will allow the insured to increase their coverage up to the amount
of the last adjusted monthly benefit for total disability. However, the insuredmust pay a premium for the increased coverage but there are no financial or medical underwriting requirements.
There are some other differences, but, I believe, the major ones are reflected above.
Keep in mind that MetLife’s new Income Guard policy has a very large number of riders available, as such, unless the agent you are dealing with is very familiar with disability insurance, mistakes can easily be made.
How do you recommend finding a good broker (we live in Texas)? Also, what are your thoughts on the relative worth of disability insurance in a household where both individuals have high paying jobs and robust retirement savings in place?
If you are financially independent (i.e. could quit working now) then you don’t need disability insurance. You may also not wish to carry it if you could live off the other spouse’s income. You would be running the risk of both of you becoming disabled at once, not to mention disability after a divorce, or a disability leading to a divorce etc.
I’m not sure what you mean by a broker. If you want a financial planner or an asset manager, I’ve written many posts about how to find a good one. If you want a brokerage account, most people are happy with accounts at Fidelity, Charles Schwab, Wells Fargo or even Vanguard. These discount brokers allow you to buy and sell online for less than $10 a trade. If what you mean by a broker is some kind of full service commissioned salesman at some place like Edward Jones to predict the future for you, I’d caution you against hiring one at all. Perhaps spend some time here:
https://www.whitecoatinvestor.com/investing/what-you-need-to-know-about-financial-advisers-2/
By broker I meant an insurance broker who can offer us several different disability insurance options. There are several mentions in your posts about making sure you find someone who is independent and “unbiased.” Our finances are under control but I’ve never ventured far into the insurance marketplace.
You will want to make sure that the insurance agent(s) that you deal with provide you with illustrations for several insurance carriers and educate you as to the differences among them. Ideally, some of which should be discounted based on hospital affiliation (assuming you are a physician) or other professional association.
The areas that differ among most companies are how claims for disabilities related to mental and nervous conditions are handled, if there are limitations for foreign residency and the triggers for Residual Disability. For females, if a policy with unisex rates is available, a considerable amount of premium can be saved.
You can also ask the agent(s) how long they have been in the industry, how many companies they represent and how many disability insurance policies the have written for your occupation(s).
When in doubt, ask questions or have another qualified insurance agent review what has been presented to you for a second opinion. I receive calls or emails to do this “all the time”.
I agree. The key to finding a good insurance agent is knowledge of physician-specific issues AND independence. You don’t want a guy who can only sell you a policy from one company. What are the odds that the one company he sells for has the best fit for you? Not that good.
Thanks for the helpful info. Can you comment on Berkshire vs Metlife in terms of claims experience? Metlife is listed on the list of “Bad-faith insurance companies” on badfaithinsurance.org. Does that mean I basically will need to fork out 20-30% of my benefits to hire a disability attorney if I have a claim.
Is Guardian significantly better with claims than Metlife, enough to justify the higher price?
So much reading on disability as I’m signing my first policy 4 months out from graduation from anesthesia residency. I’m starting with Principal, regular occupation. I want to increase my policy in the next couple of months but can’t figure out if I should just get another policy with another company to “stack” with a younger starting age and locked in health status (best health status currently) or max out my Principal policy and add on a second carrier later when I make partner with substantially higher salary. Is there any benefit to doing this one way or another? Also, people keep mentioning females pay more, but my policy is unisex. Is a male policy cheaper? Multiple authors state you can obtain discounts through “certain medical associations” on individual policies. Which associations are these? I could always join if the dues aren’t that high and offset the price of insurance. Lastly, thank you to all who have provided the guest posts on DI (I feel pretty good about understanding DI now!).
What does the independent agent who sold you the Principal policy say? That’s where I would start. It is an interesting question. One benefit of getting a new policy would be that you could preserve the ability to increase the Principal policy later if you want.
For females, purchasing a policy with a unisex rate and discount is considered the “holy grail” as the premium rates will be 40-50% lower compared to the normal female rates.
Principal will issue up to $15,000 month of individual coverage. Assuming that your employer does not provide you with any group LTD coverage,this protects an income of approximately $350,000.
Unless your income potential is going to be substantially higher than that (assuming that even as a partner you will not be provided with group LTD), you should probably max out the Principal policy first – especially if you are female (I know males and females named Kyle) as another policy with a unisex rate may not be easily available – and then in the event you need or want more coverage, go elsewhere.
For males, especially those in high income specialties like neurosurgery, orthopedic surgery and others that are procedure oriented, it makes sense to purchase coverage from at least two carriers to potentially reach $25,000-$30,000 month doing only one exam, blood test and urine test.
While there are association discounts available with several of the carriers, they typically do not have unisex rates.