Lawrence B. Keller
[Editor's Note: This is a guest post from Lawrence B. Keller, CFP®, CLU®, ChFC®, RHU®, LUTCF, a frequent contributor to the blog. This is another in his long-running series updating you on some of the intricate details of the disability insurance marketplace. This particular post deals with Ameritas and Lloyds of London. We have no financial relationship.]
Ameritas – Unisex Rates to be Discontinued
Effective April 1, 2014, unisex pricing will be discontinued for all fully underwritten multi-life, association (even those previously “grandfathered” and big case discount programs. This change will apply to all states except Montana, which requires unisex pricing for all policies and Ohio, which requires unisex pricing for all policies issued with a discount. Unisex pricing will continue to apply to all Guaranteed Standard Issue (GSI) cases and all existing policies that were issued with unisex pricing and a discount.
Again, this provides female physicians with the opportunity to save 40-50% off of the normal female rates. Therefore, if you have been presented with an illustration of coverage with a unisex rate and discount (other than in Montana or Ohio), the time to make your decision is now. Additionally, if you have not been presented with an illustration of coverage with a unisex rate and discount, the time to inquire if one is available to your via your employer or hospital affiliation is now – especially if you are in private practice.
Ameritas – Increased Participation Limits with Group Long-Term Disability Coverage
While the issue limit for Ameritas will remain at $15,000 month (the maximum monthly benefit that they will sell on their own) and their participation limit with other individual carriers will remain at $25,000 month, they will now participate up to $30,000 month for those physicians that have group Long-Term Disability (LTD) insurance inforce. This is true for all states, including California, which traditionally has had lower Issue & Participation (I&P) limits compared to other states.
Lloyd’s of London – Accelerated Benefit to Age 65 Disability Insurance Plan Introduced
Lloyd’s of London has introduced an “Accelerated Benefit to Age 65 Disability Insurance Plan”. The Accelerated Benefit to Age 65 plan was designed to provide an insured person with high-level coverage on top of any existing benefits while, at the same time, providing a benefit period that will provide income for the insured person to age 65. Since this policy is offered as an excess or supplemental policy, the insured person must have underlying group and/or individual disability coverage in force.
When the insured person becomes disabled and the elimination period is fulfilled, the insured person will begin receiving monthly disability insurance benefits. If the insured person is totally disabled for a period longer than 120 months, the Accelerated Benefit Payout provision will be triggered and the policy will pay the remaining monthly benefits to age 65 as a lump sum without any additional definition, which will include the Cost of Living Adjustment COLA), if the rider was purchased.
The policy has a 5-year term. The term of insurance is the time period during which the terms of the certificate or the rates charged cannot be changed by the Underwriters. On the renewal date following a Term of Insurance the underwriters reserve the right to refuse renewal or to offer renewal with different terms or rates.
Exclusions under the policy include suicide or intentional self-inflicted injury or poisoning; committing or attempting to commit a felony; taking illegal or non-prescribed drugs, or addiction or misuse of prescription drugs; alcohol abuse or addiction, or being under the influence of alcohol as defined by the vehicle code of the state or province in which the accident has occurred; mental and/or psychiatric disorders; conditions not disclosed during underwriting; pregnancy and pregnancy related conditions; nuclear, biological or chemical exposure as a result of terrorism or war; active participation in terrorism or war.
[Editor's Note: More information on purchasing disability insurance can be found in my series on disability insurance, which begins here. What did you think of the article? Do you find articles with this much detail useful? Would you consider adding a Lloyd's of London policy on top of your current policy? Comment below!]
Lloyd’s hasn’t’ been mentioned in previous posts about the big 6. Do they have an own occ policy?
Lloyd’s of London is really a supplement to other individual or group LTD plans. In the case of individual policies, for physicians, any one carrier will only issue $15,000-$17,000 in monthly benefit. When one combines carriers, this can increase to $25,000-$30,000 month (up to $35,000 month with group LTD coverage if MetLife is involved).
However, for those physicians earning substantial incomes or those that want a higher percentage of their incomes replaced, Lloyd’s of London makes a lot of sense.
For example, let’s take a neurosurgeon earning $1,000,000 annually. Even if he or she purchases $30,000 month of individual disability insurance, that only replaces 36% of their income.
Since Lloyd’s of London will go up to 65% of earned income (minus existing coverage), an additional $24,166 month ($54,166 month minus the existing $30,000 month) would be available.
Yes, the policy does contain a true “Own-Occupation” definition of total disability. Residual Disability and COLA Riders are also available.
In the past, with the 5-Year benefit period, an optional Lump Sum benefit could be purchased. This was payable if the physician would never be able to return to their specialty again (had a career ending disability).
Now, with the Accelerated to Age 65 Benefit Period, if the physician is disabled and the lump sum benefit is paid after 120 months, that physician can ultimately return to the practice of their specialty.
The key is that Lloyd’s of London would be the last coverage purchased after all of the traditional policies are “maxed out” and the physician is looking for more coverage.
Otherwise, depending upon the amount of Lloyd’s coverage purchased, the other carriers would not allow for any additional coverage as their Issue and Participation (I&P) limits are much lower compared to those of Lloyd’s of London.
Lawrence,
Can you clarify why you would want to max out two individual policies before the Lloyd’s of London policy versus maxing out one policy and then getting the Lloyd’s of London policy? Thanks.
Remember, any one company will only allow for $15,000-$17,000 monthly benefit. This protects an annual income of approximately $350,000-$475,000, depending upon the specific insurance carrier, assuming that no other employer provided group LTD coverage is inforce.
If one is earning a higher income and desires additional coverage with a level premium rate and benefits payable to the age 65 or longer, (like their original policy), layering another policy on top of it can allow them to reach $25,000-$30,000 monthly benefit. Assuming no other employer provided group LTD is inforce, this protects an income as high as $1,220,000.
The Term of Insurance for Lloyd’s of London policies is typically 5 years. On the renewal date following a Term of Insurance the underwriters reserve the right to refuse renewal or to offer renewal with different terms or rates. This is NOT the case with a Non-Cancellabe and Guaranteed Renewable policy from a traditional carrier.
For this reason, until one has “maxed out” their coverage under traditional carriers, it does not make sense to purchase a Lloyd’s of London policy for personal disability income protection.
Does this help clarify things?
Yes, thanks.
I would love to see a survey on the blog about monthly premiums:benefit amount. I am always wondering if I’m overpaying at 350/month own occ for 10,500/month age 31. Purchased at age 29.
Unfortunately, you really won’t find anything like that as there are many variables involved including:
1. Age (Younger the better)
2. Gender (Generally, females pay much more unless they have a unisex rate or multi-life discount on their policy)
3. Monthly Benefit Purchased (was it all at age 29 or did you start with a lower monthly benefit and exercise an increase option rider?)
4. State of policy issue (Depending upon the company states like CA, FL, NV, AZ, for example, can be more expensive)
5. Occupation Class (Surgeon vs. Non-Invasive, Non-Surgical). Some companies are better for certain medical specialties than others
6. Riders (Residual, COLA, Catastrophic Disability, FIO). The more you have, the more expensive the policy will cost)
7. Time of Purchase (Companies make changes to their policies in terms of occupation class, policy series and discounts available)
8. Discounts (Was the policy issued with a discount?). Some agents have access to a variety of discounts with different carriers and others do not.
9. Policy Structure (Does the policy have a level premium, a graded premium, a Step Rate Premium or a Level Term Premium?)
So, as you can see, with the number of variables, it is unlikely that you will find a post that will apply to your situation.
If you are curious as to how your premiums compare to today’s marketplace, you should have it reviewed by an agent that specializes in disability insurance for physicians. If you provide him or her with the schedule pages of your policy and the specifics of your situation, it will be very easy to see if you are paying a reasonable premium for the coverage that you have.
If you desire and send me an email, I would be happy to do it for you. I do this on a daily basis. A second opinion never hurts.
Agree, too many variables. Do your comparing when you’re shopping for a policy, not after.
Just as a general price-to-benefit ratio, I’d say you are definitely NOT overpaying. There are individuals paying double of what you are for the same amount of coverage. If you’d like though, feel free to post your specialty and state of residence – Lawrence or I could easily give you a more thorough opinion.
Thanks for the prompt reply. Ohio, Emergency Medicine, non-smoker, no medical problems. I appreciate your input.
Assuming age 31 (I used your current age), Male, Emergency Medicine Physician in Ohio, the pricing is as follows:
1. MetLife (“old” Omni Advantage policy series) with full/mental and nervous coverage, $10,500 month, 90 day waiting period, benefits to age 65 with the “Your Occupation” Rider, a Residual Disability Rider (36 Month Recovery Benefit Rider), a 0-10% COLA Rider and a $6,500 GIO Rider. The level monthly premium is $427.25.
2. Standard (Protector Platinum) with full/mental and nervous coverage, $10,500 month, 90 day waiting period, benefits to age 65 with “Own-Occupation” and a Partial Disability included, a 3% COLA Rider and a $4,500 FPO Rider. The level monthly premium is $390.87. This includes a 10% association discount.
3. Ameritas, $10,500 month, 90 day waiting period, benefits to age 65 with “Own-Occupation” and an Enhanced Residual Disability Rider, a 6% COLA Rider and a $4,500 FIO Rider. The level monthly premium is $423.83. This includes a 15% association discount.
4. MassMutual, $10,500 month, 90 day waiting period, benefits to age 65 with an “Own-Occupation” and an Extended Partial Disability Rider, a 3% COLA Rider and a $4,500 FIO Rider. The level monthly premium is $436.40.
5. Principal, $10,500 month, 90 day waiting period, benefits to age 65 with a “Regular Occupation” Rider, a Residual Disability and Recovery Benefit Rider, a 3% COLA Rider and a Benefit Update Rider. The level monthly premium is $289.66. This includes a 10% association discount.
I will post Berkshire’s premium rate shortly as their website is down for system maintenance.
6. Berkshire, $10,500 month, 90 day waiting period, benefits to age 65 with “Own-Occupation”, a Residual Disability Rider, a 3% COLA Rider and a $6,500 FIO Rider. The level monthly premium is $412.77.
Keep in mind that your policy may not include all of the riders that I included. Additionally, discounts are usually available for MetLife. If you purchased a Berkshire policy when you were in residency, a 10% discount may have been available and MassMutual also have discounts available at certain hospitals along with an occupational class upgrade.
So, this should definitely help you see where you stand. However, keep in mind that every situation is different and the premium rates and discounts available will vary.
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