[Editor's Note: This is a guest post from Lawrence B. Keller, CFP®, CLU®, ChFC®, RHU®, LUTCF, a frequent contributor and now an advertiser on the blog. This is Part 9 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 three of the “Big Six” disability insurance companies- Principal, Metlife, and Ameritas.]
Principal launched several product and underwriting changes, including coverage for individuals working part-time, updates to occupation classes, as well as, tobacco status classifications.
Income Protection for Part-Time Employees (All States)
Historically, industry guidelines required potential insureds to work at least 30 hours per week in order to qualify to purchase
individual disability insurance policies. Principal now makes coverage available to those working 20-29 hours a week, earning at least $40,000 annually and are in occupation classes 3A/3A-M or higher (those more favorable). The only rider not available is the Residual Disability and Recovery Benefit (or Residual Disability/Recovery Benefit Rider).
[This is a serious issue for many emergency physicians. If I average my work hours over all 52 weeks of the year, I'm right around 30 now working 15 shifts a month. If I ever cut back on shifts I'll be well below 30.-ed]
This is great news for those physicians and other professionals that might be raising families, going back to school for additional education or simply looking for more of a work/life balance. These employees can also be considered when trying to establish a multi-life discount, which requires three or more employees with a common employer to purchase disability insurance from Principal.
A good example might be a female physician in private practice with a part-time office manager and a medical assistant. As long as the pre-discounted annual premium for the staff members is $200 or more (which is income tax-deductible to the practice), the doctor can save up to 50% on her policy due to the combination of unisex rates and a 20% multi-life discount.
New 6A Occupation Class (In Approved States)
The 6A occupation class provides, on average, a premium decrease of 12% when compared to the previous 5A rates with a 10% Select Occupation Discount (5A-Select).
6A occupations include Actuaries, Architects, Attorneys, Auditors, CPAs, Economists, Engineers, Judges, Optometrists, Executives/Office Managers/Professionals (earning $75,000 year for the past two years) and Astronomers, Biochemists, Biologists, Botanists, Chemists, Meteorologists, Physicists, Sociologists and Zoologists that hold a Ph.D. and perform office and/or lab duties. Individuals in non-approved states continue to be 5A-Select. [Interesting to see all the stuff Principal views as less risky than doctors and lawyers.-ed]
Benefit Update (BU) Rider (In Approved States)
Advance updates are now available when clients have a 20% (previously 50%) sustainable increase in earnings. Additionally, when clients take an advance option, they don’t lose their next scheduled update and, if an advance Benefit Update option is taken within 12 months preceding a regularly scheduled review, the regular review is not held to help minimize administrative redundancies. This is fantastic news for graduating residents and fellows that want to increase their coverage, regardless of their health, as their incomes rise.
As of this writing, the 6A Occupation Class and the Benefit Update Rider Enhancements are not approved in the following States: Alaska, Colorado, Connecticut, Idaho, Massachusetts, New York, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Vermont and Virginia. The 6A occupation class and Benefit Update Rider changes are not being filed in the State of California.
Tobacco User Status
Tobacco/Non-Tobacco status is now used instead of Smoker/Nonsmoker status. Tobacco rates apply if clients have used tobacco-related products (smoke, chew, cigar, pipe, marijuana), any form of nicotine cessation products or e-cigarettes within the last 12 months. Non-tobacco rates apply if clients use 12 or fewer cigars in the prior 12 months, have negative urine specimens for nicotine and admit to cigar use on the application.
Upgrade for Non-Interventional Cardiologists
Cardiologists (non-interventional) have been upgraded from occupation class 5M to 6M, the top occupation class available to physicians.
Simplified Underwriting Program Improvements
MetLife will now issue up to $6,500 month of individual disability insurance coverage or up to $10,000 month of disability Business Overhead Expense (BOE) insurance (to those applicants age 45 or younger) using their Simplified Underwriting Program (SUP). All that is needed is a full application and prescription history database inquiry. The Guaranteed Insurability Option (GIO) Rider can also be added for applicants up to age 45. Benefit periods to age 65 and age 67 are available (to age 70 or lifetime benefit periods are not available) with a waiting period of 90 days or longer. [Wait wait wait….prescription history database inquiry? You mean disability insurance companies have access to more medical information than doctors do? The only prescription history I can access is controlled substances prescribed in the last year. Where does this database come from?-ed]
For those insureds ages 46-50, up to $3,000 month of individual disability insurance coverage or up to $7,500 month of disability Business Overhead Expense (BOE) insurance is available.
If you own, or have applied for additional disability insurance coverage, the maximum benefit will be limited to either $3,000 or $6,500 month, based upon age. If other coverage is group Long-Term Disability (LTD), the maximum benefit is either $3,000 or $6,500 month over the LTD amounts based upon age.
Please note that the Simplified Underwriting Program is not available in California. Additionally, an application is ineligible if an insured has an adverse driving record (DUI) and/or had a disability insurance policy rated, modified or declined.
Self Employed Applicants
The monthly benefit amount offered to self-employed applicants will now be based on 120% of the applicant’s reported net income. In the past, the monthly benefit amount for self-employed applicants was calculated using their reported net income after expenses.
Take a look at the following example showing how a self-employed applicant earning a net income of $100,000 annually can qualify for an increased maximum monthly benefit amount. Using MetLife’s issue limits, this income would normally allow for the purchase of up to $5,050 monthly benefit. Using the new rule for self-employed applicants, up to $5,800 monthly benefit would be available.
Keep in mind that applicants are considered self-employed if business is structured as partnership, closely held S-Corporation or files a Schedule C.
Several medical specialties have been upgraded. As a result, premium rates for the medical specialties below have decreased. The following medical specialties have been upgraded from the 5M to 6M occupation class:
- Critical Care Physicians
- Pulmonary Specialists
- Sports Medicine Physicians (no surgical duties)
The following medical specialties have been upgraded from the 4M to 5M occupation class:
- Orthopedic Surgeons
- Sports Medicine Physicians (with surgical duties)
- Vascular Surgeons (Non-Cardiac procedures only)
As a result of this change, the specialties where I expect to see Ameritas gain a competitive advantage are Ophthalmologists, Neurosurgeons, Orthopedic Surgeons and Vascular Surgeons – particularly in those states that have additional discount factors – Illinois, Indiana, Iowa, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Virginia and Wisconsin as they use a .90 State Factor for occupation classes 5M and 6M.
Medical and Dental Resident Discount Program
A new Medical and Dental Resident Discount program (using a 20% discount compared to the previous discount of 15%) off of sex-distinct rates is now available for medical residency programs. Additionally, staff physicians serving at an approved teaching hospital or university are eligible for the 20% discount. Considerable savings may be available when all of these changes and discounts are combined, for example, an Ophthalmology Resident, in a .90 State that is part of a medical residency discount program.
What do you think? Do you find this level of detail about disability insurance interesting? Why or why not? Did you know there was a prescription database floating around out there? Comment below!