Larry Keller
[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
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.
MetLife
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.
Ameritas
Specialty Upgrades
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
- Neonatologists
- Nephrologists
- Oncologists
- Ophthalmologists
- Proctologists
- Psychiatrists
- Pulmonary Specialists
- Sports Medicine Physicians (no surgical duties)
The following medical specialties have been upgraded from the 4M to 5M occupation class:
- Neurosurgeons
- 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!
Interesting updates. I love reading these posts to keep staying on top of the market. It just so happens I am an ophthalmology resident in Florida – but I already have a Guardian and a Principal policy (maxed benefits for a resident). will have to keep that Ameritas option in the back of my mind for the future
MedPoint by Ingenix, Intelliscript by Milliman, and ScriptCheck by Quest all use information primarily from pharmacy benefit managers to track your prescriptions in the past five years. If you gave the pharmacist your insurance card and not just your cash (and maybe even then), Big Brother and the insurance company know about it.
It’s all part of the fine print and rights we signed away when applying for disability and life insurance. Bet the insurance company likes it as it’s quicker and dirtier than having to wait on and wade through our notes as physicians. These are covered, however, by the Fair Credit Reporting Act and can be accessed for free annually like the more commonly known credit bureaus.
I’m still interested in these posts even though I have max individual policies and a group policy. What happens to existing policies if you work less than 30 hours a week? I’m also an emergency medicine doc and average about that but plan on dropping a couple of shifts a month soon. If I’m under 30 hours should I consider dropping my policies (I have Standard protector I place for near a decade).
I don’t believe they drop you once you already have a policy, but I’d like to hear Mr. Keller’s answer to your question.
The 30 hour requirement is only applicable at the time of the initial purchase. If you subsequently reduce your hours after the policy is inforce, the insurance company cannot cancel your disability insurance policy.
If you are working less, earning less or simply don’t feel that you need the same level of coverage that you have in place, you can always reduce the monthly benefit on your policy.
Thanks for confirming my understanding.
30 hr at time of purchase with no impact by future hours seems quite beneficial for residents. Thanks for the clarification.
Do any of these policies cover normal pregnancy time off?
Normal, routine maternity leave is typically only covered by an employer-sponsored short-term disability policy. Even the short-term disability insurance policies offered on an individual basis do not cover maternity leave.
Long Term disability insurance policies do cover complications of pregnancy (unless specifically excluded on your policy), just as they would any other illness.
Thanks for the updates, Lawrence. It takes substantial professional effort to remain on top of changes in the disability insurance marketplace since regulations are not uniform. It can also be difficult to obtain the latest information from the carriers themselves. That is why an agent who specializes in disability insurance can bring a lot of value. Meanwhile, MetLife’s Income Guard still hasn’t been approved here in California!
[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]
This is an indicator of the trend. Eventually, all that will be needed is for the applicant to sign off on what the company calls “a license to hunt” in which the company undergo an exhaustive electronic search for your medical records, script checks, avocation licenses, financial records, motor vehicle reports, medical insurance claims, existing disability coverage, etc.
If anyone is contemplating disability insurance, it would probably be best to act sooner rather than later because access to this additional information will make it even more difficult to establish disability coverage.
I believe as my net worth increases I have a smaller and smaller need for insurance. Life and disability are included. Is there a way to set up policies that actually decrease over time to extinction upon “hitting your number / retiring?”
Not really. For disability insurance, you would have to work with your agent to remove riders and/or reduce your monthly benefit as your needs change.
For life insurance, the best thing that you can do would be to “ladder” your term life insurance policies to expire as you hit different numbers but that can also be tricky. So, again, you should just work with your agent to make modifications to your coverage as needed.
I think most people would agree with you. As Lawrence indicated, this type of reduction can easily be processed through your agent, but not automatically.
Keep in mind that inflation naturally reduces a person’s coverage as well. We obviously cannot forecast future inflation, but assuming an average of 3%, $1 loses half its purchasing power every 24 years. So, a physician who purchases his policy at age 30 and does not increase his/her coverage at all, will have approximately half the protection he/she originally purchased, by age 54.
They all kind of do that when you consider the effects of inflation.
The other option for reducing coverage, assuming you are young, is to have several policies and drop the ones you no longer need. I have 4 policies from the same company that I purchased as my income and needs increased (kids) over the first few years of working. I plan on dropping one of those policies next year as my needs have decreased. I did not plan it this way, but it seems one could do this on purpose.
I’m going through the underwriting process right now, will I still be able to benefit from these changes – like the extra 5% off for residents for Ameritas or the SUP + GIO for metlife?
(I’m applying to Metlife and Ameritas simultaneously right now.)
Yes, you would qualify for the 20% resident discount with Ameritas. Those resident discount programs that were 15% have been adjusted to reflect the increase to 20%.
If you are applying for both Ameritas and MetLife, you would not qualify for MetLife’s SUP (as the total monthly benefit between the two carriers applied for are $10,000, which exceeds the MetLife SUP limit of $6,500).
Thanks Larry,
Sorry, I guess that sounded like I’m getting both policies – I’m not. One or the other. I submitted an application to both but haven’t gone through the complete underwriting. I just thought since it sounds like the process is easier and can get a higher base benefit even though I’m headed to fellowship. Something to look into?
You would still not qualify for more than a total of $5,000 month until you are in the last 6 months of fellowship.
Yes, I realized that it was one or the other but MetLife will not view it that way for the Simplified Underwriting Program.
In general for standard underwriting of disability policies, how far back to they go with your medical history? I recently started as an employed practicing non-invasive cardiologist (I saw the post above about MetLife). Back during my training days, I had to undergo hip surgery about five years ago due to an injury. I have had no problem since then and am not on any meds; at this point, would I be facing an exclusion for my hip?
Some companies have “ever” questions, some are 10 years and some are 7 years.
What type of hip surgery did you have? Was any surgical hardware placed?
If it was 5 years ago and you have not had a problem since, I don’t anticipate any adverse action for your hip (other than potentially an exclusion for the removal or pins or screws if you have any).
I can easily check with an underwriter and let you know.
What’s your advice for active duty military residents/physicians and disability insurance?
I’m not in residency yet, but I’ve casually asked a few people I know in the insurance field and it seems like no one sells disability insurance to active duty doctors, even with some sort of “combat exclusion.”
The VA disability system would provide some benefits, especially if severely disabled, but probably not match a good disability policy that a doctor would likely have otherwise.
If you are a resident/fellow that is active duty, you can purchase coverage from Standard Insurance Company without restrictions.
Otherwise, MassMutual has a program for military physicians with limited benefits.
As a last resort, you can purchase coverage from a medical association.
For General cardiologists (non-interventional), the premium for DI with MefLife is unbeatable now. As pointed out by Mr. Keller, cardiologists are in 6M category (lowest risk=lowest premium). This is not the case with other companies (guardian, standard) etc.
I was surprised to find 2 of Metlife agents who gave me the quotes put me in 4M occupational category as a general cardiologist, while an independent agent gave me a 6M and a much lower quote!
Question,
I currently have a disability policy in place and I went to look over the policy after its already been in place for a month and a couple of things on the medical Hx r inaccurate. For example I had surgery when I was a kid and I (act prob my agent bc I didn’t think about it) check no. Is there a statute of limitations on this stuff or can this bite me in the ass 5 years from now if gd forbid I needed to file a claim?
Unless it is something chronic, I would most likely not concerned.
However, you might want to send your agent an email outlining the details that needed to be corrected regarding your medical history.
He can them forward them to the underwriter to document your file or have a new policy issued amending how those questions were answered.
Hi Lawrence,
I have a disability policy from when I was a resident. I’m now an attending 2 years out. I never explored alternative and have no clue if my policy is adequate. Do you review policies? I’m curious to know if I mine is good enough or if I need to make changes.
Thanks for your help,
Michael
Yes, I review policies on a daily basis and can easily evaluate your policy.
If you send me an email ([email protected]), I can email you a few questions to answer and tell you exactly what I need.
In case you are wondering, there is no charge associated with this at all.
No charge for a review, but agents are paid commissions when they sell you a new policy. So his obvious bias is to say your current policy is crap and you need a new one and he can sell it to you. Not that I think he would do that (it helps that he’s past the “hungry” phase all agents go through), but it’s important to be aware of the biases of anyone advising you.
That might have come off too harsh. I should mention that he reviewed a policy of mine once and recommended I keep it and I felt the review was as unbiased as you can get from an agent.
I should say that Larry took the time to review my policy. He was very thorough and reviewed my policy documents in detail. He was very courteous and replied quickly through email. He did not recommend a new policy. I hope this helps others.
At what point should someone cancel their disability insurance?
For ex, 61 yo primary care doc with 11K monthly policy. Premium is about $500/month.
if becomes disabled, the policy pays til 65 yo, correct? (unless becomes disabled between 64-65yo).
currently ok.
so, would you advise risking it and putting the premium $ into retirement accounts?
The general rule is stay insured until you’re financially independent. However, I’m not sure I’d pay full premiums for just a year or two of benefits. 61….I dunno, I might risk it if I was feeling pretty healthy and pretty close to financial independence.
Toby,
In my opinion, a person should only cancel their policy once they no longer have a need for it. Within your post you asked “would you advise risking it”? If it’s too big of a risk, then No. If you have nearly sufficient assets to retire at this point but are not quite comfortable, you can always consider modifying your policy instead of outright cancelling it. Insurance companies will allow you to remove optional riders (such as a COLA rider you may still have on it), reduce the benefit amount, increase your elimination period, etc. These are all options that would help reduce your cost but still allow for some coverage to remain in place, just in case.
I’d like to hear your opinion about first time purchasing disability insurance. As a young full time physician with an adequate group coverage policy (despite the known downsides of group plan), does it make sense to get a low coverage individual policy (sub 5000 monthly) with future increase option solely for the reason in case the group policy gets canceled? So I would increase the coverage at a later time when I am older if I leave the group or if the group plan is canceled, without need for underwriting. But then the premium would be much more expensive at that time? Would it be more worth it to just get a high coverage plan when I am still young despite feeling the group policy is adequate for now? Thanks
Tough question. Personally, if I felt the group policy was adequate for now (with all the research that statement entails) I would skip the individual policy, but I’m much more risk tolerant, both in life in general as well as financially, than most docs.
Thank you for your quick reply.
I agree. I wasn’t planning to get an individual policy until I was alerted that group policy can be canceled anytime, or that I may leave the group, and I might be too old by then to secure an individual policy without exclusions, so obtaining a cheap policy now with FIO may be beneficial.
Your blog has been very helpful.
My group has a pretty good plan with short term disability at 60% and LT 50% (up to 10K) all un-taxed..
I still decided to get an individual plan 5k+1.5k (added)= 6.5k which together with my spouses income covers our current mandatory expenses (mortgage, loans, life). I may not stay with this group forever and I think its prudent to lock in a min. benefit when you’re young. It costs 250/month which stings but is largely outweighed by my piece of mind which I value.
I have a separate question WCI: When would my individual DI kick in? Only after my group ST or LT is maxed out (like a pseudo umbrella plan) or is it additive? Thank you for your amazing site and book.
Your individual policies would pay in addition (additive) to the employer provided group LTD plans if you meet the definition of total disability under all of the policies.
Unlike health insurance, there is no “primary” or “secondary” policy.
Yup, additive.