There are fewer disability income carriers in the marketplace than there were in the ’90s. However, there are several very good disability insurance companies that offer high-quality individual policies. How do you choose the right carrier for your client?
Choosing a strong Definition of Disability for income protection is critical. The definition of disability triggers the claim and determines how long and under what conditions the claim will be paid. The strongest definition of disability is the “true” own occupation–cannot perform the material and substantial duties of your occupation, even if you are working in another gainful occupation by your choice. Physicians and professionals are the best candidates for the “true” own occupation definition.
The “modified” own occupation definition of disability is a quality definition for most occupations. In short, the insured will be considered disabled if he or she cannot perform the material and substantial duties of his or her occupation and is not engaged in any other gainful occupation. So, if the insured chose to work in another occupation the monthly disability benefit would be offset by the income earned. However, only 1% of claims result in the insured choosing to work in another occupation. So, for most occupations, the “modified” own occupation definition is adequate income protection.
The less-favorable definition of disability states that the insured is disabled if her or she can’t work at any gainful occupation. This definition leaves a lot of discretion to the carrier. For some manual occupations, a portion of the benefit period will have this definition. So, for a construction worker, the definition may be “modified” own occupation for two years and any occupation for the remainder of the benefit period.
Take care in choosing a disability income contract with a strong residual or partial benefit and return-to work benefit. Thirty-three percent of claims are partial or residual only. For this reason, it is important to seek a strong partial or residual definition of disability in a disability plan. If at all possible avoid a disability plan that require a full disability before it will pay a partial or residual disability claim. Choose plans that instead will pay a partial or residual claim with a 15-20 percent loss of income in addition to a loss of time or duties. Most plans will pay at least
In addition, choose plans that will pay a recovery benefit when possible. If the insured is no longer on claim and back to work at least 30 hours a week, yet still experiencing a 15-20 percent loss of income because he must build his business back up to pre-disability levels the plan will pay a partial benefit for a period of time. The strongest contracts will pay a return-to-work benefit for the duration of the contract or whenever the insured’s income returns to pre-disability levels, which ever is sooner.
When choosing a disability income carrier, consider its financial strength. In the event your client becomes disabled, you are staking your reputation on the carrier’s ability to pay the claim. Without a company, there is no disability benefit. A competent disability income specialist will review the financial strengths ratings of the companies they discuss with you from Standard & Poor’s, Moody’s and A.M. Best.
Contact a disability income brokerage company (such as the one who runs this website) who represents several disability carriers. You can ask for quotes from each carrier and get side-by-side comparison of benefits, so you can easily analyze the benefits and premiums of each policy. The major players in the high-quality individual disability insurance market are Guardian (Berkshire), Mass Mutual, MetLife, Principal, Standard and Union Central. A broker specializing in disability income should be able to get you quotes from most of these companies.