When you are working with individuals, such as executives or physicians, who have the potential to be high earners as their careers progress, consider writing disability income with two carriers. Here’s why:
All carriers have maximum issue limits, the maximum monthly DI benefit that a carrier will write on one individual. For most carriers, the issue limit is $17K. On the other hand, carriers’ participation limits–the combined maximum monthly benefit a carrier will allow when the client also has income protection with another individual carrier or group LTD—are higher.
For example, if your client is a 5A executive, carriers will participate up to $35k with group LTD and/or individual coverage with another carrier. For most physician specialities, carriers will participate up to $30K with group LTD and/or individual coverage with another carrier.
Early in their careers, executives and physicians will not likely qualify for these high participation limits, but as their incomes grow, so can their disability income protection when they are insured with two carriers.
The key is to add a future purchase option on both policies, so they can increase their benefits as their incomes grow with no medical underwriting.
Let’s consider an example: a top-earning physician could qualify for $17K of individual disability income with one carrier, $9K with another carrier, even though he has a $5K employer-paid group LTD benefit for a total of $30K. Most carriers discount employer-paid group LTD by 20 percent because it is a taxable benefit, so in this example the group LTD benefit counts as $4K.
On the other hand, a high-earning executive could qualify for $17K with one carrier, $14K with another individual carrier, in addition to his $5K employer-paid group LTD for a total of $35K. Again, the employer-paid group LTD benefit will be discounted by 20 percent to $4K.
When clients write two individual disability policies with the maximum future increase option early in their careers, they can easily add more disability income protection to keep pace with their rising compensation, regardless of their medical history. It’s the best way to insure maximum income protection for your high-income clients.