What do issue and participation limits mean and why are they important? Issue limits are the highest monthly disability benefit a carrier will issue, regardless of income. For most carriers the range is between $15-$20,000, depending on the occupation class.
Participation limits become important, especially for high-earning physicians and executives, when these clients have reached their maximum issue limits with a carrier or their compensation is higher than the group LTD cap. Participation limits are the highest monthly disability benefit carriers will offer in addition to group Long Term Disability (LTD) or other individual disability insurance the insured may have.
Example: Tom Jones is a 50 year-old attorney earning $750K. He has an employer-paid group LTD policy which will pay a maximum monthly benefit up to $15k. He also has a $17K individual policy, so he’s reached the maximum issue limit with his individual disabilityinsurance carrier. However, another carrier will participate up to $35K with group LTD and individual coverage. Most carriers discount employer-paid group LTD by 20 percent because it is a taxable benefit. So, the client would qualify for an additional $6K monthly benefit with another carrier—insuring a higher percentage of his income in the event of a disabling injury or illness.
For producers working with resident physicians specializing in high-income medical specialties that might eventually yield salaries in excess of $500K, it may be wise to write two starting disability policies with two different carriers, so the client can easily maximize his or her disability benefit as his or her income increases with future increase options. Choose carriers who have high participation limits so the client can replace a higher percentage of his or her salary.
At this time, Principal and MetLife offer the highest participation limits. Principal will participate with group LTD up to $35k for all occupations. It will participate up to $35k with other individual disability insurance coverage for most administrative and executive occupations, and up to $25k with most medical occupations, excluding anthesiologists and emergency room physicians.
MetLife will participate up up to $40K with employer-paid group LTD for high ranking adminstrators and executives (4A-6A). For all physician specialties, it will participate up to $30K with other individual disability income.
As producers review benefits with their clients, especially high-earning clients, contact a disability income specialist at Source Brokerage, Inc. to learn more about maximizing disability coverage for your clients—especially if they have reached the issue limits with another individual disability carrier or their salaries have surpassed the cap on their employer-paid group LTD. We can help you tailor a plan that will provide the maximum income protection for your clients.