This Month:
Guardian broadens individual DI portfolio
Cultural changes spur DI innovation
Income at risk: Unemployment drops for disabled
The great disability divide
Pru: Practical solutions for disability clients
Tips to inspire employees to review benefits
Proteau: Voluntary portfolio- big opportunity in small business
Tips to inspire employees to revidew benefits options
Lundquist: Bridging the Disability Divide
DI helps businesses, employees in tough economy
Guardian Broadens Individual Disability Portfolio
to Help Producers Serve More Markets
New Features Include Choice of True Own-Occupation
or Modified Own-Occupation Definitions, Patent-Pending Lump-Sum Benefit
NEW YORK, N.Y., - The Guardian Life Insurance Company of America (Guardian), a market leader in individual disability insurance, announced that is has expanded its flagship ProVider Plus portfolio to enable producers to reach more clients across the income protection spectrum.
The new product series- which includes an enhanced ProVider Plus and a brand-new ProVider Plus Limited- was designed to strengthen Guardian's position in premier medical markets while accommodating increased price sensitivity among certain segments within the medical field, as well as in other occupations.
"The changes we've observed in the marketplace, reinforced by what we've been hearing from our producers and in customer focus groups across the country, confirm that one size doesn't fit all,' said Gordon Dinsmore, President of Berkshire Life Insurance Company of America, the Guardian
company that issues its individual disability insurance policy.
"Just as there is no longer one path to practice medicine, in the 21st century, no matter what profession you're in, there should be multiple ways
to secure this important protection- ways that take price into account- without compromising the quality of the coverage," he added. "We are
confident that Guardian now has the broadest disability insurance product portfolio in the industry."
Aligning to Price Sensitivity While Maintaining Value
To better serve the value-focused segment of the medical market- as well as those individuals in other professions for whom affordability is a
concern- Guardian's new ProVider Plus Limited provides benefit-rich basic income protection at a more affordable price. With package-exclusive
configurations and a host of optional riders, policy owners are able to customize coverage to fit their income-protection needs, while not having
to pay for features their situations don't require. Features include:
- Choice of true own-occupation or modified own-occupation definition of total disability;
- Basic Residual Disability Benefit Rider;
- Industry-unique Waiver of Elimination Period, built into the base policy;
- Benefit Purchase Rider, ProVider Plus Limited's version of a future purchase option;
- A Presumptive Total Disability Benefit that- unlike most other carriers' policies- need not be irrecoverable.
At the same time, Guardian has strengthened its premium ProVider Plus offering by introducing a patent-pending Lump Sum Disability Benefit Rider, an option not available anywhere else that is designed to provide benefits after the policy expires at age 65 (or 67).
The new Guardian rider pays a lump-sum benefit equal to 35% of all disability benefits paid over the lifetime of a policy. Owners of active
policies don't need to even be disabled at the end of their contracts in order to qualify for this benefit.
"This Lump Sum Disability Benefit Rider sets Guardian apart: It is truly state of the art," noted Dinsmore. "In surveying physicians, we learned
that more of them are working past traditional retirement age and want to maintain the ability to replace lost income. In addition, the idea of
receiving a lump sum benefit was more appealing to them than a lifetime-structured benefit, for the sense of control it gave them over how and when to deploy their assets."
Other ProVider Plus enhancements and features include:
- Choice of true own-occupation or modified own-occupation definition of total disability;
- Residual Disability Benefit Rider that pays sooner and more than most other carriers' policies;
- Industry-unique Waiver of Elimination Period, built into the base policy;
- Future Increase Option.
In addition to the innovation and affordability built into Guardian's new offering, Dinsmore emphasized the strength of the ProVider Plus base
contract as fundamental to every policy sold.
"At the end of the day, regardless of which package and options they select, our individual disability insurance clients will have the benefit-rich income protection they want and need with either of our ProVider Plus policies," he said.
Sweeping Cultural Changes in Medicine
Offer Opportunities for Disability Insurance Innovations
One size definitely does not fit all
NEW YORK - The economic and societal forces that have transformed the medical profession over the past decade open the door to new approaches to income protection, according to The Guardian Life Insurance Company of America (Guardian), a market leader in individual disability insurance, which announced a new offering today.
"On the other hand, staff doctors and non-physician medical professionals may not need as many bells and whistles on their disability policies, but they don't want to compromise on the expectation that the coverage will be there when they need it most"
Physicians and other medical professionals have long been aware of the need for this type of coverage- which protects one's ability to earn an income even if a work-stopping illness or injury strikes, because they witness the lifestyle changes caused by unexpected disabilities every day in their work. Many are also motivated to protect the significant investment they've made in their education. But all professionals whose families depend on their income will benefit from the product innovations just launched by Guardian.
Gordon Dinsmore
"The changes we've observed in the marketplace, reinforced by what we've been hearing in focus groups across the country, confirm that one size doesn't fit all," said Gordon Dinsmore, President of Berkshire Life Insurance Company of America, the Guardian company that issues its individual disability insurance policy.
"Just as there is no longer one path to practice medicine, in the 21st century, no matter what profession you're in, there should be multiple ways to secure this important protection, ways that take price into account, without compromising the quality of the coverage," he added. "We are confident that Guardian now has the broadest disability insurance product portfolio in the industry."
Changing Landscape for Medical Providers
While demand for medical services in the U.S. continues to increase due to the aging population, the face of who is providing that care, and how it is delivered, is changing rapidly. The high cost of electronic health records, downward pressure on medical reimbursement and soaring levels of medical-school debt mean that many doctors are opting to join hospital staffs and large medical practices as salaried employees, rather than opening their own practices. At the same time, growing numbers of female physicians, 50% of medical school students are women, compared to just one-third 30 years ago, as well as the recent influx of Gen X doctors into the marketplace has underscored the priority on work-life balance.
All of these trends have brought on yet another significant change: the expanding role of non-physician professionals such as physician assistants and nurse practitioners in providing more and more medical services. The U.S. Department of Labor projects that jobs within this category of skilled mid-level providers will grow 20-50% by 2018.
Having monitored these market developments over the past several years and verified their impact on income protection requirements through national research, Guardian has increased the breadth of its flagship ProVider Plus individual disability insurance portfolio to accommodate the total needs spectrum.
"Solo medical practitioners are essentially small business owners, operating on a high risk/high reward basis. They have significant earnings potential but are likely highly leveraged in their practices, and should therefore have top-tier income protection coverage in place," explained Dinsmore.
"On the other hand, staff doctors and non-physician medical professionals may not need as many bells and whistles on their disability policies, but they don't want to compromise on the expectation that the coverage will be there when they need it most," he added. "Now, thanks to Guardian, they don’t have to."
Aligning to Price Sensitivity While Maintaining Value
To better serve this value-focused segment of the medical market, as well as those individuals in other professions for whom affordability is a concern, Guardian has introduced ProVider Plus Limited, an individual disability insurance policy built on Guardian's well-known core contract. With package-exclusive configurations and a host of optional riders, policy owners are able to customize coverage to fit their income-protection needs, while not having to pay for features their situations don't require.
At the same time, Guardian has strengthened its traditional ProVider Plus individual disability insurance policy by introducing a patent-pending Lump Sum Disability Benefit Rider, an option not available anywhere else that is designed to provide benefits after the policy expires (at age 65 or 67), a time when the full impact of even a brief disability during one's working years can make itself felt as retirement begins.
How does it work? Guardian's exclusive rider pays a one-time, lump-sum benefit equal to 35% of all disability benefits paid over the lifetime of a policy. Policy owners don't need to even be disabled at the end of their contracts in order to qualify for this benefit. So, a 47 year-old professional who is in a serious accident requiring multiple surgeries and extensive physical therapy, who returns to work after two years and remains healthy until his or her retirement, will still receive this additional payment when the policy expires at age 65 (or 67), as long as it remains active until that time.
Finally, Guardian has enhanced the flexibility of both its ProVider Plus and ProVider Plus Limited offerings by giving consumers the option of selecting a true own-occupation or modified own-occupation definition of total disability for either product, enabling an unprecedented level of coverage customization.
"Everyone's personal and professional circumstances are unique, and the disability insurance they obtain to protect their ability to earn an income should be tailored to their needs, not the needs of the doctor or lawyer across the hall," explained Dinsmore.
About Guardian
A mutual insurer founded in 1860, The Guardian Life Insurance Company of America and its subsidiaries are committed to protecting individuals, business owners and their employees with life, disability income and dental insurance products, and offer 401(k), annuities and other financial products. Guardian operates one of the largest dental networks in the United States, and protects more than six million employees and their families at 115,000 companies. The company has approximately 5,000 employees in the United States and a network of over 3,000 financial representatives in more than 80 agencies nationwide.
For more information about Guardian, please visit: www.GuardianLife.com.
Income at Risk: Unemployment Rate Drops
Significantly for People with Disabilities
Fourth-quarter unemployment rate for people with disabilities is lowest in three years;
Social Security disability applications continue slight decline
Belleville, Ill. - After climbing for four consecutive quarters, the unemployment rate for people with disabilities dropped in the final quarter of 2011 to the lowest rate since the fourth quarter of 2008, according to a study by Allsup, a nationwide provider of Social Security Disability Insurance (SSDI) representation and Medicare plan selection services.
Still, the Allsup Disability Study: Income at Risk shows that people with disabilities experienced an unemployment rate more than 60 percent higher than the rate for people with no disabilities for the fourth quarter of 2011. Specifically, the unemployment rate averaged 13.2 percent for people with disabilities and 8.1 percent for people with no disabilities during the fourth quarter of 2011. This compares to 16.3 percent for people with disabilities and 8.8 percent for people with no disabilities during the third quarter of 2011. These figures are based on non-seasonally adjusted data from the U.S. Bureau of Labor Statistics.
The Allsup Disability Study: Income at Risk shows that 660,712 people with disabilities applied for SSDI during the fourth quarter of 2011, down from 737,468 for the previous quarter. For 2011 overall, nearly 2.88 million people filed disability claims, compared with nearly 2.94 million applicants in 2010, a decrease of 1.98 percent year to year. However, nearly 1.8 million SSDI claims are pending with an average cumulative wait time of more than 800 days, according to Allsup's analysis of the Social Security disability backlog.
"People with disabilities continue to face an uphill battle in securing employment, and when their conditions make it impossible for them to keep working, they face even greater hardship" said Paul Gada, personal financial planning director for the Allsup Disability Life Planning Center. "For these individuals, it's essential to apply for SSDI benefits as soon as possible to help secure their financial future."
Many people with disabilities awaiting SSDI benefits fall below the national poverty line and face significant financial peril. A 2009 study by Allsup of nearly 300 awarded claimants found that 35 percent drained their retirement or savings accounts; 14 percent missed mortgage payments; 31 percent missed payments other than mortgage payments; and 9 percent had their utilities turned off while waiting to receive their Social Security disability benefits.
"These individuals paid for SSDI benefits through their payroll taxes while working. For many, these benefits truly are their last safety net when they become disabled," said Gada. "In addition to applying as soon as possible, they need to evaluate ways to manage their expenses during the waiting period, including budgeting and looking for financial assistance, to help them until their benefits are awarded."
Gada also noted it's important to seek representation in applying for SSDI benefits. Yet many people do not know help is available. For example, the Allsup 2009 study found that only 51 percent of respondents knew initially that they could have third-party representation to help them apply for SSDI. Most who did not know, said they would have hired a representative had they been aware of that option.
Early Representation Critical To Receiving SSDI Benefits
There are several advantages to having a Social Security disability representative, especially at the initial application. For example, 52 percent of Allsup claimants are awarded benefits at the initial application level compared to just 35 percent nationally.
Additional benefits people realize by having representation during the SSDI application process include:
- Find out before they apply if they are likely to qualify for SSDI benefits. In evaluating a person's application, the Social Security Administration (SSA) follows a five-step sequential process and makes decisions based on medical documentation, work history, age and other factors. A representative can help review this information to determine if the person is likely to qualify for Social Security disability benefits, before they apply.
- Receive specialized expertise and hands-on help from the beginning. Delays are often caused because people don't complete or inaccurately complete the necessary forms. Professional representation ensures expert, knowledgeable help in completing the application and activities of daily living (ADL) forms.
- Avoid waiting in Social Security telephone and office lines. A professional representative can handle the paperwork, answer questions and submit the individual's claim. For example, eight out of 10 Allsup claimants never need to visit an SSA office, easing what can be a significant hardship for many people with disabilities.
- Improve the likelihood of receiving their benefits. Having a representative who makes certain the person is likely to qualify for SSDI benefits and then providing them support improves a person's likelihood of being awarded. In fact, Allsup has a 98 percent success rate among customers who complete the process with them.
Anyone with questions about eligibility for Social Security benefits can contact the Allsup Disability Evaluation Center at (800) 678-3276 for a free disability evaluation.
Allsup also provides free financial planning tools to help people better manage their finances while awaiting SSDI benefits here
ABOUT ALLSUP
Allsup is a nationwide provider of Social Security disability, Medicare and Medicare Secondary Payer compliance services for individuals, employers and insurance carriers. Founded in 1984, Allsup employs more than 800 professionals who deliver specialized services supporting people with disabilities and seniors so they may lead lives that are as financially secure and as healthy as possible. The company is based in Belleville, Ill., near St. Louis. For more information, visit www.Allsup.com.
The Great Disability Divide: Gap Between Consumer and Advisor
Perceptions Presents Significant Opportunities
New research shows greater need for education and planning
PORTLAND, Maine- Nearly two-thirds of consumers say it's important to start planning financially for a potential loss of income 'in their 20s' or 'at any age,' yet financial advisors perceive consumers 'in their 40s' are most open to discussing income protection. That divide is just one of several uncovered by the 2011 Disability Divide: Advisor Study, a consumer and advisor research study conducted by the Council for Disability Awareness (CDA). The survey reveals meaningful variances between what consumers perceive about the disability risk and advisor assumptions about the consumer mindset. The positive finding is that consumers, even at younger ages, are more receptive to a conversation about income protection.
The Disability Divide survey illustrates other differences between how consumers answered questions related to income-threatening disabilities compared to advisors' predictions of how they would respond to those same questions. CDA believes these differences make clear the need for education, for raising awareness about the real facts about the disability risk and of the importance of income protection planning. After all, one thing that consumers and advisors solidly agree on is that income is virtually every wage earner's most valuable financial resource- the source of all financial security.
An overwhelming majority of the consumers surveyed, 83 percent, agree that 'a disability could happen to anyone at any time,' while only 35 percent of advisors expected consumers to agree with that statement.
The survey also showed that even when consumers and advisors are in agreement, their shared beliefs could be inconsistent with the facts. For instance, most consumers and advisors think injuries trigger the majority of disabilities, but the reality is that illnesses such as musculoskeletal disorders (e.g., back problems), cancer and heart disease are 10 times more likely than accidents to interrupt a wage earner's income.
"The Disability Divide survey findings are empowering to advisors and consumers," said Barry Lundquist, president of the CDA. "What we are hearing is that consumers are more ready to have the conversation about protecting their income from serious disability than advisors may assume, or than may have been the case in the past. It may be that the difficult economic times have made consumers feel more vulnerable and more serious about protecting their financial security. Armed with this knowledge, advisors are in a strong position to help America's wage earners take action to protect their financial futures."
CDA conducted the online survey with both individual advisors, those who work more often with consumers in one-on-one settings, and group advisors, who typically advise employers and consumers in the work setting. All respondents were actively involved in providing advice about the disability risk and income protection products. Altogether 1,267 financial advisors including insurance agents and brokers, investment advisors, employee benefit consultants, financial planners and wholesalers completed the survey.
The study's purpose was to evaluate how accurately advisors would predict consumer attitudes about disability, determine the perception gap between what advisors and consumers believe, and identify opportunities for advisors to engage consumers. Bridging this gap calls for education about the risk of disability, the consequences of income loss and the importance of income protection planning.
The research showed that even though nearly all consumers say their ability to earn an income is their most important asset, astonishingly, 37 percent say they've never thought about protecting it. Advisors overestimate consumers' sense of unpreparedness, assuming that as many as 65 percent of consumers would say they have never thought about an income protection plan.
"The all important first step is for all wage earners to recognize the facts about their own personal disability risk. They get the fact that they can't live without their income, they agree 'disability can happen at any time', but they deny the disability can happen to them personally. Most people's financial future depends on income and the ability to work, but there are no guarantees for any of us that our present state of health will continue in the future," said Lundquist. "Advisors must find ways to connect on this important message, and consumers need to be proactive about understanding what needs and benefits they have, and whether they are adequately protected before a disability strikes. Human resources professionals and financial advisors are great resources to help find out what their benefits will or will not cover if they become disabled."
"Whatever the disconnect may be, the bottom line is income protection is a necessity in any environment but even more so today," said Lundquist. "Disability is a very real possibility for people of all ages. Any sound financial plan must include an assessment of how to protect your income stream."
The full report can be viewed here.
The CDA offers resources and information for consumers, employers, HR professionals and financial advisors to educate themselves and others about the likelihood of disability and its devastating effects. Disability preparedness tools and resources are available here.
About the Council for Disability Awareness (CDA)
The Council for Disability Awareness (CDA) is a non-profit group dedicated to helping the American workforce become aware of the likelihood of disability and its financial consequences. The CDA engages in communications, research and educational activities that provide information and helpful resources to wage earners, their families, employers and others who are concerned about disability and the impact it can have on wage earners and their families.
What to do when disabilities become career-ending
Why Most Highly-Compensated Individuals Live on the Edge of a Financial Catastrophe
by Phil Davis
Mr. Davis is President and Founder of Corporate Compensation Plans and WealthSecure, located in Danbury, CT. He can be reached at ptdavis@corpcompinc.com
What do you think is the absolutely worst possible thing that could happen to you?
How about this:
- You lose your job because of a serious injury or stroke, or because of an illness such as cancer, diabetes, Parkinson’s, or Multiple Sclerosis.
- Your doctor tells you that you will never work again in your profession or occupation.
- Your income stops but your disability insurance replaces only 40% of it.
- Your injury or disease may cause the need for daily health care or therapy that can cost you thousands of dollars a week – costs that are not covered by Medicare or your medical insurance.
Let's put some numbers to this scenario:
Peter is a 50-year-old partner in a large law firm. He earns $1,500,000 a year and is deferring $120,000 a year into his profit sharing and defined benefit pension plans. In addition, his firm provides him with $40,000 a month of disability insurance.
Peter's car runs off the road, he breaks his back and his career is over. Here is his financial story at age 65:
Peter stays healthy Peter breaks his back(2)
After tax income to age 65(1) $17,200,000 $7,200,000
After tax Retirement Plan assets @5% $1,760,000 $ 0
Total $18,960,000 $7,200,000
1 Assumes Peter's income will increase at 3% per year.
2 Tax-free insurance.
In other words, Peter's accident wiped out 62% of his income.
Now let's look at Georgiana, a Senior Executive in a large public corporation. She is also age 50 and, like Peter, earns $1,500,000 a year. However, unlike Peter, Georgiana has a significant amount of benefits that are paid for by her company:
- A $250,000 annual contribution to her nonqualified deferred compensation plan accounts (this includes accruals to her 'excess' defined benefit pension plan).
- Stock options and restricted stock awards that are valued at about $200,000 a year.
Georgiana also has a long term disability insurance plan that will pay her a $40,000 a month benefit if an injury or illness prevents her from working.
Things are going well for Georgiana, but she has some bad luck – she has a serious stroke and she cannot return to work..
Let's take a look at her financial story at age 65:
She stays healthy She has a stroke
After tax income to age 651 $18,600,000 $7,200,0002
After tax Retirement assets @ 5% $ 3,600,000 $ 0
After tax equity awards3 $ 2,900,000 $ 0
Total $25,100,000 $7,200,000
Financial loss from accident $17,900,000
1 Assumes her income increases at 3% per year.
2 Tax- free disability insurance benefits.
3 Assumes 5% growth in equity.
In this case, Georgiana's accident cost her over 70% of her income and retirement assets.
Now you may say these are extreme examples, but a career-ending disability will be a financial disaster for most highly-paid people for three reasons:
- Their disability insurance benefits rarely will replace 100% of their pre-disability after tax incomes – which means their families' standard of living is guaranteed to suffer.
- Their disability insurance benefits rarely increase with inflation – which means the purchasing power from them constantly reduces.
- Their disability insurance benefits rarely continue contributions to their retirement plans – which means they have the potential for catastrophic losses in their retirement assets.
And do these career-ending disabilities actually happen to real people? Unfortunately the answer is yes. For example, just last year Brenda Barnes, Sarah Lee's 55- year- old Chairman and Chief Executive Officer, had a very serious stroke and had to step down permanently from those positions so she could focus on improving her health.
And what are most firms doing about the huge financial exposure their top talent has to a career-ending disability? The answer, in all too many cases, is nothing. In our view, there are three reasons for this neglect:
- Many HR personnel earn -have a difficult time emphasizing and identifying with the financial and emotional consequences their highly-paid employees and partners will experience when they are forced to stop working because of a disability. Therefore, enhancing disability benefits is not a priority for them.
- Some firms take the position it is the responsibility of their higher paid employees and partners to find their own solutions to their financial security issues. In essence they say, "It's our responsibility to make certain they earn substantial sums of money; it's their responsibility to figure out how to protect it."
- The large majority of firms don't realize that it is now possible to provide their highly-paid employees and partners with insurance protection that most likely will cover almost all of their financial exposure to a career-ending disability.
This high limit disability insurance protection consists of three layers of coverage:
- individual disability insurance policies issued, priced, and administered on a group basis.
- Group long term disability insurance.
- Excess lines disability insurance issued on a group basis. This insurance protection has been facilitated by the passage of the Non Admitted and Reinsurance Reform Act by Congress- legislation that makes it easier to write this coverage on a multi-state basis.
Combining these coverages into an integrated package allows firms to protect the incomes and retirement contributions of even their highest paid employees and partners- and, if desired, on a voluntary, cost-neutral basis to the firms.
This means that there is no longer any reason- other than neglect- for firms to allow their top talent to risk the catastrophic loss of income and assets that a career-ending disability will cause them.
CDA Releases 2011 Long-Term Disability Claims Review
$8.3 Billion Paid in Claims Last Year; Economy a Factor in Rise of Disabilities, Claims
PORTLAND, Maine - September 28, 2011 - The 2011 Long-Term Disability Claims Review, conducted by the Council for Disability Awareness (CDA), reveals that CDA member companies paid more than $8 billion in disability insurance payments to over 587,000 disabled individuals during 2010. CDA member companies approved long-term disability insurance benefits for 139,000 new individuals, up 2.6 percent from 2009. Insured lives declined by 0.8 percent, reflecting job loss in the broader economy, decreased worker participation in existing plans and slightly fewer employers providing traditional group long-term disability programs in 2010.
"The 2011 Claims Review results reflect the continued challenges posed by the economy and the aging of the workforce," said Barry Lundquist, president of the CDA. "New long-term disability claims approved and claim incidence increased, while the number of insured employees and employers offering long-term disability insurance programs to their employees declined slightly from 2009." The study also concludes that claims are lasting longer due to the severity and complexity of some disabling conditions and the difficulty qualified, willing claimants have been experiencing in returning to the workforce when few jobs are available for them to return to. "Economic uncertainty seems to be driving U.S. workers to take more personal responsibility for their financial security, just as greater financial vulnerability is making it crucial for workers to protect themselves and their families from the risk of losing income due to disability."
Since 2005, the CDA has conducted the Annual Long-Term Disability Claims Review, which analyzes private and public long-term disability claims data and identifies continuing and emerging disability trends among U.S. workers. The proprietary claims data is gathered from CDA's member companies, the top U.S. disability insurance companies which represent roughly 75 percent of the commercial disability insurance marketplace.
Additional key findings of the Claims Review include:
Over 50 percent of participating companies reported increased claim incidence, and most suggested the increase was impacted by the recession.
Diseases of the musculoskeletal system and connective tissue - such as arthritis, spine disorders, back pain, sciatica and osteoporosis - were once again the leading cause of new and existing disability claims in 2010.
Other common causes of claims were nervous system related disorders like multiple sclerosis, ALS (Lou Gehrig’s Disease) and Parkinson's Disease, as well as heart and circulatory system diseases and cancers.
About 90 percent of new long-term disability claims were caused by illnesses rather than accidents, and fewer than 5 percent were job related.
Applications for Social Security Disability Insurance (SSDI) benefits rose to 2.9 million and new SSDI awards totaled over one million - both records - in 2010. However, the ratio of applications approved as a percentage of applications received remains near its 25-year low. Over 5.9 percent of the workforce, or 8.2 million workers, were receiving SSDI at the conclusion of 2010.
According to the Claims Review's qualitative data, while the incidence of claims increased in 2010, it remained mostly unchanged in 2009, and most participating member companies characterize the incidence rate as lower than anticipated given the continued uncertain economic climate. CDA member companies also reported they are carefully monitoring the impact of the slow pace of economic recovery and potential residual effects of health care reform.
For a copy of the 2011 Long-Term Disability Claims Review, please go here. Additional resources are also available through CDA's website, including disability research, statistics, tools and financial planning guides that provide tips on how to assess the risk of disability and protect against its impact. Individuals can determine their own personal risk of becoming disabled using CDA’s disability calculator, the Personal Disability Quotient (PDQ) here.
About the Council for Disability Awareness (CDA)
The Council for Disability Awareness (CDA) is a non-profit group dedicated to helping the American workforce become aware of the growing likelihood of disability and its financial consequences. The CDA engages in communications, research and educational activities that provide information and helpful resources to wage earners, their families, employers and others who are concerned about disability and the impact it can have on wage earners and their families.
About the 2011 Council for Disability Awareness Long-Term Disability Claims Review
Since 2005, the Council for Disability Awareness (CDA) has conducted a proprietary annual review of long-term disability claims among the U.S. working population. The purpose is to identify continuing or emerging trends, and to share them with interested audiences. The 2011 CDA Long-Term Disability Claims Review includes quantitative and qualitative long-term disability insurance claims data from the annual CDA member Long-Term Disability Claims Survey. Also included is selected worker disability data from the Social Security Disability Insurance (SSDI) program. Fourteen CDA member companies, representing roughly 75 percent of the commercial disability insurance marketplace, participated in the 2011 survey.
Innovations
Prudential Launches Practical Solutions for Disability Clients
Online Program Helps Employers Support Workers through Absences while Managing Productivity
Newark, N.J. - Prudential has developed an innovative online tool for disability insurance clients. Absence & Productivity: Practical Solutions for Managers is designed to help employers manage their benefits costs through enhanced worker productivity and effective return-to-work strategies.
Absence & Productivity: Practical Solutions for Managers contains two components: a Manager's Kit for front-line managers, and an off-the-shelf program for training facilitators designed to reinforce key concepts in a hands-on workshop. The program helps empower managers to improve performance, prevent some disability absences, and manage absences that do occur.
Terrie Sorensen, vice president of Absence and Disability Product Management and Innovation for Prudential's Group Insurance business, explains, "Clients have told us that our new program is an ideal solution to help educate managers, giving them the opportunity to communicate their leave policies and available accommodations for return-to-work."
The development of the program was informed by Prudential's ongoing research of the employee benefits market. Sorensen notes, "According to Prudential's Fifth Annual Study of Employee Benefits: Today & Beyond, 49% of employers cite increasing employee productivity as a top benefits objective. Yet, managing an employee through a disability absence and a return to work, along with maintaining workplace productivity can be a challenge.
Prudential's research also reveals that return-to-work initiatives have been successful in generating cost savings as well as productivity gains. Regarding such strategies, 62% of respondents are 'using some' or 'using to a great extent,' and 66% report being 'highly successful' in achieving desired cost savings with their return-to-work strategies.
The program helps managers learn how to balance short-term pressures with the long-term good of the employee, the work team and the company. Employers can easily distribute the Manager's Kit material to front-line managers via their own websites or they can email the material. The Management Training Program includes all of the tools that a Human Resources or training professional needs to conduct meaningful sessions. It provides a trainer's guide and two presentation options, giving trainers the flexibility to deliver a workshop with group exercises, or a shorter version without.
"At the heart of our program, we emphasize how managers make a difference in employees' lives and in their perceptions of the work environment. It's the human-to-human connection that really improves the return-to-work experience overall," concludes Sorensen.
Prudential Financial, Inc. (NYSE: PRU), a financial services leader, has operations in the United States, Asia, Europe, and Latin America. Prudential's diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services. In the U.S., Prudential's iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please go here.
Voluntary Benefits Survey: Tips to Inspire Employees to Review
Benefits Options, Increase Participation, and Understand Disability Risk
Study asks: What is controlling employee choice?
Wellesley, MA. June 28, 2011 - A national survey on voluntary benefits released by the Employee Benefits Group division of the U.S. Business Group of Sun Life Financial Inc. concludes that employers can raise the level of informed participation in voluntary benefits by providing live assistance to explain benefits options, and delivering a clear message on the risks of suffering a disability.
Surveying 3,000 employed adults, Voluntary Benefits: What is Controlling Employees' Choices? represents the third annual study by Sun Life's Employee Benefits Group Division.
The study's key findings include:
The majority of respondents said they spent no time reviewing their benefits options. The only exception was medical insurance, for which at least a quarter of respondents reviewed their benefits options for thirty minutes or more. Benefits participation rises when employees receive live assistance to learn about benefits options, and online or print assistance to enroll. Employees incorrectly believed that they had the same chance of needing life insurance as needing short-term disability and long-term disability insurance. Yet statistically, men are twice as likely to suffer a disability as to die during their working years, while women are three times as likely. Employees misunderstand how different types of benefits provide different levels of financial protection, ranking dental coverage as protective as both short-term disability and long-term disability. However, a household’s financial loss from disability, or worse, from the death of a breadwinner, generally far exceeds the costs of a dental procedure. Employers can thus raise the level of informed participation in voluntary benefits by providing live assistance programs that help employees fully understand their benefits options, while conveying the risks and costs of suffering a disability.
"Designing crystal clear communications that help people grasp both their health risks and their benefits options is a win-win for plan administrators and employees," says Michael E. Shunney, Senior Vice President and General Manager of Sun Life's Employee Benefits Group. "And plan administrators wear many hats, only outstanding communications can help them work at peak efficiency."
"These results reveal three steps plan administrators can take to raise informed plan participation," adds Shunney. "First, put all verbal and written benefits communications into plain language, without the technical industry jargon. Sun Life's personal enrollment kit provides a great example, since it recently won a ClearMark plain language award."
"Second, use the right communications medium at different stages in the enrollment decision making process- offer the personal touch of live assistance to help people learn about benefits- but provide the independence of online or print forms to let them enroll."
"Finally, devise powerful ways that resonate with employees about a sobering theme, that over the course of a working life, we all stand a far greater chance of becoming disabled than of dying. As a founding member of the Council for Disability Awareness, Sun Life is committed to educating the American public about the growing risk and financial impact of disability."
For the full report, go to www.sunliferesearch.com
About the Survey
Sponsored by Sun Life Financial, the survey polled employees who either made or shared family benefits decisions, and worked for companies with 25 or more employees. An independent research firm, Gen Re, of Portland, Maine administered and analyzed the online survey just after the 2010 enrollment season, when benefits were still fresh in the minds of employees.
About the U.S. Employee Benefits Group Division of Sun Life Financial
The Employee Benefits Group division (EBG) of the U.S. Business Group of Sun Life Financial offers Group Life, Disability, Dental, and Medical Stop-Loss insurance through 170 group insurance sales representatives in 34 major U.S. cities. As of December 31, 2010, EBG had approximately 35,000 policyholders and more than $2 billion of business in-force, covering approximately 12 million lives. For more information about Sun Life Financial’s Employee Benefits Group products, visit the EBG section of www.sunlife.com/us
About Sun Life Financial
Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. As of March 31, 2011, the Sun Life Financial group of companies had total assets under management of U.S. $484 billion.
Biggest Opportunities in Voluntary Sales Are in the Small Business Market
According to LIMRA, although many small-business owners find enrollment and benefits
communication 'very' important, many agents and brokers don't provide these services
by Judy Proteau
Ms.Proteau is an employee benefits specialist for Colonial Life, serving the Metro West region of Massachusetts. She can be reached at judy.proteau@coloniallife.com
Too many brokers spend years trying to sell to large accounts, overlooking an even bigger and more receptive market: small businesses. Small businesses make up 85 percent of all U.S. companies, and they are struggling to cope with double-digit health care cost increases. Voluntary benefits products can help enhance employers' benefits package at no direct cost to them, and many small businesses may not be called on by insurance professionals.
Show Them How Your Voluntary Products Can Help Provide More Coverage Choices for Their Employees
One of the most compelling discussions you can have with your clients is how your voluntary benefits strategy can help them better manage benefits program costs and increase their employees' satisfaction. You may want to recommend that the employer lower costs by changing to a high-deductible group plan. Then, you could demonstrate how a menu of voluntary supplemental health products can help fill coverage gaps. The employer can pay the premiums on these voluntary products or let employees pay through payroll deduction.
For example, you could add a supplemental health insurance product, such as those providing hospital confinement, accident, cancer and critical illness coverage. Many coverage gaps resulting from the higher deductible could be covered through products like these. Other voluntary benefits, such as life and short-term disability insurance, can also help round out your client's benefits program. Your client could save money, and their employees could choose the coverage that's right for their family and situation.
Offer a Benefits Communication Plan that Can Help Increase Your Client's Employee Satisfaction
How well you communicate the value and advantages of your client's enhanced benefits package can help determine an enrollments success. It's also an opportunity to make yourself indispensable to your client.
Your communications plan needs to inform employees about the overall value of their benefits package, including the advantages of their core benefits. You become an unofficial — and very welcome — addition to your client's HR functions.
Small businesses typically have little to no human resources staff, which means the business owner often handles HR duties in addition to everything else. Your role is to make your client's life easier by incorporating many HR tasks into the enrollment process, including benefits communications, and using the enrollment process to keep employee information up to date.
According to a recent LIMRA International study, although many small-business owners find enrollment and benefits communication 'very' important, many agents and brokers don't provide these services. What's more, these services could help increase the customer loyalty of a producer's small-business clients and reduce the defection rate to other producers or carriers.
Your enrollment team should use group meetings and one-on-one discussions to reach out to your client's employees and get them excited about their new benefits choices. If your agency isn't set up for these labor-intensive tasks, you need to find an experienced voluntary benefits partner to do the work for you at no direct cost to you or your client.
Only one in four small businesses has been approached by a benefits counselor about voluntary benefits. The same can't be said for the big accounts. That means there's a vast, largely untapped market of small businesses that are looking for remedies for their health care woes. When you partner with a quality voluntary benefits provider, you'll not only be able to offer solutions that make a big difference for your prospects, but you'll also be one of the few tapping on their doors. Those are great odds, and it's great business.
Tips to Inspire Employees to Review Benefits Options,
Increase Participation, and Understand Disability Risk
Sun Life Financial Releases Voluntary Benefits Survey
WELLESLEY, Mass. - A national survey on voluntary benefits released by the Employee Benefits Group division of the U.S. Business Group of Sun Life Financial Inc. (NYSE:SLF, TSX:SLF) concludes that employers can raise the level of informed participation in voluntary benefits by providing live assistance to explain benefits options, and delivering a clear message on the risks of suffering a disability.
Surveying 3,000 employed adults, Voluntary Benefits: What is Controlling Employees' Choices represents the third annual study by Sun Life's Employee Benefits Group Division.
The study's key findings include:
The majority of respondents said they spent no time reviewing their benefits options. The only exception was medical insurance, for which at least a quarter of respondents reviewed their benefits options for thirty minutes or more.
Benefits participation rises when employees receive live assistance to learn about benefits options, and online or print assistance to enroll.
Employees incorrectly believed that they had the same chance of needing life insurance as needing short-term disability and long-term disability insurance. Yet statistically, men are twice as likely to suffer a disability as to die during their working years, while women are three times as likely.
Employees misunderstand how different types of benefits provide different levels of financial protection, ranking dental coverage as protective as both short-term disability and long-term disability. However, a household's financial loss from disability, or worse, from the death of a breadwinner, generally far exceeds the costs of a dental procedure.
Employers can thus raise the level of informed participation in voluntary benefits by providing live assistance programs that help employees fully understand their benefits options, while conveying the risks and costs of suffering a disability.
"Designing crystal clear communications that help people grasp both their health risks and their benefits options is a win-win for plan administrators and employees," says Michael E. Shunney, Senior Vice President and General Manager of Sun Life's Employee Benefits Group. "And plan administrators wear many hats, only outstanding communications can help them work at peak efficiency."
"These results reveal three steps plan administrators can take to raise informed plan participation," adds Shunney. "First, put all verbal and written benefits communications into plain language, without the technical industry jargon."
"Second, use the right communications medium at different stages in the enrollment decision making process- offer the personal touch of live assistance to help people learn about benefits, but provide the independence of online or print forms to let them enroll."
"Finally, devise powerful ways that resonate with employees about a sobering theme- that over the course of a working life, we all stand a far greater chance of becoming disabled than of dying. As a founding member of the Council for Disability Awareness, Sun Life is committed to educating the American public about the growing risk and financial impact of disability."
For the full report, go here.
About the Survey
Sponsored by Sun Life Financial, the survey polled employees who either made or shared family benefits decisions, and worked for companies with 25 or more employees. An independent research firm, Gen Re, of Portland, Maine administered and analyzed the online survey just after the 2010 enrollment season, when benefits were still fresh in the minds of employees.
About the U.S. Employee Benefits Group Division of Sun Life Financial
The Employee Benefits Group division (EBG) of the U.S. Business Group of Sun Life Financial offers Group Life, Disability, Dental, and Medical Stop-Loss insurance through 170 group insurance sales representatives in 34 major U.S. cities. As of December 31, 2010, EBG had approximately 35,000 policyholders and more than $2 billion of business in-force, covering approximately 12 million lives. For more information about Sun Life Financial's Employee Benefits Group products, visit the EBG section of www.sunlife.com/us
About Sun Life Financial
Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. As of March 31, 2011, the Sun Life Financial group of companies had total assets under management of U.S. $484 billion.
Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine (PSE) stock exchanges under the ticker symbol SLF.
Disability Income Insurance a Valuable Companion
for Singles Wanting to Protect Their Income
No Spouse's Income to Rely on if Too Sick or Injured to Work
NEW YORK--(BUSINESS WIRE)--Nearly two-thirds (63%) of full-time workers who are primary wage earners and not married are very concerned about having enough money to pay bills during a period of sudden income loss, according to MetLife's 9th Annual Study of Employee Benefits Trends. Despite this concern, however, nearly 60% of these single workers have no disability insurance to protect their income in the event an illness or injury prevents them from working.
"Disability income insurance is an essential part of a personal financial safety net. It is simple: if you are dependent on your paycheck, you should protect that income," said Clea Barth, vice president, Health Risk Products for MetLife. "More than a third of unmarried men and more than half of unmarried women who are primary wage earners say they live paycheck to paycheck. It is important to plan ahead in case that paycheck stops altogether."
Disability insurance replaces a portion of income when people are unable to work for a period of time due to an illness or injury. This income allows individuals to continue to pay essential living expenses, including food, utilities, home and car payments, until they are able to return to work.
Feeling Invincible?
While 65% of single, working primary wage earner women admit to being very concerned about their financial security in the event of a disability or serious illness, only 44% of single, working men say the same, seeming to indicate that men perceive a potentially disabling illness or injury as less of a realistic risk.
However, even if you are young and healthy, it is important to consider disability insurance. For example, analysis of MetLife 2010 disability claims data finds that:
- 10% of short-term disability claims approved were for men ages 21 to 30. The average claim duration was 40 days.
- 22% of short-term disability claims approved were for women ages 21 to 30. The average claim duration was 46 days.
- 5% of long-term disability claims approved were for men ages 21 to 30. Top causes were fractures, back strain, cancer. For closed claims the average duration was 32 months.
- 10% of the long-term disability claims approved were for women ages 21 to 30. Top causes were pregnancy, depression, and back strain. For closed claims the average duration was 21 months.
For more complete income protection, individuals should have both short-term and long-term disability benefits. Short-term disability plans replace income for the early period of a disability. In general, the plans provide benefits for periods that range from as little as two weeks up to two years. Long-term disability benefits help replace income for an extended period, often until the disabled person turns 65. Social Security disability benefits are not available if an individual expects to be out of work for less than a year and, if paid, will likely be deducted from group disability benefits. In addition, most causes of disability are not work-related and, therefore, not covered by workers' compensation.
Getting Started
According to the MetLife study, nearly three-quarters of employers offer some type of disability coverage, and Paul D. Taylor, vice president, MetLife Group Disability, encourages employees to learn what they have available through the workplace.
"A good place to start is to see if disability insurance is available to you at work. Take advantage of your workplace benefits, and if additional protection is needed, consider supplementing this coverage with an individual disability income policy, which can help replace bonus or incentive pay that may not be covered through a group plan, " Taylor suggests. "While some disability insurance coverage is obviously better than no coverage, a good rule of thumb is to protect 60% - 80% of your after-tax income so essential monthly expenses will be covered. There is no substitute for good advice so if you don't understand your coverage or how to determine your needs, seek professional assistance."
The MetLife study found that while only about a third (33%) of unmarried workers feel very confident in making the right financial decisions, about half (48%) don't consult with anyone about their financial matters.
Consumers can learn more about income protection at www.metlife.com/disabilityincome. The page features disability income insurance basics, frequently asked questions, a disability quiz, wellness information and MetLife's online Disability Insurance Calculator.
Methodology
The 9th Annual MetLife Study of Employee Benefits Trends was conducted during the fourth quarter of 2010 and consisted of two distinct studies fielded by GfK Custom Research North America. The employer survey comprised 1,508 interviews with benefits decision-makers at companies with staff sizes of at least two employees. The employee sample comprised 1,412 interviews with full-time employees age 21 and over, at companies with a minimum of two employees.
LIFE Encourages Agents to Take Action
During Disability Insurance Awareness Month
New Website, Photo Contest and Marketing Toolkit Help Agents Better Connect with Clients and Prospects
Professional Speaker Rosemarie Rossetti to Serve as National Spokesperson
Arlington, Va. - April 4, 2011 - Most people don't think twice about insuring valuable assets such as their cars or homes. However, millions leave themselves financially vulnerable every day by completely overlooking the importance of protecting something worth much more - their paychecks.
That's why the nonprofit LIFE Foundation is once again coordinating Disability Insurance Awareness Month (DIAM) in May to educate consumers about the important role disability insurance plays in having a sound financial plan. This year's campaign will have a simple message - Protect Your Paycheck - to help consumers connect disability insurance with the important protection it provides. The campaign is also a call to action for producers to reach out to clients and prospects and encourage them to protect their paychecks with disability insurance. In addition, benefits specialists can pass the message on to their employer-clients that May is the perfect time to let employees know about their disability insurance benefits and the need to protect their most valuable asset, their paycheck.
"This May, we want to get the message out that if you have a job and earn a paycheck, you need disability insurance," said Marvin H. Feldman, CLU, ChFC, RFC, president and CEO of the LIFE Foundation. "Our goal is to educate Americans about the benefits disability insurance provides and we hope agents and companies will do their part to help ensure people get the coverage they need."
Disability Insurance Awareness Month Campaign Tools for Agents
To help companies and producers take advantage of the DIAM campaign, LIFE has created a toolkit that provides insurance agents and benefits specialists with the resources they need to execute their own marketing and communications initiatives. The kit can be accessed at www.lifehappens.org/diamkit and includes embeddable videos, downloadable flyers, a customizable news article and release, eCards, a marketing guide-and more.
To help producers incorporate more disability insurance into their practice, LIFE is hosting a free webinar for producers, "Ramp Up Your DI Sales This May," on April 7, 2011 at 1:00 p.m. Eastern. Top disability insurance producers and experts in the field will share their tips and sales ideas, and LIFE will highlight free tools and resources that producers can use to reach out to clients and prospects during May.
LIFE also is coordinating a variety of consumer awareness-building initiatives and will launch new resources to help the industry reinforce the benefits of disability insurance to clients. At the core of these efforts is a new consumer-facing microsite, www.protectyourpaycheck.org, which will house interactive tools, videos and educational information that focus on disability insurance and reinforce the Protect Your Paycheck theme. The site will be launched in late April.
To get consumers thinking about the importance of their paycheck and all the essential things that it pays for, LIFE also will sponsor the "This Moment Made Possible by My Paycheck" photo contest. The contest will ask consumers to submit a photo and caption depicting a memorable moment made possible by their paychecks. The entrant with the best photo and caption will receive a $500 gift card. The contest will run throughout the month of May and will be accessible through the microsite and LIFE's Facebook fanpage.
DIAM Spokesperson: Rosemarie Rossetti
LIFE also will sponsor national radio public service announcements featuring this year's campaign spokesperson Rosemarie Rossetti. Rossetti's life was changed in an instant when a tree fell on her while she was biking, paralyzing her from the waist down. It was her disability insurance that helped her through her darkest years when she had no paycheck coming in.
As a professional speaker, Rossetti knows how to get to the crux of the matter with her message on the importance of disability insurance and why agents should be selling it with conviction. Her story will be available to share through video messages to both the industry and consumers and through a realLIFEstory flyer.
For more information about the 2011 DIAM campaign, please visit www.lifehappens.org/diam or contact Maggie Leyes, LIFE's DIAM campaign coordinator, at mleyes@lifehappens.org.
About Disability Insurance Awareness Month
Disability Insurance Awareness Month (DIAM) was created to get American workers to think more about the need to protect their greatest asset - their ability to earn an income. Held in May, DIAM is an industry-wide effort that is coordinated by the nonprofit Life and Health Insurance Foundation for Education (LIFE).
About LIFE
The Life and Health Insurance Foundation for Education (LIFE) was founded in 1994 in response to the public's growing need for information and education on life, health, disability and long-term care insurance. LIFE also seeks to remind people of the important role insurance professionals perform in helping families, businesses and individuals find the insurance solutions that best fit their needs. To learn more about these topics, please visit www.lifehappens.org.
Bridging the Disability Divide
Employees believe that disability will happen... just not to them
by Barry Lundquist
Mr. Lundquist is president of the Council for Disability Awareness (CDA), a nonprofit organization committed to informing and educating the American public about the widespread and growing frequency of disability, and the financial impact it can have. Visit www.disabilitycanhappen.org
What's the state of disability in America? The latest industry statistics are certainly eye-opening:
- More than 8 million U.S. workers, over 5 percent of the workforce, are currently receiving Social Security Disability benefits.
- Nearly 90 percent of disabilities aren't work-related, and therefore aren't protected by workers' compensation benefits.
- Only 35 percent of initial SSDI applications were approved in 2009.3
- 100 million Americans are not protected by private disability insurance.
Given these trends, the key findings in a new consumer research report called The Disability Divide, issued by the nonprofit Council for Disability Awareness, are even more troubling. That's because the survey of 1,006 full-time U.S. workers revealed serious disconnects between what they believe about disability, and preparing for one, and the reality about these two issues.
Among the key findings in the survey
Employees believe that a disability is likely to happen. But just not to them. Eighty-three percent of respondents said that a 'disability could happen to anyone at anytime.'
Inexplicably, however, a significant number do not believe they are personally at risk. This belief seems to indicate outright denial or, at the very least, an unwillingness to view their current 'good' health as something that could change, completely unexpectedly.
Employees believe that their own chances of becoming disabled are slim.
In fact, 44 percent said they have about a one out of 100 chance of becoming disabled during their working years. But they need a reality check. The Social Security Administration estimates that one out of three Americans entering the workforce today will become disabled before they retire.
Workers imagine most disabilities are caused by catastrophic, one-time events, such as serious accidents or injuries.
This was perhaps the biggest disconnect in the survey. Seventy-one percent of workers tended to see a potential disability as resulting from catastrophic causes, such as serious accidents, stroke, cancer or heart disease. The reality? Insurance statistics show that only 9 percent of long-term disabilities actually resulted from serious accidents. The top cause of disabilities? Our own CDA 2010 Long-Term Disability Claim Review reported that many income-interrupting disabilities are triggered by more common, chronic conditions, including one out of four caused by muscle and bone disorders like back problems, joint pain and muscle pain.
Employees believe that a disability could impact their income. But, they don't have the resources to replace it if it stopped.
Fifty-seven percent of the workers surveyed equated disability with the inability to work. And 65 percent say if their income stopped they could cover expenses for one year, at the most. This seems to be in line with other economic research that says about 70 percent of Americans live from paycheck to paycheck and only 40 percent have funds earmarked for emergencies.
Employees believe most disabilities will last a long time. But few have long-term disability protection.
Although 68 percent of survey respondents believe that a disability would keep a person out of work for one year or more, roughly 70 percent of employees are not covered by any type of private long-term disability insurance.7 Nearly one-third of respondents said a disabled employee would never return to work, lending more credence to the theory that many workers view disabilities as very devastating but rather uncommon catastrophic occurrences. When offered as a voluntary benefit by their employers, fewer than 50 percent of workers choose long-term income protection. And when asked to describe their protection, barely 30 percent claim to understand it.
Employees believe their ability to earn an income is important. But apparently protecting it isn't.
Fully 90 percent of workers in the survey said that their ability to earn an income is more important than any other financial resource in preserving their financial security. But almost 40 percent said they haven't even thought about how they would protect this all-important financial resource, let alone taken action to do so. In today's world where employees perceive that financial security is more tenuous, and more valued, then ever before, it's critically important for workers to recognize that all financial security ultimately starts with their income.
Employees' options to cover expenses if they get sick and can't work are typically not well thought out or realistic.
Forty percent of employees said they would rely on sick leave/vacation benefits provided by their employer. But again, this seems to suggest a lack of understanding about to what extent they would be protected. Typically, these benefits usually run out in a matter of weeks, at a time when expenses are often increasing!
What the research means for you
Obviously, these research findings show that most workers don't understand the risk and are not prepared financially to face a disability and the likely loss of their income. And they also show a lack of understanding for such a simple financial security concept: If you can't work, you can't get paid. And that's what can lead to financial disaster for workers and their families.
As trusted financial advisors, whether working with individual clients, employers or employees, it's up to you to make sure workers understand the risk and the potentially devastating consequences of disability. They must have a sound plan in place to protect their most important financial resource. I urge you to start discussing the risks associated with an income-limiting disability and the options for preparation and planning with your customers today.
Here are a few ways you can get started:
Educate clients about disability. Most clients, prospects or employees clearly need to better understand the likelihood that illness or injury can keep them out of work for a prolonged period of time, and what options they have to protect themselves from that risk. Specifically, you can: 1) correct the misconceptions they hold about disability; and 2) help them learn what they can do to lower their risk of its financial impact. Direct your clients to www.disabilitycanhappen.org where they can find a wealth of information about the likelihood of disability and its devastating effects. There's even an easy-to-use personalized disability calculator from the Council for Disability Awareness called the Personal Disability Quotient at: www.whatsmypdq.org.
Spell out existing benefits. The workers we surveyed have a poor understanding of their benefits. So spend time reviewing existing disability benefits, how each one works and how much they're entitled to receive from each one. Also, help them determine their sources of post-disability income, and examine whether these sources will be sufficient in meeting their personal financial obligations if a disability forces them to stop working for a time. When dealing with groups of employees, self-service tools are available on the CDA website. And having some form of income protection does not automatically mean having enough protection to keep up with the monthly bills.
Encourage action. Helping employees understand more about their benefits and the consequences of disability is only half the battle. Far too many haven't taken any steps to prepare themselves financially. Point out they are responsible for their financial futures, and encourage them to take charge of their physical 'and financial' health.
Share your expertise. From the findings I've highlighted in this article, it's clear that general knowledge of disability planning is both not sufficient and not valued among workers today. Make disability planning an integral part of your financial planning process. Emphasize the specific benefits of a comprehensive disability insurance program, and help design and implement an appropriate solution for your clients that will help protect their financial security.
• More than 8 million U.S. workers—over 5 percent of the workforce— are currently receiving Social Security Disability benefits.1
• Nearly 90 percent of disabilities aren’t work-related—and therefore aren’t protected by workers’ compensation benefits. 2
• Only 35 percent of initial SSDI applications were approved in 2009.3
• 100 million Americans are not protected by private disability insurance.4
Given these trends, the key findings in a new consumer research report called The Disability Divide, issued by the nonprofit Council for Disability Awareness, are even more troubling. That’s because the survey of 1,006 full-time U.S. workers revealed serious disconnects between what they believe about disability, and preparing for one, and the reality about these two issues.
Among the key findings in the survey:
Employees believe that a disability is likely to happen.
But just not to them.
Eighty-three percent of respondents said that a “disability
could happen to anyone at anytime.”
Inexplicably, however, a significant number do not believe they are personally
at risk. This belief seems to indicate outright denial or, at the very least,
an unwillingness to view their current “good” health as something that could
change—completely unexpectedly.
Employees believe that their own chances of becoming
disabled are slim.
In fact, 44 percent said they have about a one out of 100
chance of becoming disabled during their working years. But they need a reality
check. The Social Security Administration estimates that one out of 3 Americans
entering the workforce today will become disabled before they retire.
Workers imagine most disabilities are caused by
catastrophic, one-time events, such as serious accidents or injuries.
This was perhaps the biggest disconnect in the survey.
Seventy-one percent of workers tended to see a potential disability as
resulting from catastrophic causes, such as serious accidents, stroke, cancer
or heart disease. The reality? Insurance statistics show that only 9 percent of
long-term disabilities actually resulted from serious accidents. The top cause
of disabilities? Our own CDA 2010 Long-Term Disability Claim Review reported
that many income-interrupting disabilities are triggered by more common,
chronic conditions, including one out of four caused by muscle and bone
disorders like back problems, joint pain and muscle pain.
Employees believe that a disability could impact their
income. But, they don’t have the resources to replace it if it stopped.
Fifty-seven percent of the workers surveyed equated
disability with the inability to work. And 65 percent say if their income
stopped they could cover expenses for one year, at the most. This seems to be
in line with other economic research that says about 70 percent of Americans
live from paycheck to paycheck5 and
only 40 percent have funds earmarked for emergencies. 6
Employees believe most disabilities will last a long
time. But few have long-term disability protection.
Although 68 percent of survey respondents believe that a
disability would keep a person out of work for one year or more, roughly 70
percent of employees are not covered by any type of private long-term
disability insurance.7 Nearly one-third of respondents said a
disabled employee would never
return to work, lending more credence to the theory that many workers view
disabilities as very devastating but rather uncommon catastrophic occurrences.
When offered as a voluntary benefit by their employers, fewer than 50 percent
of workers choose long-term income protection. And when asked to describe their
protection, barely 30 percent claim to understand it.
Employees believe their ability to earn an income is
important. But apparently protecting it isn’t.
Fully 90 percent of workers in the survey said that their
ability to earn an income is more important than any other financial resource
in preserving their financial security. But almost 40 percent said they haven’t
even thought about how they would protect this all-important financial resource,
let alone taken action to do so. In today’s world where employees perceive that
financial security is more tenuous, and more valued, then ever before, it’s
critically important for workers to recognize that all financial security
ultimately starts with their income.
Employees’ options to cover expenses if they get sick and
can’t work are typically not well thought out or realistic.
Forty percent of employees said they would rely on sick
leave/vacation benefits provided by their employer. But again, this seems to
suggest a lack of understanding about to what extent they would be protected.
Typically, these benefits usually run out in a matter of weeks, at a time when
expenses are often increasing!
The research can be viewed in its entirety HERE
What the research means for you
Obviously, these research findings show that most workers don’t understand the risk and are not prepared financially to face a disability and the likely loss of their income. And they also show a lack of understanding for such a simple financial security concept: If you can’t work, you can’t get paid. And that’s what can lead to financial disaster for workers and their families.
As trusted financial advisors, whether working with individual clients, employers or employees, it’s up to you to make sure workers understand the risk and the potentially devastating consequences of disability. They must have a sound plan in place to protect their most important financial resource. I urge you to start discussing the risks associated with an income-limiting disability and the options for preparation and planning with your customers today.
Here are a few ways you can get started:
Educate clients about disability. Most clients, prospects or employees clearly need to better understand the likelihood that illness or injury can keep them out of work for a prolonged period of time, and what options they have to protect themselves from that risk.Specifically, you can: 1) correct the misconceptions they hold about disability; and 2) help them learn what they can do to lower their risk of its financial impact. Direct your clients to www.disabilitycanhappen.org where they can find a wealth of information about the likelihood of disability and its devastating effects. There’s even an easy-to-use personalized disability calculator from the Council for Disability Awareness called the Personal Disability Quotient at: www.whatsmypdq.org.
Spell out existing benefits. The workers we surveyed have a poor understanding of their benefits. So spend time reviewing existing disability benefits, how each one works and how much they’re entitled to receive from each one. Also, help them determine their sources of post-disability income, and examine whether these sources will be sufficient in meeting their personal financial obligations if a disability forces them to stop working for a time. When dealing with groups of employees, self-service tools are available on the CDA website. And having some form of income protection does not automatically mean having enough protection to keep up with the monthly bills.
Encourage action. Helping employees understand more about their benefits and the consequences of disability is only half the battle. Far too many haven’t taken any steps to prepare themselves financially. Point out they are responsible for their financial futures, and encourage them to take charge of their physical—and financial—health.
Share your expertise. From the findings I’ve highlighted in this article, it’s clear that general knowledge of disability planning is both not sufficient and not valued among workers today. Make disability planning an integral part of your financial planning process. Emphasize the specific benefits of a comprehensive disability insurance program—and help design and implement an appropriate solution for your clients that will help protect their financial security.
Disability income insurance misconceptions
The Danger of Living with the 60% Illusion
Gary F.
Terry is Executive Vice President and Managing Director of The Westport Group, Braintree, Ma. He is one of the developers of Executive Income
Assurance, a
proprietary disability income plan designed to protect highly compensated
executives, both domestic and foreign. He can be contacted at 781-380-1010 or gterry@westportgp.com
In any discussion of employee disability benefits–including those with highly compensated employees and professionals, a lack of understanding becomes quickly apparent. Whether it’s an office assistant or an executive, almost everyone says, “I didn’t realize that.”
Corporate executives, business owners, money managers, lawyers and others firmly believe that they are adequately protected and that their company’s disability income plan provides them with 60% coverage. In other words, if they become disabled, they will receive 60% of their annual compensation. Starting with their first job out of college, they always seem to remember something about disability insurance at 60%.
As it turns out, the 60% figure is an illusion. Unfortunately, employees only come face-to-face with reality when they have become disabled and delve deeper into the actual coverage.
The crucial question, every employee should ask is this: 60% of what? The answer is more complex than one might either expect or be prepared for:
· Is it 60% of the base salary?
· Is it 60% of the base salary, plus the annual bonus?
· Is it 60% of the base salary, plus annual bonus and long-term bonus?
· Is it cash compensation only? What about deferred compensation, restricted stock or other compensation?
· Are the benefits taxable or tax-free?
· What is the monthly benefit cap? Is it $10,000, $15,000, $20,000 or $25,000?
· What is the definition of disability? Is it an inability to perform your own occupation for two years or to age 65? Is it partial disability or total disability only?
What first appears to be a simple, direct and clear question turns out to be complex and even confusing.
The vast majority of all employer group disability insurance plans cover 60% of base salary with a maximum monthly benefit cap of $10,000 to $15,000. There are few companies that cover base salary and annual bonus up to $20,000 per month. Employer-paid benefits are taxable at the time of claim, while employee-paid benefits are tax-free.
The dramatic differences that occur between plans covering just base pay and others that include bonus compensation are obvious. Some benefits are taxable with others being tax-free. The maximum monthly benefit cap restricts them all.
Talk about an illusion: some employees are covered at 60% of compensation, while others are actually covered at only 10%-15% of their net take home pay after taxes.
Here are actual examples:
Scenario I
The vice president of a manufacturing company with a $200,000 annual salary and a $100,000 bonus becomes disabled from a head injury resulting from a car accident. The company’s group plan will provide 60% coverage but only for base salary. There is also a maximum monthly benefit of $10,000 on the plan and the benefit paid is taxable.
His original pre-disability, after tax, take home pay was $16,250 per month or $195,000 annually ($200,000 + $100,000-[35% tax]). Now that he is disabled, his monthly after tax benefit is $6,500 ($10,000 – [35% tax] or $78,000 per year. He must now live on 40% of what he was taking home before the disability occurred.
Law firms and investment firms are unique and suffer from their own problems. Most already have their plans structured to provide tax-free benefits. Yet, their biggest problem is the benefits cap. Even though the partners of major law firms and money management professionals frequently earn $1 million to $3 million a year, their disability benefits are still capped at $25,000, $30,000 or $35,000 per month. It’s not surprising that many of these highly compensated professionals honestly believe they are protected at 60% of their earnings, when, in fact, the actual figure is far less. Unfortunately, due to the financial exposure of large claims, it isn’t practical to increase the group disability benefit.
There is supplemental disability insurance available to solve the problem, either firm-paid or voluntary. However, the first step is to recognize that there may be a serious problem.
Scenario II
The partner in a large law firm earns $1,000,000 a year, has a brain tumor and goes out on disability, indefinitely. He assumes his group disability plan will pay 60% of $1,000,000 tax-free (60% = $600,000). Unfortunately, the firm’s disability coverage will pay 60% of earnings, but there is a maximum benefit cap of $30,000 per month, which equals only $360,000 per year.
This means his original pre-disability, after tax, take home pay of $650,000 ($1,000,000 – [35% tax]) is now $360,000. He faced with living on 45% less, after tax, than he was before becoming disabled.
Having just come through one the most stressful financial periods in the past 60 years, can you imagine how difficult it would be if you suffered an accident or an illness and could not continue to work? Eighty-five percent of all disabilities are illness-related, such as cancer, MS, diabetes and heart disease. Combine that with the occasional auto accident or head injury and the picture is devastating. Then, add in a disability insurance plan that doesn’t protect 60% of earnings, the picture becomes unusually grim.
Clearly, employers should review their programs to determine how best to solve this problem, whether it is with a company-paid or a voluntary program. The employees should be educated on the limitations of the current disability program, as well as the strategies that are available to fill the gaps.
Everyone’s most important asset is his or her income and it deserves the best possible protection. The biggest and most tragic mistake is thinking you will have 60% of your income should you become disabled.
Financial impact of disability can be staggering
The financial impact on individuals who become disabled can be staggering if they lack disability insurance, as high as 20 times a person's annual salary, according to a new study released by the LIFE Foundation and America's Health Insurance Plans (AHIP).
Conducted by the global consulting firm Milliman, Inc., the study, titled "The Impact of Disability", is a rare look at the consequences facing individuals who become disabled and can't work, and the level to which various types of disability income protection can help to reduce the financial impact. The findings reveal that in the absence of insurance, a majority of Americans would likely have to make difficult financial decisions, or even drastic lifestyle changes, in order to cover the costs associated with disability, regardless of whether the disability is short- or long-term.
Cost of disability hits single, low income and long-term disabled the hardest
Examining four representative scenarios of newly disabled individuals, the study found, for example, that the financial impact of a disability, equal to lost income plus expenses, to be as high as nearly $1 million for a 40-year-old, single male earning $50,000 per year who suffers a long-term disability lasting until age 65, nearly 20 times his pre-disability earnings. The study also shows that the costs associated with short-term disabilities can be quite significant, equaling one to nearly two times income in some cases for a disability lasting just two years.
Those hit hardest by the costs resulting from a disability are single individuals, who do not have a second income to rely on; lower-income individuals, because added expenses are greater relative to the lost income; and those who suffer longer-term disabilities, since both income and expenses tend to increase with inflation, raising the cost of disability over time.
Further illustrating the stark financial reality outlined by these findings is the fact that as a result of the recession, many Americans have less savings and investments to fall back on should they become disabled and can't work. According to a recent national survey conducted by LIFE, more than a quarter (27 percent) of Americans admit they would begin having difficulty supporting themselves financially "immediately" following a disability, while nearly half (49 percent) would reach that point within a month.
"Our experience tells us that if you become disabled and don't have disability insurance, you're going to have a very rough go of it. This study quantifies the impact of a disability so working Americans can get a better understanding of financial difficulties they'll likely face without proper insurance coverage," said Marvin H. Feldman, CLU, ChFC, RFC, president and CEO of the LIFE Foundation. "Disability insurance provides a financial safety net that can be counted on to replace lost income if you were suddenly out of work due to illness or injury."
Value, availability of sources of disability income protection
Various sources of disability insurance provide valuable income replacement to help cover the high costs of disability and keep life on track for people who can't work due to a disabling illness or injury.
In fact, private disability insurance plans, such as employer-sponsored (primarily group) or individual coverage, can reduce the cost of a disability by 70 to 80 percent. Individual disability coverage, in combination with employer- or government-sponsored insurance programs, can reduce the financial cost of disability by 80 to 95 percent.
While government-sponsored disability insurance, either through Workers' Compensation or Social Security, is available to many working Americans, qualifying for it can be difficult. Workers' Compensation insurance is limited to disabilities that occur on the job, but a vast majority (90 percent) occur outside the workplace and are therefore not covered by Workers' Compensation programs. In recent years, only about 45 percent of initial applications for Social Security benefits have been approved, and the average monthly benefit, $1,062, is barely above the poverty level.
"The Social Security Disability Insurance (SSDI) program can be one source of disability income for many Americans, but this is no guarantee that disabled individuals will be eligible for SSDI," said Karen Ignagni, President and CEO of AHIP. "Working Americans and their families can benefit from the value that private disability income insurance provides."
Non-financial impact of disability
While difficult to articulate and quantify, non-financial impacts associated with disability are often tied to an individual's overall happiness and sense of self-worth, and can be exacerbated by the financial strain that occurs when a disabled person is overwhelmed with expenses in the absence of sufficient income. The availability of benefits from government programs and private insurance during a period of disability can also mitigate the severity of the non-financial costs.
"Not only does a disability take a financial toll, but it also has an impact emotionally and psychologically on the individual and affects the family as well," said Ignagni. "Private disability coverage helps not only to address the financial toll, but it also allows a person to focus on recovery and rehabilitation."
"The reality is that nearly one out of every three workers will suffer a disability that keeps them out of work for 90 days or longer at some point in their career and yet roughly 70 percent of working Americans do not have long-term disability coverage," said Feldman. "It is our hope that through studies such as this one, we can motivate greater numbers of people to investigate their need for disability insurance protection."
Back to TopDI helps businesses, employees in tough economy
by John Roberts
John Roberts is president and chief executive officer of Assurant Employee Benefits, Kansas City, Mo. He can be reached at John.Roberts@assurant.com.
With the current state of the economy, it's not surprising that most employers are looking to cut costs wherever they can. You've likely had conversations with clients who may feel the need to scale back their benefits plans to save money. They may remain committed to offering the health insurance their employees expect, but might believe that other coverages are expendable during trying times like those we're currently experiencing.
The truth is, at a time when many employers are unable to afford pay increases, a complete employee benefits package that includes the income protection that disability insurance can provide can be more important than ever to keep workers engaged. Helping your clients understand why can benefit you as well as them.
The chances of a disability are greater than you may think
For starters, the likelihood of disability is greater than most employers probably imagine. According to the Society of Actuaries, nearly one in seven individuals will be disabled for five or more years before reaching age 65. And while many people think that disabilities are typically caused by freak accidents, a 2007 long-term disability claims review by the Council for Disability Awareness found that the majority of long-term absences are due to back injuries and illnesses such as cancer and heart disease.
Without the safety net of disability insurance, the average person's financial assets can quickly be depleted. Research released by the National Association of Insurance Commissioners in 2007 indicates that 56 percent of American adults would not be able to pay their bills or meet expenses if they became disabled and could not work for a year or longer. The same organization also found that the average long-term disability absence lasts 2.5 years.
An injury or illness that takes an employee out of the workforce in a shaky economic climate can be more financially devastating than in a better economy. The financial resources many people have traditionally relied on during a period without an income, such as home equity or the sale of a home, personal savings and investments, simply can no longer be depended on to make ends meet.
Unfortunately, far too many individuals are without the income protection that disability insurance can provide and at risk of experiencing serious financial consequences. According to the Social Security Administration Fact Sheet published January 31, 2007, 70 percent of the private sector workforce has no long-term disability insurance. In addition, more than 50 percent of the workforce has no private pension coverage and a third have no retirement savings. And if those statistics aren't sobering enough, a 2005 Harvard University study found that nearly half of all personal bankruptcies are due to disability. Most individuals simply can't afford to become disabled without some level of income protection.
While it's always a good idea for employers to make disability insurance a part of their benefits packages, it can be an even better decision during uncertain economic times. While employers might believe they can continue to pay employees who become disabled and unable to work, their ability to do so for an extended period is not likely, particularly for smaller employers. Not only can disability insurance help protect the income of employees who become disabled, it can also help remove the social obligation employers may feel toward their employees by placing the financial burden on the insurer. It's also an effective way for small business owners to protect themselves and their businesses in the event of unforeseen circumstances.
The news isn't all bad
Some good news to share with your clients is that group disability insurance is more affordable than the majority of them probably believe. JHA's 2007 U.S. Group Disability Market Survey indicates that the average cost of group long-term disability insurance in the marketplace is $234 per employee per year. And many group disability policies include value-added services, such as financial counseling, elder care and disability resources, that insureds can use regardless of whether they ever file a disability claim.
In talking with your clients, you may find that many understand the value of group disability insurance and would like to provide it for their employees but they simply don't feel they have the budget to fund the premium. They are not without options. More and more carriers are allowing employers to split the cost with their employees or offer the coverage on a voluntary, or 100 percent employee-paid, basis. That's an increasingly popular option. The January 25, 2006 Eastbridge Voluntary Overview indicates that 64 percent of all employers offer at least one employee-paid product in their benefits portfolios.
Employee-paid coverage is also gaining popularity with employees. A 2008 LIMRA report on worksite marketing trends indicates that 61 percent of employees rate voluntary products as very or somewhat important. And, according to LIMRA's 2006 report titled Navigating the Workplace Benefits Landscape, 51 percent of new voluntary offerings in the workplace were made available because employees asked for them.
Making disability insurance available to their employees on a voluntary basis is a flexible and affordable alternative for employers on tight budgets. Because employees pay the premiums, cost to the employer is reduced to only administrative expenses. At the same time, employees are able to purchase a benefit they need and value on a guaranteed issue basis at more affordable group rates paid through convenient payroll deduction.
Individual disability policies can be difficult to obtain and expensive to purchase. Employees generally spend less when they buy group voluntary coverage and receive benefits tax free when they suffer a qualifying disability. In addition, group voluntary insurance may be the only coverage available for employees who are ineligible to purchase individual insurance.
No one knows what may occur in these unprecedented economic times. However, helping your clients understand the important role disability insurance can play for them and their employees can be an important step in their preparation for weathering this rough period of time.
Back to TopIdeal pieces of a DI policy
by Vincent L. Gallo
Vince Gallo is affiliated with First Financial Group, Lancaster, PA, representing the Guardian Life Insurance Company of America. He can be reached at Vincent_gallo@glic.com.
Many agents understand the importance of disability coverage for their higher income professional and/or medical clients. However, few agents understand how drastically disability income policies vary in contract language. The ill informed often shop around on price alone and ignore the language of the disability policy. This can be financially detrimental for your client in the unfortunate event of a claim.
For life insurance claims, the process is simple; the claim is paid upon death. There are not any arguments between the insured and the insurance company whether the insured is "really" dead or not. But whether you are disabled by definition and going to get paid is determined by your DI policy language.
Do you know what constitutes a good disability policy and why? I want to discuss my ideal elements of a DI policy, why they are important, and the consequences of not having these important features. Non-Cancellable and Guaranteed Renewable Definition: Non-Cancellable and Guaranteed Renewable means the insurer cannot cancel or change the policy and premiums will not increase as long as the premiums are paid on time.
One consequence of not having a policy with this structure is that the rate of the policy could go up to a level that you could no longer afford. Another consequence of your policy not having this basic structure is the entire policy can be cancelled without your consent.
Have you heard of someone getting into an accident and right after the claim was paid, they were dropped by their insurance carrier in an attempt to prevent another claim? Well obviously an auto insurance policy is not non-cancellable nor guaranteed renewable. Imagine having your disability policy dropped right after conclusion of a claim. You would not be protected if you had any other impairment or if your condition returned.
Another consequence of lacking both the Non-Can and GR structure is that in certain situations, the insurance company can change the definitions of the policy. For example, regarding a health insurance policy, possibly you've heard of a situation where the client files a claim and learns that the company no longer covers that situation or condition. You definitely don't want your disability policy to have that option. Group disability income insurance is most likely to have this option as premiums and policy language can change.
90 or 180 Day Wait and Benefits at Least to Age 65
Definition: The waiting period is the amount of time that must pass before benefits become payable (like a disability deductible). The benefit period is the maximum amount of time the benefit can be paid in the same claim.
A consequence of having a waiting period that's too long is that you may not have enough savings to pay your bills before disability benefits begin. Regarding a benefit period to age 65 or longer, the 1985 Commissioners' Individual Disability Table says about 60 percent of all people who have a disability that lasts a minimum of 90 days will make a complete recovery within a five-year period. This also means that 40 percent of the people that go on disability claim have a need for a benefit that lasts longer than five years. The consequence of not having a benefit period to retirement age is that the insureds place themselves at risk if they suffer a long lasting disability.
There is a minimal difference in premium between a five year and an age-65 benefit period. Since most DI claims are "front loaded", meaning shorter claims occur more often than longer claims, the difference in premium between a five year benefit and an age 65 benefit period is not all that significant when you consider the increased potential payout. In my opinion it is worth the extra cost for clients to purchase an age 65, age 67, or even a graded lifetime indemnity rider in certain situations, if available.
Protect Yourself in Your Own Occupation and Specialty-True "Own Occupation"
Definition: Being protected with a true own occupation definition means you are totally disabled if due to injury or sickness you are unable to do the material and substantial duties of your occupation (or occupations if more than one), even if you are at work in a different occupation, as long as you remain totally disabled in your original occupation.
A huge consequence of not having a true own-occupation definition of disability is, if you choose to do work elsewhere when on a claim, benefits being received may end or be reduced. The lesser definition of disability that is often confused with own occupation is called "modified own occ." It reads very similarly to a true own occupation definition in a policy but adds "and not working" to the own occupation definition.
Most people do not really understand the importance of having a true own occ disability income policy vs. having a modified own-occ disability income policy. To truly understand the difference we must first look at a typical claim from a different perspective. I do not know of any carrier that will insure you for 100 percent of your after tax income with base benefit. This means that when you are on a total disability claim and not working, there is always a reduction in net income to you. The companies do this so there is an incentive for you to get better, go back to work, and therefore hopefully end your claim.
One of the problems with this is when you are totally disabled, you automatically suffer from a net loss of income. Without having a "true own-occupation" definition of disability, you cannot do something else to better yourself financially because essentially anything you do that earns money may reduce or end your disability benefit. You wind up on a financial plateau and that means you are unable to better yourself financially, unless your new occupation pays more money than your old occupation, which in most cases is unlikely.
Below are two claim scenarios to further explain the differences. The first is "modified own occupation" and the second is "true own occupation". Which scenario would you prefer?
Modified Own Occupation Claim Example
"I'm sorry Mr. or Mrs. Client for what happened to you. Since you are totally disabled by definition of the disability policy you purchased, you will receive your $10,000 monthly disability benefit. I know that when you were working you made $265k and you likely cleared after all income taxes more than $10k a month, but it was the maximum benefit your disability carrier was willing to issue as no company will insure you for 100 percent of your income with base benefit. Unfortunately, now that you are considered disabled by the insurance company, you pretty much have to stay home. Why, you ask? Because if you work you may no longer be considered disabled and your benefits may end or be reduced. So, the financial goals you wanted to achieve: buy a second house, buy a Porsche, save for retirement, and pay for your kids to go to college, are not likely to happen anymore."
True Own Occupation Total Claim Example
"I'm sorry Mr. or Mrs. Client for what happened to you. Since you are totally disabled by definition of the disability policy you purchased, you will receive your $10,000 monthly disability benefit. I know that when you were working you made $265k and you likely cleared after income taxes more than $10k a month, but it was the maximum benefit your disability carrier was willing to issue as no company will insure you for 100 percent of your income with base benefit.
Fortunately, you have what is called a true "own occ" disability policy. As long as you are unable to do the material and substantial duties of your original occupation, you will be able to work in another capacity, supplementing the disability benefit. This may allow you to better yourself and your family financially plus give you the opportunity to possibly reach your pre-disability financial goals.
Do you see now why true own occ is important for the professional clients? This contract language gives the freedom of being able to do something else to better oneself financially when on claim. Even if the client chooses to not work, they will be happier knowing that they can make this choice.
Another important item regarding the true own occupation definition of disability is the importance of specialty language for medical and dental occupations. For example, one example of specialty language states if you have limited your occupation to the material and substantial duties of a medical or dental specialty, that specialty will be considered your occupation. Yes, it can be that specific.
Clients that have specialized occupations tend to be very ambitious. If they were not ambitious, they would not have been willing to do what it takes to get certified in their specialty. For example, a typical doctor goes through four years of college, followed by years of medical school, and then they complete residencies and sometimes fellowships. They spend a significant amount of time and money to become a specialist in their field. The moment you tell them they can't do something, that's when they really want to do it
Having a true own occ policy with specialty wording gives that client the freedom to choose to do something else to better oneself financially. The person with that choice will likely be much happier at time of claim because there is a chance that they can still improve their financial situation by choosing to pursue another occupation.
Protect You with Quality Partial/Residual Benefits with Unlimited Recovery Period
Definition: Residual disability provides benefits when you are gainfully employed but because of injury or sickness you suffer a loss of income. Usually the residual benefit is equal to the percent of income loss. For example: 50 percent loss of income = 50 percent of policy benefit.
Having a quality residual benefit is a very important feature of a disability policy that is often misunderstood. The best residual provisions do not require a total disability first, have a 15 percent loss of income threshold (vs 20 percent), have no requirement for loss of time and duties, and provide an unlimited recovery benefit. The consequence of not having a residual benefit with your policy is that your policy becomes an "all or nothing" policy, meaning if you are not totally disabled, you get no benefit. Keep in mind that most people at some point of a disability will be working while they are either getting better or getting worse. In other words, people are not usually totally healthy one day and totally disabled the next day or vice versa.
The percent loss of income threshold is worth noting. The best carriers use a 15 percent loss of income unlike the common 20 percent loss requirement. This allows in many situations a quicker qualification of claim as the benefit may be paid on a smaller loss of income. Additionally, a 15 percent loss threshold potentially allows paying a claim longer.
"Time and duties" clauses reflect another area of concern. In order to get a residual claim paid, a "time and duties" clause adds the requirement of a time and/or a loss of duties in addition to the income loss. The best residual provisions have no "time and duties" clauses meaning if you have a loss of income solely due to disability, you simply get paid.
Another consequence of not having a high quality residual disability benefit provision is that the policy may not have or may have a limited recovery benefit. What does that mean? After you make a complete physical recovery from your ailment, your residual benefit may end, even if you are still suffering from a loss of income. You may still have a loss of income after you recover because you've lost some of your referral sources and your reputation. People are hesitant to go back to you for your services because they know you were disabled. In some cases you may have a loss of income for the rest of your life. A good residual policy will pay you residual recovery benefits up to the full benefit period as long as that income loss is due solely to your disability even if you are now completely recovered. Other policies that have a residual recovery provision, may produce a lump sum payment or a monthly recovery benefits for a limited time period. Ideally, the recovery provision should be up to the maximum benefit period.
Protect Your Benefits Against Inflation-COLA
Definition: Cost of Living Adjustment is protection from the effects of inflation while disability benefits are being paid.
The consequence of not having the cost of living adjustment (COLA) rider on your policy is that when on claim you will be on a fixed income, as your benefit will not adjust to compensate for inflation. Imagine living today on the income you have now and never getting a raise, or worse yet, imagine living on the income that you made five or ten years ago. Everyone needs their benefit to increase with inflation to make sure they are able to maintain their standard of living. The better COLA riders out there have minimum compound increases, typically three percent, and are not tied to the CPI, for increases less that three percent. Additionally, there is a relatively new option regarding COLA, which is a delayed onset COLA. This allows long term inflation protection, but at a lower cost because the insured self insures inflation for the first three years of claim. Depending on the situation, this may be a good option to help save premium.
Full Mental Disorder and Substance Abuse Coverage
Definition: Not having your benefit limited for mental disorder claims, i.e. depression, anxiety, drug abuse, etc.
According to the 2006 Long Term Disability Claims Review, conducted by the non profit Council for Disability Awareness (CDA), website: DisabilityCanHappen.org, these claims cause a significant number (6.5 percent) of all new disability claims. For example, imagine losing a child, losing your spouse, or going through a divorce. You could be emotionally devastated. Any normal person going through an experience like that may be disabled due to such a loss. Many of them will have a loss of income. It may be temporary or permanent. Think about this; imagine being out of work for a year or two because of severe depression that occurs after an emotionally difficult situation. Your clients will go somewhere else because you are unable to give the service they need. Now you recover and have to start from scratch. Unfortunately, now people know about your past and you may never be able to get back to where you were. Having full mental disorder coverage allows the benefit period to go all the way up to age 65 or even lifetime, whatever your benefit happens to be.
Future Increase Option (FIO)
Definition: A policy rider that allows the insured to increase your coverage, as your income rises, even if your health deteriorates so long as you are not already on claim.
The consequence of not having this feature is that as your income rises you will have to be fully underwritten for any increases in coverage. Most people when young are, as they say "young and healthy"; however, as most people get older, they develop health issues. Those health issues may prevent them from getting the additional coverage they need. Adding the future increase option rider to a policy guarantees the ability to buy more coverage without evidence of medical insurability to keep one's income protection at the proper level as long as you financially qualify. You're medically underwritten only once when young and healthy, so you can be protected later. Your income is going to go up, so why only cover the income you have now?
The best FIO riders allow the benefit to be exercised every year, have a pool of potential benefit to purchase from, add the additional coverage to the existing policy, allow off anniversary exercises for special situations like loss of underlying group DI insurance or graduation from residency providing an employment contract.
The Extra Benefit if Catastrophically Disabled (CAT)
Definition: Catastrophic disability provides extra benefit above the base disability benefit if a severe (or catastrophic) disability occurs. To be considered catastrophically disabled with most carriers, one must have: permanent blindness, permanent deafness, permanent loss of speech, permanent loss of use of any two limbs, inability to do two of six Activities of Daily Living (ADLs), or a permanent severe cognitive impairment.
The consequence of not having a catastrophic benefit feature is that you put yourself at risk because your basic disability benefit may not give you enough income to protect your standard of living in the event of a catastrophic disability. When catastrophic disability occurs, your living expenses are going to increase for the extra healthcare and assistance you're going to need. The catastrophic benefit feature gives you extra benefit on top of your base to help compensate for these added expenses. By using this feature, a quality carrier can bring you potentially to 100 percent of your prior income tax-free. Yes, 100 percent of your income tax free will give you more spendable dollars than 100 percent of your after income tax earnings. However, this extra income may be needed to help offset the increased cost of living often associated with a catastrophic disability.
For example, your client is a full time surgeon that makes $465k a year and has $15k month of a quality own occupation individual DI policy. This client becomes totally disabled by definition of the policy and can no longer perform surgery due to loss of fine motor control of his dominant arm and hand. Assuming that the surgeon is otherwise healthy, the $15k month would likely be enough to maintain his or her household even though the $15k benefit is less that what was being cleared after income taxes when working. What would happen if your client had a stroke, a horrible car accident that resulted in paralysis of the four limbs, etc? In any of those catastrophic situations the $15k may be inadequate due to the added cost of living due to the very significant change in health. The client may need around the clock care and may even need to hire a nanny to take care of the kids in addition to home modification to accommodate a wheelchair. Does this make sense why I am a big believer in the CAT rider? Another thing to note is that it is not an expensive rider but may pay significantly more if your client qualifies.
Back to TopDeconstructing the Misconceptions of Cross-Selling DI
by Ronald A. Farr, Jr.
Ronald A, Farr, Jr., is assistant vice president, business development at Disability RMS, a disability risk management firm in Westbrook, Maine. He can be reached at 207-591-3000.
Benjamin Franklin once said, "By failing to prepare, you are preparing to fail." This statement holds true in many areas of business, but appears to have particular meaning in the area of cross-selling.
The concept of selling additional products to existing customers is not a new one, nor does it seem difficult to understand. However, sales initiatives often lack the critical planning stage that will take the cross-sell from merely an idea to a formal, ingrained sales process that yields results.
As is the case in most industries, cross-selling insurance products within a network of previously established relationships can dramatically increase the chances of a successful cross sale. With the tremendous opportunity that exists in the disability insurance market, there has never been a better time to develop a cross-sell strategy that includes a disability insurance product in the multi-benefit mix. Research conducted over the years continues to underscore the benefits of cross-selling.
The Misconceptions of Cross-Selling Misconception: Implementation is simple
Most often, sales teams are given the directive to cross-sell without any further education, support or resources. In fact, the conversation likely stops after providing an overview of the sales targets they are expected to meet or exceed. These declarations, while well intended, often fall by the wayside. Executing cross-selling initiatives can be complex and requires thoughtful planning and appropriate time dedicated to implementation. In fact, the only simple part of developing a cross-selling program is promoting the idea itself.
The first step in the cross-sell process is determining which products will comprise the most attractive cross-sell package. According to the July 2008 LIMRA report The Different Faces of Cross-Selling, brokers believe that the most popular combination of benefits for companies with more than 100 employees is life insurance and long- and short-term disability insurance. However, a strong argument could be made that cross-selling disability insurance with medical benefits may be a much more logical pairing given that medical carriers have information at the group level that would lend itself to a more informed product and pricing structure. Properly identifying group employers' plan needs and budgetary constraints will also help guide a customized benefits solution. Once the product mix has been identified, the following steps must be undertaken:
- Secure buy-in from the senior management team and divisional heads of the respective product lines. Without the support of the leadership team, the effort will likely fall flat.
- Educate the key stakeholders down the chain of command. The message for this initiative must go beyond the all too familiar sales rhetoric regarding the value of cross-sell initiatives. This is critical as the sales effort is a multi-tiered process, one that, like any program, requires communicating the value proposition and providing the proper training, marketing materials, information and incentives.
- Once support throughout the entire sales channel has been secured, setting a timeline of clearly defined and achievable goals is necessary. Measuring the goals against key performance indicators (KPIs) is also essential. The cross-sell initiative timeline should include:
- program design
- marketing materials development
- sales training
- distribution modeling
- official launch and roll-out
- defined follow-up strategy
- tracking, measuring and assessing prospect activity and financial goals
- communication plan for frequent updates to stakeholders
A go-to-market strategy that pairs top insurance brokers with firmly established clients presents the optimal platform for launching a successful program. Brokers need solid tools and attractive incentives including, but not limited to, compensation. Employers must also understand "what's in it for them." Brokers must explain disability insurance, the critical role it plays in protecting an employee's income stream, and that it is a necessary and affordable employee benefit. Additionally, sales representatives should be prepared to offer discounted premiums and/or enhanced benefits on the lead product to further influence the cross-sell.
Misconception: Concept to execution is instantaneous
With a sales cycle that spans anywhere from 24 to 36 months, implementing a cross-sell program takes time, as relationship building is at its core. Begin the process by strategically targeting tenured inforce customers, they are often loyal and more likely to purchase additional benefit products. The same LIMRA report indicates that selling products to new customers yields only a 15 percent chance of success, while targeting existing customers can increase the odds to 50 percent.
Using this information in combination with the articulated needs of the employer best positions the broker for cross-selling success.
With an inforce block of business, sales representatives and brokers also have access to critical data that is helpful in creating highly informed rate proposals. Once prospects have been identified, it is the responsibility of the sales representative to educate the broker on the value of adding a disability product to the offering.
Assessing strategies and identifying what is working and what is not, at defined stages in the timeline, is also important to maintain sales momentum. The cross-sell strategy is one that must continually evolve. If an employer is not immediately engaged in the cross-sell, it should not be dismissed from consideration for a future opportunity. There are numerous reasons an employer may not be ready to make a purchasing decision, including a current rate guarantee, budgetary constraints and competing business priorities.
Brokers must leverage all of the information they have captured (group health information, sensitivity to pricing, customer pain points, etc.) to deliver an attractive, customized package to employers. By doing so, brokers can significantly improve the dynamic of the sales model. Using this information in combination with the articulated needs of the employer best positions the broker for cross-selling success.
Misconception: Success depends solely on the broker
When selling multiple products, incenting brokers is often deemed the most critical component of a winning cross-sell strategy. However, motivating customers is equally, if not more, important. In fact, the majority of group insurance producers believe that focus on the employer should be paramount. According to LIMRA's The Different Faces of Cross-Selling report, only one-third of group insurance producers consider broker-focused incentives important when determining whether to present their clients with multiple products from one carrier. Alternatively, two-thirds recognize the importance of employer-focused incentives, such as rate adjustments to medical and non-medical products or adjustments to participation rates.
Increased pricing stability, combined billing and consolidated customer service are clear benefits of a multi-product package. While these advantages are often obvious to the employer, brokers will need to arm employers with the additional information they need to understand the overall benefit of purchasing multiple products. Through focused marketing efforts and a clearly defined value proposition, customers will better understand the benefits and key differentiators thereby positioning them to confidently make a purchasing decision.
Developing a formal, thoughtful cross-selling program that will thrive long term is the ultimate goal. Companies need to embrace the complex process of ingraining cross-selling into day-to-day business operations. By instituting a formal plan that goes beyond the initial proposal, carriers and brokers can reverse the pitfalls long associated with cross-selling.
The opportunity to successfully cross-sell exists. If executed correctly, the benefits, for carriers, brokers and employers, far outweigh the challenges of implementation.
Back to TopPhysicians reevaluate DI needs, look to group coverage to reduce costs
by Patricia M. Pfeifer
Patricia M. Pfeifer, GBDS, is physician segment program manager for group disability and group life insurance for The Hartford Financial Services Group, Inc. She can be reached at patricia.pfeifer1@hartfordlife.com.
It takes years of education and experience for physicians to develop the finely tuned skills they need to effectively practice medicine. The probing diagnostic capabilities, gentle dexterity and common touch that successful healers possess are held in high esteem by patients and fellow practitioners alike.
But one skill that is often underappreciated is the ability to walk a tightrope. Today's doctors practice medicine while balancing between rising costs for malpractice and health insurance on one hand, and continued reductions in reimbursements on the other. The business of medicine is becoming harder to manage than ever before.
Those financial realities are prompting many physicians to reevaluate their costs for a wide range of insurance services; among the highest priorities being their premiums for disability insurance. Increasingly, physicians are considering group disability insurance policies as a low-cost option for quality protection.
Few people understand the value of disability insurance more than doctors, who see both the physical impact of disabling medical conditions and need to protect their most important asset, their ability to earn an income over a 30 or 40-year medical career.
With so much at stake, most doctors need significant amounts of disability insurance to protect their long-term earnings potential against disabling accidents or illnesses. They want coverage that protects their income over the long term, particularly as it relates to the special skills they possess.
Specialty Coverage for Physicians
The newest group coverage provides significant benefits and features especially designed for physicians at a fraction of the cost available through individual policies. Many group long term disability policies provide benefits of up to $15,000 a month. The better policies include "own-specialty" and "sub-specialty" definitions of disability, meaning physicians will receive benefits even if they can practice medicine in a different specialty, but not their original specialty. An insured is considered to be disabled if he or she is unable to perform one or more of the essential duties of his or her specialty or sub-specialty.
Extended and Progressive Benefits
The better group LTD policies include a physician-oriented benefit that take into account the special risks that medical professionals face, including infectious and contagious diseases, progressive illnesses, continued loss of income after a return to work, and loss of income to a practice.
When most salaried executives return to work after a disability, they typically earn the same salary as they did before becoming disabled. That's not necessarily so for a doctor, especially if he or she runs a small practice. It's common for doctors to continue to suffer from a loss of income after recovering from a disability. While disabled, many of their patients were probably referred to other practices, reducing their receipts. Even upon returning to practice, fewer patients may be referred them or their former patients may have decided to stick with a new practice.
Another income-related hazard that physicians face is exposure to contagious diseases. Doctors spend a lot of time around sick people and, despite being cautious, risk catching their patients' maladies. A benefit that protects a physician's earnings level, while they are not disabled, will help assure that they are financially protected. The likelihood of becoming disabled increases with age, and like the rest of American society, the population of physicians is getting older too. That makes them equally susceptible to progressive conditions, such as arthritis.
Doctors can help protect themselves from a continuing loss of income by securing a group LTD policy with an extended protection benefit. The benefit pays a portion of the original LTD benefit based on a proportionate income loss formula if the insured continues to see a loss of income beyond the triggering level.
Progressive illness benefits protect physicians if their income should slowly decrease due to a progressive, debilitating illness or condition. In instances where someone suffers a progressive illness, it's conceivable that the insured may never qualify for disability benefits because the decrease in his or her monthly income never reaches the loss threshold required to trigger payment. To counter this problem, it's possible to obtain a policy that establishes the insured's pre-disability earnings at the higher of his or her income when the diagnosis of a progressive illness was reported or their current income.
Portability Problem Solved
Many physicians, given their extraordinary need for high quality disability insurance, know nearly as much about their coverage as the agents who sell and service the policies. So why haven't more physicians gravitated to group coverage until now?
In the past, one of the reasons many doctors relied primarily on individual LTD policies is the portability factor. With an individual policy, the doctor owns the policy and can continue coverage even if he or she went to work for a new practice or decided to start his or her own practice. Group LTD policies also allow continued coverage without proof of insurability if he or she leaves the current practice. This can be critical, especially if a doctor suffers from a medical condition that could impact his or her future insurability.
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