An Introduction to Individual Disability Insurance For producer use only. Not for use with consumers 2/26/20 Individual Disability Insurance Individual Disability Insurance provides replacement income paid on a monthly basis as the result of a qualifying, disabling injury or sickness. Consumers are conditioned to protect tangible assets, but many leave their less visible futureearnings potential unprotected.
2 2/26/20 17232PPT (8/19) SI/SNY Spectrum of Typical Assets $4,085,000* *Earning potential from age 24 to age 67 at $95,000/year does not include raises $300,000 $20,000
Car 3 2/26/20 Home 17232PPT (8/19) SI/SNY Career Income Potential The Need for Income Protection Insurance 4
2/26/20 17232PPT (8/19) SI/SNY Disabilities Are Lasting Longer Disabilities that last more than 90 days often last for several years. Age at Disability Duration in Years Under 40 4.3
40-44 7.5 45-49 7.3 50-54 6.3 55-59 3.9 60-64
1.9 This chart represents the average duration of disability lasting more than 90 days (and ending before age 65) based on the individuals age when disability begins. 1985 Commissioners Individual Disability Table A. 2012 Individual Disability Experience Committee of the Society of Actuaries. 5 2/26/20 17232PPT (8/19) SI/SNY Disabilities Have Many Causes Fractures (except Back) Circulatory/Heart
Mental/Emotional Nervous System Cancer Back Conditions Other Injury/Disease of Joints 0% 5% 10% 15% 20% This example is provided only to show a breakdown of The Standards open claims above as of Jan. 31, 2019 without regard
to the decision made on each claim. Having the conditions listed does not establish disability. Each claim is evaluated on its own merits and according to the terms of the policy. 6 2/26/20 17232PPT (8/19) SI/SNY Multiple vs. Single Use A key difference between the purpose of life insurance and individual disability income insurance is that life insurance covers only one event. There is no telling how many times an insured might need the
financial protection of disability income insurance, such as in a recurring back condition. 7 2/26/20 17232PPT (8/19) SI/SNY Mortality vs. Morbidity Life insurance underwriting is based on mortality rates, a measure of the number of deaths in a given population. Its tables show the probability of death for males and females at all ages. Underwriting for IDI is based on morbidity which is the likelihood that a person in a particular group will suffer a disabling disease, illness or injury. Morbidity is a factor in setting premium rates.
For example, a previous shoulder injury that resulted in surgery may not matter in life insurance underwriting. For IDI, it would likely result in an exclusion of coverage for the shoulder. 8 2/26/20 17232PPT (8/19) SI/SNY Premium Rates for Men and Women With life insurance, women will typically pay less for a policy. With income protection insurance, women typically pay more for protection than men
because women become disabled more frequently than men. 9 2/26/20 17232PPT (8/19) SI/SNY Types of Disability: Total, Partial and Presumptive A typical individual disability insurance contract provides income protection for three main types of disability. Total Disability: Because of injury or sickness, your disability prevents you from doing your job.* Partial (Residual) Disability: You are not totally disabled, able to work, but
continue to experience a loss of income due to your disability.* Presumptive Disability: You are presumed to be totally disabled if your injury or sickness results in the total, permanent loss of any of the following: speech, hearing in both ears not restorable by hearing aids, sight in both eyes or the use of two limbs. *Definitions can vary for different products and carriers. Always preview policy for details of coverage. 10 2/26/20 17232PPT (8/19) SI/SNY Expectations and Eligibility 11
2/26/20 17232PPT (8/19) SI/SNY Eligibility Comfort Zone Because income protection insurance coverage can replace the income lost due to sickness, its important that you are comfortable discussing your clients medical history and income. Medical conditions and income documentation are two of the most important factors in determining the outcome of an individual disability insurance application. Its key that your customer provide accurate medical and financial details to the carrier to help obtain the best possible offer of coverage for your customer. 12 2/26/20
17232PPT (8/19) SI/SNY Health Conditions Since more people become disabled due to sickness than injury, it is important to know if there are existing medical conditions that could cause offered coverage to be changed or limited in underwriting (policy modification). Applications should include detailed health history of hospitalizations, long-term treatments (e.g., for chronic back pain), surgeries and any prescriptions or over the counter medications. If a proposed insured is taking anti-depression or anxiety medication, or seeing a mental health practitioner, you should know why and for how long. 13
2/26/20 17232PPT (8/19) SI/SNY Occupation Class The occupation class is a classification insurance companies use to help determine the insureds risk. The occupation class is determined by looking at occupational duties. The higher the occupation class, the lower the rate. Providing clear details on the specific duties of the applicants occupation will help avoid delays in the underwriting process. 14 2/26/20 17232PPT (8/19) SI/SNY
Occupation Class The duties of the job are relevant, not just the job title. For example, the president of a company might have duties which include 15 2/26/20 Administration (20%) On-site supervision (25%)
Manual labor in field (25%) Meetings at client locations (25%) Operating heavy equipment (5%) 17232PPT (8/19) SI/SNY Ineligible Occupations Some occupations are considered
uninsurable by conventional carriers, typically because they have a higher degree of risk. These include: Law Enforcement Firefighters Commercial Pilots Military Professional Athletes Commercial Fishermen 16 2/26/20 17232PPT (8/19) SI/SNY Hazardous Sports
Some applicants may engage in sports or hobbies that either make them ineligible or require modification of their policy. Some examples include: Skydiving Scuba diving Mountaineering Private aviation Auto racing 17 2/26/20 17232PPT (8/19) SI/SNY Policy Exclusions
It may be necessary to exclude certain areas of coverage from an offer. Examples include: Exclusion of the lumbar back Exclusion of the left knee due to recent knee surgery Exclusion for mental disorders Some exclusions may be considered for removal in the future, upon application and approval. A modified offer can still provide excellent income protection in the event of a disability. It just has specific provisions necessary to manage risk for the individual circumstance. 18 2/26/20 17232PPT (8/19) SI/SNY
Types of Individual Disability Insurance Contracts 19 2/26/20 17232PPT (8/19) SI/SNY Types of IDI Contracts There are four types of IDI contracts: 1. Noncancelable Premiums and policy provisions are locked in for the length of the contract. 2. Guaranteed Renewable
Policy provisions are locked in for the length of the contract, regardless of changes to occupation or health. However, premium can be changed on a risk class basis. 20 2/26/20 17232PPT (8/19) SI/SNY Types of IDI Contracts There are four types of IDI contracts: 3. Conditionally Renewable The contract can be terminated by
insurer for a short list of reasons besides non-payment of premium. 4. Optionally Renewable Contract can be canceled or premium can be changed at any policy anniversary at the discretion of the insurer. 21 2/26/20 17232PPT (8/19) SI/SNY IDI Policy Definitions Total disability
Any occupation, your occupation and own occupation vs. income loss. Partial or residual disability Loss of duties Loss of time Loss of income 22 2/26/20 17232PPT (8/19) SI/SNY IDI Policy Definitions Waiver of premium For example, if the 90-day waiting
period is selected, after 90 days of disability, premiums are waived during disability. Premium due and paid during the 90 days is refunded. 23 2/26/20 17232PPT (8/19) SI/SNY IDI Policy Definitions Rehabilitation This is a voluntary program of vocational training or education intended to prepare disabled
insureds for return to work. It may include vocational and employment assessment, adaptive equipment, educational expenses and evaluation of worksite modifications. 24 2/26/20 17232PPT (8/19) SI/SNY IDI Policy Definitions Waiting (Elimination) Period 60, 90, 180, 365, 730 days cumulative or consecutive
Benefit Period 2 Year, 5 Year, 10 Year, To-Age-65 or -66 or -67 or -70 25 2/26/20 17232PPT (8/19) SI/SNY IDI Policy Definitions Cost of Living For each year of continuous disability after the first, the rider increases the policy benefit. Increases benefits each year based on Consumer Price
Index. There may be a maximum or minimum. 26 2/26/20 17232PPT (8/19) SI/SNY IDI Policy Definitions Increase Options Such as Future Purchase Option or Benefit Increase Rider Allows insured to increase coverage when salary increases, or for other life events. Requires financial
underwriting only. There is no medical underwriting. 27 2/26/20 17232PPT (8/19) SI/SNY Individual Disability Insurance Claims 28 2/26/20 17232PPT (8/19) SI/SNY
IDI Claims 29 Claims form Physician report Onset of disability Vocational rehabilitation 2/26/20 17232PPT (8/19) SI/SNY
IDI Claims At The Standard, we are committed to making the claims process as simple and straightforward as possible. An insured individual will complete a Claim Packet, which includes: The Insureds Statement An Attending Physicians Statement Authorization to Obtain Information 30 2/26/20 17232PPT (8/19) SI/SNY
Taxation of Benefits 31 2/26/20 17232PPT (8/19) SI/SNY Taxation of IDI Benefits 32
Individual Sole Proprietor Partnership S Corporation Premium non-deductible Benefits tax-free 2/26/20 17232PPT (8/19) SI/SNY Taxation of IDI Benefits Typically, fully underwritten individual disability insurance benefits are tax-free if premiums are paid by the insured.
*This information serves as a general guideline. When completing tax returns, direct specific questions about the taxability of benefits to a tax advisor or accountant. 33 2/26/20 17232PPT (8/19) SI/SNY The Standard is a marketing name for StanCorp Financial Group, Inc. and subsidiaries. Insurance products are offered by Standard Insurance Company of 1100 SW Sixth Avenue of Portland, Oregon, in all states except New York, where insurance products are offered by The Standard Life Insurance Company of New York of 333 Westchester Avenue, West Building, Suite 300, White Plains, New York. Product features and availability vary by state and company, and are solely the responsibility of each subsidiary. Each company is solely responsible for its own financial condition. Standard Insurance Company is licensed to solicit insurance business in all states except New York. The Standard Life Insurance Company of New York is licensed to solicit insurance business in only the state of New York.
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