Not all Long Term Disability insurance policies are the same - this is why we provide our clients with the top 3 results for your potential Long Term Disability insurance policy!
Once a client or Fee-Only financial planners completes our Long Term Disability insurance, they can expect to receive a comparison of potential policies in a 1 page insurance proposal just like this:
We will also attach the illustration for the policy that we are recommending.
We focus on:
Policy definition
-What actually triggers the disability, by definition. Some carriers require you to meet 1 of the 3 criteria, some the insured must hit 2/3. What are the possible triggers? (depends on carrier)
15-20% loss of income
15-20% loss of time
Loss of 1 major job duty
Occupation class
Every occupation has a different risk classification. Carriers have different scales and risk categories, thus, some occupations are cheaper with some carriers over others.
Insurable Age
By definition, the age of the policy holder on the most recent birthday. If 6 months past birthday, most carriers will round up in age. This is due to "insurable age."
Health Rating
Every insurance carrier is different, and each carrier has their own underwriting scale and requirements. Some call their top rating Select Preferred, others Preferred Plus, others Premier. Here's another article we wrote about health ratings.
Monthly Benefit
This is the monthly amount you will receive when on claim. So long as premiums are paid with post tax dollars, the monthly benefit of a LTD policy will be tax free. Most carriers will write up to $20,000 monthly, some with do $30,000. For even higher income earners, we can even look into stacking policies.
Waiting Period
Otherwise referred to as a "time deductible," waiting periods usually vary from 90 to 180 to 1 or 2 years from the date of initial disability till when the policy will start paying benefits.
Benefit Period
This is how long the benefits are paid for. Common options on LTD policies are 2 years, 5 years, 10 years, to 65, to 67 or to age 70.
Base Policy Premium
This is the base premium before any riders are added. No policy or carrier is exactly apples to apples, so it is important to make sure definitions match or you add the riders needed to compare.
Enhanced/Basic Residual Rider
Both the Basic and Enhanced Residual Disability Riders offer a recovery benefit to policy owners who return to work for as many hours as worked before the disability, but still suffer an earnings loss of at least 20 percent due to the previous injury or sickness.
Own Occupation
The gist of an "own occupation" (sometimes called "regular occupation") clause is that insureds must have an injury, illness, or disease that precludes them from working in their "own occupation" to receive benefits.
Cost of Living Adjustment (COLA)
In short: inflation protection. Offered at 3% or 5% either simple or compounding (depending on carrier offerings and what you see fit.) Note: most policies the COLA starts when on benefit, not when the policy starts.
Future Increase Option (FIO)
This is a way to lock in your health rating when you start the policy, and allows you to increase the policy as your income increases even if you health changed.
Total policy cost
Comparing apples to apples, and taking in all the factors and definitions above into consideration, we will then examine the total cost to find the carrier that best matches the financial plan for the least amount of premium possible.
Once the client is able to review the comparison and the quotes, we will adjust as needed and answer any calls via call, email, text, or Zoom.
If the client is ready to move forward, the next step in the process is our client fast fact.
