disability income insurance underwritten and issued by berkshire life insurance company of america,...
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Disability income insurance underwritten and issued byBerkshire Life Insurance Company of America, Pittsfield, MA a wholly owned stock subsidiary of
The Guardian Life Insurance Company of America, New York, NY or provided by Guardian.
For producer use only. Not for use with the general public. Product provisions and features may vary from state to state.
8542--05-08
Guardian DI:Protection for Individuals
and Small Businesses
An Introductory Overview
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Disability Insurance Products
Personal DIProVider Plus (Policy Forms 1400 & 1500)
The use of ProVider Plus in our marketing programs
Business DI Overhead Expense (Policy Form 4100; NC82 in Montana) Business Reducing Term (Policy Form AH55-A) Disability Buy-Out (Policy Form 3100; AH84 in Montana)
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A Word About Guardian& Berkshire
Berkshire Life Wholly owned stock subsidiaryDI and LTCI productsA. M. Best rating: A+
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Why Is DI Important?
Your client… Income is your client’s most valuable and
vulnerable asset.
You…Professional responsibility Market alignment & access Profit
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Why ProVider Plus?
Disability is unpredictable
The best policy… provides the most comprehensive protection tailored to specific needs
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Evaluating a Disability Policy
Renewability
Definition of total disability
Strong policy provisions & safeguards
Optional benefits
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Renewability
Non-cancellable and guaranteed renewable until the expiration date (age 65 or 67)
We cannot…cancel the policy change policy provisions increase the policy premium after issue
(as long as premium payments are made on a timely basis)
After expiration date, conditionally renewable for life
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Total Disability: True “Own-Occ”
“unable to perform the material and substantial duties of your occupation…”
The insured can be gainfully employed in another occupation and still be considered totally disabled
True “own-occ” protection for the entire benefit period – all occupation classes
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Specialty Language
Medical & dental specialists
“If you have limited your occupation to the performance of the material and substantial duties of a single medical or dental specialty, we will consider that specialty to be your occupation.”
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Occupation Class
One of the primary determinants of risk
Occ classes based on claims experience
Determines pricing & benefits available
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Occupation Classes
Class 6-3: white collar professionals, executives, managers
Classes 2-1*: occupations with primarily manual duties
Classes 6M-1M: medical & dental occupations
* Available only in employer-sponsored plans; Class 2 also available to business owners who have owned the business for at least 5 years. Class 1 is not available in Florida.
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Move Up Option
Many occupations can “move up” in class.
Criteria include: income level & stabilityexperience amount of travelcharacteristics of the business organization
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Monthly Indemnity
Amount payable for total disability
Primary determinants of issue amount: earned incomeoccupation classother disability coverage in force
(individual and group)who pays the premium (individual vs.
employer pay)
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Maximum Issue Limits*
Occupation Class
Maximum Issue Limit
Maximum Participation with Group LTD
6 – 4 $15,000 $25,000
6M, 5M $15,000 $25,000
4M, 3M $15,000 $20,000
2,1, 2M, 1M $7,500 Not available
* For issue ages 18 – 55. Limits vary for medical and dental professionals, depending on the use of the TeleMed underwriting process. Limits also vary in Florida.
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Elimination Period
Elimination periods available: 30, 60, 90, 180, 360, 720* days
To satisfy the EP, must be disabled from the same or different causes.
Days of disability don’t have to be consecutive, but must occur during the accumulation period.Example: 90 day EP – 210 day APExample: 180 month EP – 360 day AP
* Not available in some states
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Elimination Period
Benefits begin to accrue after theelimination period has been satisfied.
Elimination period waived if you becomedisabled again within 5 years after theend of a prior disability… which lasted more than 6 months for which we paid benefits
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Benefit Periods
2 years, 5 years, 10 years, to age 65, to age 67
Flexibility to meet your clients’ needs
Graded lifetime benefits* available by rider (see details on the following slide)
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Graded Lifetime Indemnity for Total Disability Rider
For disability prior to age 46, full monthly indemnity payable after age 65 (or 67)
For disability at age 46 or after, benefit after age 65 (or 67) is a percentage of the monthly indemnity decreases 5% for each year beyond age 45 that
disability occurs
Examples:For disability at age 46: 95% of monthly indemnityFor disability at age 50: 75% of monthly indemnity
Note: Availability of this rider is limited in Florida.
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Recurrent Disability
No new elimination period if a disability occurs within 12 months of a previous disability.
To be considered recurrent, the later disability must be due to the same cause or causes as the previous disability.
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Presumptive Total Disability
Total disability presumed, even if at work, for total and complete loss of:sight, hearing, speechuse of both hands, both feet, or one hand
and one foot
Elimination period is waived
Benefit paid as long as loss continues during the benefit period
Loss does not have to be irrecoverable
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Capital Sum Benefit
Lump sum benefit paid for: Total and irrecoverable loss of sight in one eye or
complete loss of a hand or foot by severance
Capital Sum = 12 X monthly indemnity
Payable in addition to any other policy benefit
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Rehabilitation Benefit
Helps to meet the costs of a rehabilitation program while totally disabled.
We must agree to the program in writing before enrollment.
A formal program of retraining to help the client return to work in his or her occupation.
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Modification and Access Benefit
Reimburses appropriate and reasonable costs incurred by the client
For a modification designed to assist in a return to work in his or her occupation.
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Transplant & Cosmetic Surgery
Benefits payable for total disability due to transplant of a part of your body to another
person orcomplications of cosmetic surgery
Must become totally disabled more than 6 months after the policy’s effective date.
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Waiver of Premium
Waives premium while your client is disabled and receiving benefits
Continues to waive premium for six months following recovery.
Refunds any premium paid that is attributable to the period of disability – even if paid before the disability began.
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Exclusions & Limitations*
No benefits payable…during incarceration for disability caused by, contributed to or resulting
from:– military training, action, conflict or war while serving in
the military or working for contracted military services.– commission of, or attempt to commit, a criminal offense.– being engaged in an illegal occupation.– suspension, revocation or surrender of professional or
occupational license or certification.– an intentionally self-inflicted injury.– any loss excluded by name or specific description.
* Exclusions & limitations may vary by state.
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Exclusions & Limitations*
Normal pregnancy or childbirth are not covered during the first 90 days of disability or the elimination period, if longer.**
Foreign Residency Limitation - The insured must be living full time in the U.S. or Canada in order to receive benefits (except for incidental travel or vacations).
* Varies by state
** Policy Form 1400 only
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Exclusions & Limitations
Mental Disorder and/or Substance Abuse limitation.*monthly benefits are limited to an aggregate total
of 24 months
Does not apply while continuously confined as an inpatient in a hospital and under care of physician.
* Applies to all policies issued in Florida. It also applies in all states to anesthetists, anesthesiologists, ER physicians, pain management physicians, and CRNAs.
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ProVider Plus:Optional Benefits
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Optional Benefits
Classes 6 – 3, 6M – 3M Residual Disability Benefit Rider Cost of Living Adjustment Rider Graded Lifetime Indemnity for Total Disability
Benefit Rider Future Increase Option Rider Automatic Benefit Enhancement Rider Catastrophic Disability Benefit Rider Retirement Protection Plus Disability Benefit Rider
All Classes: Social Insurance Substitute Rider Unemployment Waiver of Premium Rider
Classes 2, 1: Partial Disability Rider
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Residual Disability Benefit Rider
Requires loss of income of at least 15% of prior income.
Specific loss of time or duties are not required.
Elimination period can be satisfied by total or residual disability.
First 12 months – dollar-for-dollar loss of income benefit, up to the monthly indemnity*
* Coordinates with benefits payable from any other disability insurance policies the client may already have.
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Residual Disability Benefit Rider
After the first 12 months, benefits are proportionate to the loss of income.
If income loss is 75% or more, we consider the loss to be 100%.
Residual benefits payable for entire period.
Recovery: residual benefits will continue up to the end of the benefit period, as long as the loss of income is at least 15%.
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Cost of Living Adjustment Riders
Fixed 3%: The monthly benefit increases each year during disability by 3%
6% Maximum: The monthly benefit increases each year during disability according to changes in the CPI-U. Increases will be no lower than 3% and no higher
than 6%
For these options, increases begin after the insured has been disabled for 12 months
Note: All COLA increases are calculated on a compound interest basis.
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Cost of Living Adjustment Riders
Four-Year Delayed: Increases begin on the fourth anniversary of disability.
The monthly benefit increases each year during disability by 3%
Economical option for obtaining long term cost of living protection
Note: All COLA increases are calculated on a compound interest basis.
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Cost of Living Adjustment Riders
No cap on increases before the expiration date
After recovery, indexing increases remain part of the policy’s base benefituntil the expiration dateno extra premium
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Future Increase Option Rider
Allows for the purchase of additional coverage in spite of any change in healthor occupation
Total increase option: up to 2 times the base policy plus total in-force with Guardian and Berkshire*
Annual option dates to age 55
Special option date: For loss of Group LTD coverage orOn a date declared by the company
Note: State variations may apply.
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Future Increase Option Rider
Until age 45, insured can exercise up to the total increase option.
Afterwards, up to 1/3 of the available option amount each year, or the remaining option amount, if less than $1,000.
May exercise an option if disabled on an option date increased benefit available for a subsequent
disability only
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Automatic Benefit Enhancement Rider
Attached to policy at underwriter’s discretion
4% compound annual increases for 5 years
Increases provided despite any change in health, income or occupation
If the insured declines two consecutive increases, no future offers
Before age 60, insured may apply to extend the rider for additional 5-year periods.
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Catastrophic Disability Benefit Rider
Pays additional monthly benefit for Loss of 2 of 6 ADLsCognitive impairment Irrecoverable disability
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Catastrophic Disability Benefit Rider
Benefit amount: up to $8,000 per month total coverage not to exceed 100% of
applicant’s income
Built-in annual 3% fixedcompounded adjustmentsmaximum benefit = two times the original benefit
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Social Insurance Substitute Rider
Coordinates with social insurance
Dollar-for-dollar offset
Issue amounts: up to $1500 per month
Required for policies issued to classes 2 – 1 and 2M – 1M.
Note: In New York and New Jersey, if the insured receives any social insurance benefits, no benefits are payable under the rider.
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Unemployment Waiver of Premium Rider
Premiums waived if insured becomes unemployed
Must receive unemployment compensation for at least 60 consecutive days.
Premiums waived for 12 months, even if insured returns to work.
Renewable to age 60 or until the date option is exercised.
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Partial Disability*
Benefit is payable if sickness or injury causes a loss of the ability to perform one or more of the material
and substantial duties of the insured’s occupation, or the ability to perform these duties for more than
one-half the time normally required.
Elimination period must be satisfied by total disability
Benefit = 50% of the monthly indemnity
Payable for up to 6 months
* Available to classes 2 – 1 and 2M – 1M.
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Premium Options
Level Premiums remain the same until age 65 or 67.
Graded Low initial rate, with annual increases. Can be converted to a level premium (at attained
age rates) until age 50.
Step-rate Premium increases once to a level premium At the later of age 35 or five years after purchase
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Premium Payment Modes
Annual, Semi-annual, quarterly, monthly
Monthly Guard-O-Matic – no service fee
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Risk Classes
Preferred
Select
Standard
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Employer-Sponsored Plans
Gender-distinct pricing (Policy Form 1400) used for policies issued in Individual salesVoluntary Income Protection programsAssociation programs
Unisex pricing (Policy Form 1500) used for policies issued in Qualified Sick Pay Plans Executive Bonus Plans
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Discounts
Multi-policy discount5% on the first year premium
Employer-sponsored discount: 10%Groups of 2+ lives Groups of 3+ lives if one of the participants is in
class 6M – 1M
Association discount: 10%*For 10+ lives in approved associations
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Business Products
Overhead Expense
Business Reducing Term
Disability Buy-Out
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Overhead Expense*
Protects the business if the owner is disabled
Reimburses covered expenses incurred in the daily operation of the business
Excellent sequential sale to personal DI or…
Lead with Overhead Expense
* Policy Form 4100; NC82 in Montana
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Overhead Expense
Renewability:Non-cancellable & guaranteed renewable
to age 65Renewable to age 75 if working full time
and responsible for business expenses
Definition of disability: own-occupation
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Overhead Expense
Waiting period30, 60 or 90 days
Maximum indemnity periods12, 18 or 24 months
Maximum issue limit*$30,000 per month
Available to Classes 6, 5, 4, 4P, 3
* Higher limits may be available, subject to underwriter discretion.
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Overhead Expense
A reimbursement contract
Eligible expenses covered up to the policy’s maximum monthly benefit
Carry-over of benefits “unused” benefits may be carried over to a
subsequent month. may be carried over until aggregate maximum
benefit is paid – up to twice the maximum benefit period
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Covered Expenses
Rent
Utilities (e.g. electricity, phone, water)
Rent or lease expense (e.g. furniture and equipment)
Interest on debt
Depreciation or scheduled installment payments of principal of debt
Taxes on business property
Other normal, necessary and customary fixed business expenses
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Covered Expenses
Salaries of employees who are not members of the insured’s profession
Professional replacement benefit80% of replacement’s salary is considered a
covered expense for up to 6 months
Note: Policy provisions vary In Montana.
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Residual Overhead Expense Benefit Rider
Residual disability: insured suffers…at least 20% loss of gross monthly revenue and loss of time or duties
Benefit = covered overhead expenses minus current gross monthly revenue
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Future Purchase Option
Annual increase options to age 55
Maximum annual option amount: $1500
Total additional coverage of up to twice the maximum monthly benefit
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Tax Considerations
Premiums for overhead expense coverage are deductible
Policy benefits are taxablehowever, benefits are used to reimburse covered
expenses, which are deductible
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Premiums & Discounts
Gender-distinct, except for MT
Based on “age nearest birthday”
Non-tobacco user discount: 20%
Volume discount for monthly benefits of $4,000+
List bill discount: 10%
Association discount: 10%
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Business Reducing Term*
Protects fixed-payment business obligations… loan for purchase of business or practice business loan (e.g. expansion)guaranteed employment contract
Unique product!
* Policy Form AH55-A; Available in all states except FL, MN, MT, NC, SC, VA.
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Reducing Term Insurance
Decreasing Term Reducing Term Life Insurance Disability Insurance
$25,000 $1,000
Issue Term Ends $0 Issue Term Ends $0
Full Amount Payable Until
Monthly IndemnityFace Amount
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Business Reducing Term
Coverage lasts for a specified term5 to 30 yearspolicy term = length of the obligationcoverage cannot extend beyond age 60
Benefits payable until the end of the policy term
Elimination periods: 1, 3, 6, 12 months
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Business Reducing Term
Conditionally renewable to end of policy term renewal refused only for lack of insurable interest,
or reduction/ termination of need for the policyyour obligation: conduct an annual review
Modified own occ definition of total disability: unable to perform… your occupation & not working at any occupation
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Business Reducing Term
Benefit paid directly to loss payee the holder of the obligation “indemnity” vs. “reimbursement”
Issue limits…minimum: $1,000/mo. ($500 if other Guardian
or Berkshire coverage in force)maximum: $6,660-$22,500, depending on the
policy term
Maximum issue age: 55
Gender-distinct rates
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Business Reducing Term Issue Amounts
Purchase loans or business obligations: up to100% of the monthly payment
Employment contracts: up to 100% of the after-tax cost of contract payments
We require proof of the obligation
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Business Reducing Term Tax Considerations
Premiums are not deductible
Benefits are not taxable to the policyowner
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BRT: The Opportunity
Simple sale: owners and professionals understand that they are “on the hook”
Young professionals: practice purchase loan loss payee: bank or older professionaloften, the note-holder requires insuranceavoids having to assign personal DI policy
Supplements the overhead expense sale can match exactly the term of the obligation
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Disability Buy-Out*
Provides benefits to assist in funding a business’ buy-sell agreement
Benefits paid to the policyowner:co-owner or corporation
Benefits reimburse amounts paid to purchase the business interest of the disabled owner
* Policy Form 3100; AH84 in Montana.
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Renewability
Renewable until…Maximum reimbursement amount has been paid Insured no longer has an ownership interestPolicyowner, if individual, no longer has ownership
interest Insured ceases to be actively employed by
the businessPolicyowner, if individual, ceases to be actively
employed by the business Insured obtains actual and/or constructive ownership
of more than 90% of the businessPolicy anniversary on or most nearly after the
insured’s 64th birthday
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Definition of Total Disability
“Due to sickness or injury, the insured is unable to perform the substantial and material duties of his or her regular occupation and not at work for the business organization.”
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Eligibility
Occupation Classes6, 5, 4, 4P, 3
No minimum ownership requirement – 90% maximum ownership
All owners must apply, unless they are uninsurable or not active in the business.
Coverage is not available to two partners more than 15 years apart in age
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Disability Buy-Out
Waiting Periods360, 540, 720 days
Payment methodsLump sum Monthly payments (24, 36, or 60 months) Combination of initial lump sum & monthly
payments (“down payment” method)
Payment method must match provisions of the buy-sell agreement
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Issue Limits
Waiting Period Lump Sum Monthly/Down Payment
12 months $ 750,000 $ 1,250,00018 months $ 1,000,000 $ 1,500,00024 months $ 1,500,000 $ 2,000,000
Note: The maximum issue limit for medical & dental professionals is $1,500,000; issue limits vary for Montana.
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Policy Indemnity
Remains level until insured reaches age 60
Thereafter, it decreases annually by 20%
Policy terminates when insured reaches age 64
Benefit equals lesser of:amount paidpolicy indemnity fair market value
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Buy-Sell Agreement
Payments conditioned on evidence that the buy-out is occurring
Buy-sell agreement not required at time of underwriting, but required:at end of first policy yearat time of disability
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Optional Benefits
Presumptive Permanent Disabilityonce monthly benefits begin, they continue to be
paid, even if the insured recovers
Future Purchase Option right to increase the maximum monthly benefit
without evidence of medical insurability.annual options to age 55maximum option amount available each
year: $150,000
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DBO: Financial Underwriting
Requirements: firm’s balance sheetprofit & loss statements proof of owners’ salaries
Acceptable valuation formulas for determining issue amounts vary, according to the type of business.
Amount issued for DBO is generally less than what would be issued for life insurance.
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Premiums
Level or step-rate (at five year intervals)*
Gender-distinct** (age nearest birthday)
No-tobacco use discount: 20%
Batch billed discount: 10%
Association discount: 10%
* Level premiums only in Florida.
** Unisex rates only in Montana.
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Tax Considerations
Premiums for DBO are not tax deductible.
Benefits are received tax-free.
Disabled owner is subject to capital gains tax if buy-out payments exceed the cost basis.
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Field Underwriting Guide
Pub. 4089BL
Order at Guardian Online home page. Click on “Order Materials” under Frequently Used Links.
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Questions?
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Guardian DI:Protection for Individuals
and Small Businesses
An Introductory Overview