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© 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY An Introduction To Individual Disability Income Insurance For producers only. Not for use.

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Presentation on theme: "© 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY An Introduction To Individual Disability Income Insurance For producers only. Not for use."— Presentation transcript:

1 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY An Introduction To Individual Disability Income Insurance For producers only. Not for use with consumers.

2 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Individual Disability Income Insurance (IDI) 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 future-earnings potential unprotected. Individual Disability Income Insurance

3 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Spectrum Of Typical Assets Car HomeCareer Income Potential $20,000 $300,000 $4,085,000* *Earning potential from age 24 to age 67 at $95,000/year – does not include raises

4 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY The Need For Disability Income Insurance

5 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY ** * Individual Disability Experience Committee, Society of Actuaries, ** Average Duration of Disability Lasting More Than 90 Days and beginning before age 65. Duration is measured from the start of disability to (at most) age 65. Disabilities Are Tending To Last Longer Disabilities that last more than 90 days often last for several years.*

6 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY This example is provided only to show a breakdown of The Standard’s open claims above as of 12/31/2012 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. Disabilities have many causes

7 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Difference Between Life Insurance And Disability Income Insurance

8 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY 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. Multiple vs. Single Use

9 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY 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 for the shoulder. Mortality vs. Morbidity

10 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Premium Rates For Men And Women

11 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY With life insurance, women will typically pay less for a policy. With disability income insurance, women are disabled more frequently than men, and so typically pay more for protection. Male And Female Rates

12 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY The Main Types Of Disability

13 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY A typical disability contract provides income protection for three main types of disability. Total Disability Because of injury or illness, 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 Total, Partial, And Presumptive

14 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Expectations And Eligibility

15 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Because individual disability income insurance coverage can replace the income lost due to illness, it’s important that you are comfortable discussing your client’s medical history and income. Medical conditions and income documentation are two of the most important factors in determining the outcome of an individual disability income insurance application. It’s therefore key that your customer provide medical and financial details accurately to the carrier to help obtain the best possible offer of coverage for your customer. Eligibility Comfort Zone

16 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Medical History

17 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Since more people become disabled due to illness 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 hospitalization, long-term treatment (e.g., chronic back pain), surgery and any prescription 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. Health Conditions

18 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Occupational Duties

19 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY The occupation class is a classification insurance companies use to determine the insured’s 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 occupation will help avoid delays in the underwriting process. The duties of the job are relevant, not just the job title. For example: The president of a company might have duties which include company administration (20%), on-site supervision (25%), manual labor in field (25%), meetings at client locations (25%) and operating heavy equipment (5%). Occupation Class

20 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Occupations That Involve Excessive Risk

21 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Some occupations are considered uninsurable by conventional carriers, typically due to the higher degree of risk. These include: Law Enforcement Firefighters Commercial Pilots Military Professional Athletes Commercial Fishermen Ineligible Occupations

22 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Hazardous Sports and Avocations

23 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY 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 Hazardous Sports

24 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Modifications And Exclusions

25 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Sometimes a problematic medical history or high risk activities can be accommodated by modifying the policy. Some examples include: An applicant who initially applied for a To-Age-67 benefit period could receive a modified offer with a 5-year benefit period. Additional premium might be attached to the policy such as an additional 25% premium Optional riders chosen by the applicant might be removed from the final offer of coverage. Policy Modifications

26 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY It may be necessary to exclude certain areas of coverage entirely 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 reviewable. 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. Exclusions

27 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Types of Individual Disability Income Insurance Contracts

28 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY 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 Contract remains intact regardless of occupation or health change but premium can be changed on a class basis Types of IDI Contracts

29 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY 3.Conditionally Renewable. The contract can be terminated by insurer for a short list of reasons besides non-payment of premium. 4.Optionally Renewable. Either contract can be canceled or premium can be changed at any policy anniversary at the discretion of the insurer Types of IDI Contracts

30 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Individual Disability Income Insurance Definitions

31 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY 1. Total disability Any occupation, your occupation and own occupation vs. income loss 2. Partial disability Loss of duties Loss of time Loss of income IDI Policy Definitions

32 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Waiver of premium For example, if the 90-day waiting period is selected, after 90 days of disability premiums are waived during disability. Premium paid during the 90 days is refunded. IDI Policy Definitions

33 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY 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. IDI Policy Definitions

34 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Waiting Period 60, 90, 180, 365, 730 days cumulative or consecutive Total Partial Recurrent Benefit Period 2 Year, 5 Year, 10 Year, To-Age-65 or -66 or -67 or -70 Accident/Illness IDI Policy Definitions

35 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY 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 floor or cap. IDI Policy Definitions

36 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Future Purchase Option Allows insured to increase coverage when salary increases, or for other life events Requires financial underwriting only. There is no medical underwriting IDI Policy Definitions

37 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Individual Disability Income Insurance Claims

38 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Claims form Physician report Onset of disability Vocational rehabilitation IDI Claims

39 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Taxation Of Benefits

40 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY Individual Sole Proprietor Partnership S Corporation Premium non-deductible Benefits tax-free Taxation of IDI Benefits

41 © 2010 Standard Insurance Company 17232PPT (Rev 6/14) SI/SNY


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