What is Disability Insurance?

Disability insurance offers income protection for individuals who become disabled due to illness or injury for a period of time. Individuals typically cannot work during that time period.  Disability Insurance is used to replace lost earned income at the highest percentage as possible, thereby ensuring clients’ hard-earned assets are not affected, and ultimately, very little change is realized in their lifestyle due to the accident or illness hindering the ability to earn an income.

Who Needs Disability Insurance?

Anyone who is currently working or owns a business needs disability insurance, whether it is short-term or long-term disability.  Disability insurance provides a way for individuals to protect the income stream to pay for bills and living expenses if the wage-earner is unable to work.  Disability insurance provides a way for clients to maintain their lifestyle, continue to pay expenses, and provided for their loved ones.

How Much Does Disability Insurance Cost?

Age, income, gender, occupation, and even state variances are considered for determining disability insurance costs.  The general rule of thumb when estimating DI cost is between 1%-3% of an annual salary.

Individual Disability Types

Short Term Disability: Provides a portion of an individual’s income for up to a year from disability due to injury or illness, regardless of where the injury or illness first occurred.

Long Term Disability: Provides a steady income stream for two years, five years, or up to age 65, depending on the policy.

Supplemental Disability: Provides additional coverage to fill in the gaps of an existing employer group plan.

Business Disability Products

This is referred to as either BOE or OE.  It provides either monthly overhead reimbursement benefit to a business owner while out of the office due to a disability.  It can provide Buy-Sell Equity or Cross Purchase funding through a Lump Sum method, or amortized over 2,3, or 5 years,  for two or more business partners setting up a Business Buy-Sell agreement.

An Individual, or personal Disability policy will consist of a base monthly benefit amount, issued up to a maximum Issue or Participation limit, published by the Disability Insurance Carrier.   Your personal annual earnings, whether a salaried W-2 employee or a business owner with expenses, governs how much income protection you can purchase.  A combination of personal policies can be part of one’s Disability Insurance portfolio, available up to that maximum Participation limit.    Individual policies are underwritten medically and financially.  Some traditional carriers offer Simplified Underwriting, whereas very little requirements are required, but the monthly benefit offered and approved is restricted.  Tax free benefit dollars are paid to an insured/owner when they personally pay the premiums.  Taxable benefit dollars are paid to an insured/owner if the policy premium is paid by an employer.  Discounts are applied to premiums by some carriers when applying for both a Business Disability Product as well as a Personal Individual Disability product.  Having a little “something” is better than having NO income replacement.  You can often build on a simple Base benefit over time using Future Insurability Options; or you can  purchase a portable Individual Disability Policy that would supplement an underlying  employer sponsored Group LTD plan offered to you at your place of employment.  Again, the amount of combined coverage must not exceed Issue and Participation limits.

The traditional Individual Disability carriers have their market focus.    There is a carrier to accommodate most  occupations.  Occupations are “classed” by the carriers.  Risky hands-on duties will have a lower occupation class than that of someone working at a desk using a computer.  Lower classing equals higher premiums and more restrictive benefits.  Higher education equates to a higher occupation class with lower premiums.  The client is applying for  three main types of disability – Total, Partial, and Presumptive.  Any features and rider options beyond this could differ between the Disability carriers.    To find out the premium for a particular Individual Disability policy or Business Disability product, there are particulars that are needed to build an illustration.    The basic data needed is:   client’s name; state of residence; tobacco status;  date of birth; occupation/duties; ownership/yrs. owning; annual earnings; adverse health history; in force disability.   As long as the individual works 30+ hours to satisfy eligibility requirements, this basic list of information can result in an illustration, or a decline to quote if ineligible.  Answer everything asked for on the application.  Provide physician names and contact data where applicable.  Please provide benefits that are presently in force when supplementing coverage to maximize income replacement.  Return to IPG a completed application and sold illustration.  If licensing and contracting has not been addressed for a particular carrier, now is the ideal time to get the paperwork completed.  Underwriting an Individual Disability application can take from a month to six weeks.  Medical records and telephone interviews will often be ordered.    It is not necessary to take money up front with an application; however, if you prefer to include premium to bind coverage, please express the application package to IPG so as to have tracking on the package.  Paint a clear and complete picture of the applicant with data noted.  This may not be the easiest application package to complete, but the potential income replacement you are writing could be upwards to millions of dollars.  It shouldn’t be too easy.

Once you have determined your clients’ needs, quoted them, and they are ready to protect their income, you’re ready to write the application.

Step 1:  Get contracted with the carrier (s).  Fill out our Producer Packet and submit it to us.  Be sure to let us know which carrier you are going with.  If you are already appointed with the carrier through us, then you don’t need to submit contracting.

Step 2:  Use our forms tool to build an application packet for the product/carrier/state.  Most applications are state-specific.  You can also contact our DI specialist to get assistance with getting the right application materials.

Step 3:  Fill out the application completely.  Be sure to get all the required signatures and dates.

Step 4:  Submit the application directly to our office.  We will scrub the application and will provide further instructions if we need anything prior to submitting the case to the carrier.  You can submit the application by any of the following options:

Email:  tnicolai@ipg-us.com

Fax: 1-877-488-3361

Mail: 20645 N. Pima Rd, Suite 150, Scottsdale, AZ  85255

Step 5:  Once the application is submitted, we will provide you with updates throughout the process.

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