COVID-19 has brought on a surge of interest in disability insurance in the individual marketplace. In fact, the Council for Disability Awareness reports more applications and pending applications of individual disability insurance (IDI) than at any other time in recent history. But with all of that interest, how can you stand out as a broker—especially when your clients may already have a standard group long-term disability (LTD) policy through their employer. The answer is to offer a quality policy and to convey its importance to your clients.
Healthcare professionals typically see group LTD coverage as inferior to IDI coverage. This is because group coverage is usually not designed with the unique needs of healthcare professionals in mind. Too often, brokers and healthcare professionals alike do not understand that the right group coverage can stack on top of their existing IDI coverage – with no impact to their personal IDI benefit.
What Constitutes Good Coverage
In an ideal world, healthcare professionals would have adequate financial coverage for both short-term disabilities and longer-term mental or medical issues. Some professionals believe that their IDI coverage will provide them with enough funds to cover their needs in the event of a disability. Unfortunately, healthcare professionals often need to supplement their IDI with a quality LTD policy in order to adequately replace their income in such a situation.
The selection of a quality supplemental LTD policy (sometimes called a group IDI supplement) is, in actuality, essential to the financial security of healthcare professionals. A quality supplemental policy should behave like a top-notch IDI policy, and do all of the following for the beneficiary:
Work in combination with any existing IDI policies to cover at least 60-70% of their salary.
Make sure to have a conversation with your client about the realities of a disability, how long it might last, and how much income they truly need to meet their obligations over a lengthy period of time. And be sure to ask them what the salary coverage is on their current group LTD, if they are already insured through their employer.
Last for several years, or for life.
The policy should last as long as the disability persists or until retirement age. It is important for clients to have sufficient ongoing coverage if they do not recover from the disability quickly—or ever. Five years of coverage should be the absolute minimum. Remember that the U.S. Social Security Administration predicts just over one in four of today’s 20-year-olds will become disabled before the age of 67.
Have an elimination period of no longer than 90 days.
Many short-term disability (STD) policies are designed to last for the first 90 days of a disability, and this is a reasonable amount of time for professionals to rely on their own savings as a buffer in case a disabling event occurs that is not covered (or if they do not have STD coverage at all). A long-term policy, however, should always have an elimination period that matches any existing short-term policy the client may have. If the policy does not kick in within three to six months, your client risks financial insecurity via a lapse in payments or a depletion of savings.
The “Definition of Disability”
What constitutes a disability within the policy language can be a critical part of the equation. If your client’s specific disability does not meet the policy’s definition, or if the policy is set up to only pay benefits if the client cannot work in any field, the client could be denied benefits completely.
Look for certain policy exclusions that may prevent your client from obtaining benefits.
Exclusions can be written for certain illnesses or injuries, or for pre-existing medical conditions that temporarily flare up and prevent the healthcare provider from working full-time. Make sure any exclusions are reasonable and will not impact your client’s ability to collect benefits. A good policy will also provide a Mental & Nervous and Drug & Alcohol (MNDA) benefit on a per-occurrence basis rather than on a lifetime basis. This is critical, as healthcare professionals face mental health impacts while they continue to battle the COVID-19 pandemic. In the event that a healthcare professional exceeds their lifetime maximum for a MNDA claim (say 24 months), or should they suffer another MNDA disability (including a relapse), they will not be eligible for benefits if their contract includes “lifetime maximum” language.
Check for an “Own Procedures” definition of disability, which is essential for healthcare professionals.
When offering a long-term policy, make sure it contains an “own procedures” definition of disability that uses the professional’s actual CPT/CDT-coded procedures that were regularly performed during the previous 12 months. When it comes to group LTD coverage, neither “own occupation” nor “any occupation” definitions of disability are strong enough to protect the income of specialized healthcare professionals.
Explain the potential pitfalls of choosing a weak group LTD policy.
Most group policies are governed by The Employee Retirement Income Security Act, which is a set of federal laws that kick in when a group disability claim is filed. If a claim is denied for any reason, such as for a policy exclusion or because of an “any occupation” policy definition, there are rigid legal procedures the healthcare provider must follow in order to appeal the case. A group LTD policy that works as a supplement to existing IDI coverage is the best option for healthcare professionals, as benefit payouts are based on the professional’s actual performed procedures. There is a much lower risk of denial with this type of policy.
Insurance Riders Can Bridge Crucial Gaps
Insurance riders can tailor the supplemental LTD coverage to the client’s needs and should be offered when available.Riders can offer healthcare professionals additional options such as:
- Increased benefits with inflation, which helps the client maintain their financial security if the disability lasts many years
- Lifetime extension of benefits, to help override any policy limits based on time or occupation
- Residual benefits, to protect a client’s income if their practice suffers during the absence and ultimately leads to a decrease in salary
- Partial payments for part-time work, which enables the provider to return to their field on a modified schedule without losing access to financial assistance
- No exclusions/limitations due to mental disorders, which are especially important during times of high mental and emotional stress—like during a pandemic
COVID-19 has caused all of us to start thinking about the realities of becoming disabled, but nowhere is this concern greater than within the healthcare industry. Physicians and healthcare professionals are at a much greater risk for becoming disabled than the general population due to prolonged exposure to not only stress, but to a disease that can have long-term health consequences.
Brokers should be on the lookout for group LTD programs designed exclusively to address the added coverage needs faced by surgeons, physicians, dentists, and other healthcare professionals while safeguarding their earnings and professional standards. In short, brokers should look for supplemental group LTD coverage that mirrors quality IDI coverage.
