Submitted Courtesy of MGIS
Why should doctors or members of their staff buy group long term disability? The answer to can be found by asking them this question: “If you got sick or hurt and couldn’t go to work for a lengthy period of time, and therefore couldn’t earn an income, how would you pay your bills?” The need for disability is the foundation of the sale. The contract is the instrument that addresses the need and forms the basis for the claim. And the name of the game is the claim.
Doctors or dentists and their employees should buy the policy that has the best chance of paying them at claim time. So what factors go into this “claim paying ability”? There are four key factors: 1) the reputation of the carrier, 2) the experience that carrier has in the DI marketplace, 3) the financial stability of the carrier, and 4) the contract language. Let’s explore each of these in greater detail.
1. Reputation of the Carrier
Does the carrier have a good reputation of paying claims, or a poor one? There are articles on the internet, and word of mouth from current policyholders, that can be referenced when considering this factor.
2. Experience in the Marketplace
The fact is there are carriers that have been in and out of the market like a yo-yo the past 20 years. The reason many carriers leave the DI marketplace is that they haven’t priced their product for the long term, and when claims occur, they either have to raise their rates or exit the marketplace altogether. Also, if the occupation is more specialized, such as a doctor, you want to look at how the carrier has treated that specific occupation in the past. MGIS has focused on the physician market for 40 years – a record unmatched by any other carrier.
3. Financial Stability of the Carrier
This ties into the previous factor. Look for a carrier with the financial strength to sustain the ups and downs of the business. Rating agencies such as A.M. Best, Moody’s, and Standard & Poor assign ratings based on their interpretation of that carrier’s financial strength and their ability to pay claims. Sun Life’s ratings are among the highest in the industry and among those active in the group LTD physician marketplace.
4. Contract Language
Again, this is the instrument that is referenced when someone is sick or hurt and unable to work for a period of time. You want to look for a contract that gives the doctor, dentist, or employee the best chance of getting paid. Unlike many other types of insurance, there are a few phrases and words that can mean the difference between a claim being paid, or not being paid.
- Definition of disability — The best contract to buy is one that insures the specific duties of a specialty/sub-specialty. These go beyond the basic “own occupation” contract, which usually states “you will be considered disabled if you cannot do the material and substantial duties of your own occupation, and/or have a loss of income (usually 20% or greater).” Specialty/sub-specialty language states that “you will be covered if you cannot do the specific duties of your specialty/sub-specialty.”
A great example would be a radiologist who also does injections. An “own occupation” contract might cover the radiologist as a “medical doctor,” and a specialty contract might cover him/her as a “radiologist,” but a sub-specialty contract would insure him/her as a “radiologist who handles injections.”
If this doctor cannot do injections anymore due to a sickness or injury, that is considered a material duty and would be covered. Other contracts may not pay if it is determined that this doctor can do the material and substantial duties of a medical doctor or even a radiologist.
- Definition of earnings — Look in the contract to see how earnings are defined. Some contracts will only insure W-2 earnings paid by the employer, but do not cover any bonuses, commissions, production formulas, or K-1 earnings if the doctor or dentist is a partner. Obviously, the best language is that which covers any and all compensation paid to the employee. This is especially important for occupations such as doctors and dentists who are normally not strictly salaried employees, but make money based on patients seen.
- Income Test — When determining income loss, look for language that looks at income earned and received from work performed while disabled (MGIS), and avoid those policies that only look at income when received.
- Residual Payments – How does the contract define partial disability, and how are earnings considered in determining the benefit level? Also, look at what formula is used when calculating the residual benefit. Many carriers only consider one type of formula (such as offsetting the LTD benefit by 50% of the earnings earned after returning to work), but a better scenario would be to look for language that considers the best of two formulas (the 50% offset or a proportionate loss formula), which MGIS does.
- Mental/Nervous/Drug/Alcohol abuse conditions — Most group LTD contracts will have a lifetime benefit period of 24 months for disabilities related to mental, nervous, drug abuse, or alcohol abuse conditions. MGIS pays these per occurrence instead of lifetime.
- Offsets/Exclusions — You want to look for contract language that has the least amount of conditions and situations that exclude the benefit being paid. Definitions that include language such as “maximum capacity” and “prudent person” are restrictive in nature and may stop a benefit from being paid at claim time.
- Rehabilitation Provisions — Look for policy language that gives the choice of going through a rehabilitation process to get back to work (MGIS) versus a contract that requires it.
The common factor in all of the above bullets is this: There are phrases and language that will either help you get paid at claim time or hinder that claim payment. Instruct your doctors and dentists to consider looking for the policy that gives them the best chance of getting paid. The name of the game is the claim.
You may notice that price has yet to be mentioned. The reason for this should be evident — the better the contract language, the more it will probably cost. But that shouldn’t be a major factor when choosing the best disability income policy. This is definitely an area where buying the bargain doesn’t work. No disability income policy is a bargain if it won’t pay at claim time.
Disability income really hasn’t changed in the past 20 years. Yes, some carriers marketing disability income have come and gone, and policy language has been tweaked — but the need for disability income, the focus and financial strength of the carrier, and the quality of the contract — will never go away!