Disability Insurance
Frequently Asked Questions For Insurance & Financial Advisors


Sales & Marketing:

- Why do your clients need Disability Insurance?
Your client’s most important asset during the Asset Accumulation stage of life is not their home, their car or any other possession for that matter. Your client’s most important asset is their ability to earn a living. Think about it: all of their future plans, from buying a home to putting their kids through college, to building a retirement nest egg, are based on the assumption they will continue to earn income until they retire. But what would happen to those plans if their income stopped?

That’s where Disability Insurance comes in. It provides an income to your client should they be unable to work because of sickness or injury by providing a source of income to help make ends meet until they are able to return to work. We believe that it is important to ask every client how long they believe they would last without a paycheck before it would be difficult to pay for everyday expenses? Usually, after four months of no income, people will either live off of friends, family or the federal government. Consider the following facts:

  • In just the past hour, almost 3,000 Americans became disabled. That's 49 every minute.
  (Source: National Safety Council, Injury Facts 2008 Ed)

  • The average long-term disability lasts 2½ years.
  (Source: Commissioner's Individual Disability Table A)

  • Workers today are 3 times more likely to suffer a long-term disability than die during their working years
  (Source: The Council of Disability Insurers, The Long Term Disability Claims Review: 2005)

  • The likelihood of being disabled for more than 3 months is greater than dying in any given year.
(Source: Society of Actuaries)

  • Each year, 1 person in 8 will suffer disability.
  (Source: National Association of Insurance Commissioners)

  • 1/3 of all people between the ages of 30 and 64 will become disabled sometime in their lives
  (Source: Health Insurance Association of America)

  • At age 32, the chance of being disabled for 90 days is 6.5 times greater than the chance of death
  (Source: National Association of Insurance Commissioners)

  • 17 percent of American families (1 in 6) have at least 1 adult who is disabled from employment
  (Source: 2000 U.S. Census)

  • 75% of disabilities are caused by an illness rather than an accident
  (Source: Commissioner’s Disability Table)

  • Over 51 million Americans - 18% of the population - are classified as disabled.
  (Source: US Census Bureau, Nov 2008)

  • 2 out of 3 American families live paycheck to paycheck; 70% of families can only afford to be without a paycheck for 1 month or less
  (Source: The Council of Disability Insurers, The Long Term Disability Claims Review 2005)

  • Disability is the leading cause of personal bankruptcies and causes nearly 50% of all mortgage foreclosures, compared to 2% by death
  (Source: The Council of Disability Insurers, The Long Term Disability Claims Review 2005)

  • 48 percent of VA Mortgage Foreclosures are attributed to disability
  (Source: FHA, Disability Income Concepts, 1998)

  • 82 percent of American workers have inadequate or no disability protection
  (Source: Consumer Federation of America and American Council of Life Insurers, 2003)

  • Nearly 7 million workers currently receive SSDI benefits. Almost half are under age 50.4
  (Source: Social Security Administration, Fact Sheet Jan 31, 2007)

  • More claims are denied than approved. More than half of the 2.1 million workers who applied for SSDI benefits in 2005 were denied.  Less than half - 39% - were approved.
  (Source: Social Security Administration, Office of Disability and Income Security Programs)

  • The average monthly Social Security Disability Income (SSDI) payment is $1,004, replacing on average, about 33% of current income
  (Source: Social Security Administration, Fact Sheet 2008)

  • Only a small fraction - 10% - of disabling accidents and illnesses are work related. The other 90% are not, meaning Workers Compensation doesn't cover them.
  (Source: National Safety Council, Injury Facts 2008)

  • 70% of workers in the private sector have no Disability Insurance.
  (Social Security Administration, Fact Sheet Jan 31, 2007)

We believe it is not wise to ignore these risks.  Hopefully a Disability will not happen to you or your clients, but wouldn’t it be better to know that you both have the financial resources in place just in case? Disability Insurance can provide that peace of mind.

- Why do so many agents have problems selling Disability Insurance?
We believe the answer to this question is very simple. It is our opinion that Agents and Advisors who have a hard time selling Disability Insurance have not been trained properly.  Unfortunately, agents and advisors try to elephant hunt instead of learning to eat the elephant one bite at a time.  We have found that agents and advisors are usually being “trained” by people to use scare tactics and emotions as a primary motivation to get clients to purchase insurance.  And because many of these trainers do not understand other product lines, they really aren’t able to train agents how to properly implement Disability Insurance in conjunction with a well thought out plan of protection.  Needless to say, this leads to agents and advisors trying to sell the max amount of coverage up front to every client they present.

We believe your clients will make good business decisions based on complete and accurate information and as such, selling with fear should have little to do with a responsible recommendation. Training should include understanding the importance of and how to gather information, the importance of coordinating Disability Insurance with other products to protect the entire portfolio and finally, how to take clients down the path of proper education so they can have confidence in the decisions they are making.  We look forward to training you how to be successful with Disability Insurance.

- Who is buying Disability Insurance?
The demographics of those purchasing Disability Insurance are:
  • Male and Female
  • Ages 26 to 60
  • Income of $20k to over $1 million
  • Diverse occupations ranging from blue to white collar:
- Attorneys and CPAs
- Business Owners/Independent Contractors
- Doctors and other medical professionals
- Executives
- Hairstylists
- Insurance and Financial Advisors
- Mechanics
- Office and Administrative Workers
- Public Service Workers (ie. Police and Fireman)
- Teachers

- Why should I purchase a Disability Insurance policy?
For the same reasons your clients should buy Disability Insurance.  In addition, your clients will follow the leader.  A picture is worth how many words?  Are you looking to separate yourself from the other Insurance and Financial Advisors?  Owning what you are selling is one of the most effective means of accomplishing that.

- Why should you sell Disability Insurance?
No one likes to think about what life would be like should they get sick or hurt and are unable to work. Considering 82% of American workers have inadequate or no Disability protection (Source: Consumer Federation of America and American Council of Life Insurers, 2003), as an Insurance or Financial Professional, it is your responsibility to help people consider the consequences of not planning properly. Disability planning is a key component of any sound financial and risk management plan. When your client loses the ability to work, their plans for future retirement are put at risk. How will their current bills get paid, what happens to their home, will the children still be able to go to college, will they be able to enjoy a secure retirement?  Since each client is unique and no two disabilities are the same, the questions we ask can be as numerous as the individual situations your client could face.

The Ark Group is a Disability Insurance product and planning resource for thousands of Insurance and Financial Professionals nationwide. We are recognized experts in the insurance industry and are dedicated to supporting your efforts in helping your client’s put together a protection plan that is appropriate based on their unique situation. We will help you learn more solution based concepts available to your clients with advanced case design and access to scheduled training sessions.

- How much Disability Insurance does my client need?
We recommended that disability coverage be chosen to replace as much of your client’s total taxable earnings as they can afford and the insurance company will allow. To estimate the benefit amount your client would need if they became disabled, ask them how much monthly income would they need to cover their main living expenses and would these expenses go up or down if they became disabled?

It is also important to consider how long your client will need to have this income replaced as well.  The longer the Benefit Period the higher the premium will be for your client.  Since most clients will be sensitive to premiums, do NOT fall into the trap of selling a “Cadillac Plan” to every client.  How do you eat an elephant?  One bite at a time is correct.  Many times your clients need to have some coverage to start off with and at their annual review, you can talk about increasing coverage.  One of the quickest ways to lose a Disability Insurance sale is to sell the maximum benefit all at once.

- Will Disability Insurance pay benefits in addition to your client’s other insurance policies?
Yes. Disability Insurance pays over and above/in addition to any other coverage your client has in force.  However, it is strongly suggested that they have the proper amount of Life Insurance, Health Insurance and Critical Insurance in place to compliment their Disability Insurance coverage.

- Your client has Life Insurance…do they need Disability Insurance?
Absolutely! Life Insurance is imperative as it primarily pays a benefit to beneficiaries upon death of the insured.  We should never confuse the need for Life Insurance and the need for Disability Insurance as both were designed to perform completely different functions.  The real question here is what happens to a financial plan if the insured person loses their most valuable asset…their ability to work and earn income?  Will the Life Insurance policy pay a benefit in this case? Disability helps protect your client’s retirement portfolio by giving them income when they need it most…when they lose it because of Disability.

- Your client has Health Insurance…do they need Disability Insurance?
Absolutely!  Health Insurance was designed to reimburse doctor and hospital bills based on usual, reasonable and customary charges.  We should never confuse the need for Health Insurance and the need for Disability Insurance as both were designed to perform completely different functions.  The real question here is what happens to a financial plan if the insured needs to go Out of Network and can no longer work? Are they prepared to replace the lost income?  Health Insurance will not replace it and supplements to Health Insurance will not replace it effectively either.  Disability helps protect your client’s retirement portfolio by giving them income when they need it most…when they lose it because of Disability.
 
- Your Client has Critical Insurance…do they need Disability Insurance?
Absolutely!  Disability Insurance was designed to replace income.  Critical Insurance was designed to protect your client’s retirement portfolio, medical expenses not covered by Health Insurance and finally make up for the percentage of income that Disability Insurance doesn’t replace.  Both products are important to your client.  The real question is how do you implement both for your client to maximize their protection and their premium dollar? WE look forward to helping you implement both into your client’s portfolio.
 
- Your client has Long Term Care Insurance…do they need Disability Insurance?
Great question! In all reality, this question shouldn’t even be asked.  These products are similar because each product has its place in protecting the estate and the retirement portfolio.  However, what we first need to consider is the age group each product was specifically designed for.  Disability insurance was designed to protect your client’s income during the Asset Accumulation stage of life.  This is the stage of life where people are building towards retirement.  This product’s primary age group is from 25 to 55…maybe age 60 depending on a person’s retirement timeline. Disability Insurance helps ensure that there is a need for Long Term Care Insurance once a person begins transitioning into retirement age.  Income is much better for your client as it can be used for many more purposes than a Long Term Care policy benefit.

Conversely, Long Term Care Insurance was designed to protect the retirement portfolio during the Asset Preservation stage of life.  This is the stage of life where a person has already built most, if not all, of their retirement and is concerned about outliving what they have built up.  This age group is anywhere from age 55/60 and above. Disability Insurance is usually not available to clients in the Preservation Stage of life anyway.

- What criteria are used to help choose the right company for my client?
It is important to work with The Ark Group when in the process of choosing the right company for your client. We always help you make decisions with regard to your client’s best interest based on each client’s unique situation.  Disability policies can be compared based in part, on the following criteria:

  • Policy Definitions
  • Policy Benefits
  • Policy Riders
  • Your Client’s Health History
  • Financial Strength of the Insurance Company

- When is the best time to buy a Disability Insurance policy?
Because premium and policy eligibility are based on age and health status, the best time to buy a disability policy is when your client is young and healthy. However, we understand that not every client is in the most ideal age and health status. So with all clients, we recommend you speak to your clients NOW…in other words, do not procrastinate.  We dare you to talk to one of your clients today about the importance of protecting their greatest asset.  Who knows, you may actually protect a client from future financial disaster.  How would that make you feel?


- How do I best help my client purchase Disability Insurance?
There are several ways to obtain disability income coverage but the most important way is to simply talk to your clients about it. You may also want to purchase an individual disability income policy yourself. To own what you are selling will help separate you from the other agents and “advisors” who are trying to earn your client’s business and if it is important for your clients, it must be important for you as well.  Here are some tips to follow when helping your client purchase Disability coverage:

Compare Coverage. Compare definitions, policy benefits, underwriting possibilities and premiums…also consider whether the policy is Non-Cancellable or Guaranteed Renewable.

Buy Young If Possible. As you know, Insurance gets more expensive as your clients age. Also, as your client gets older, they may develop health problems that could limit or preclude them from getting coverage.

Structure the Right Policy. Do NOT fall into the trap of having to sell a “Cadillac Plan” to every client.  How do you eat an elephant?  One bite at a time is correct.  Many times your clients need to have some coverage to start off with and at their annual review, you can talk about increasing coverage.  One of the quickest ways to lose a Disability Insurance sale is to sell the maximum benefit all at once. So, if your client is premium sensitive, we can trim the cost of a policy. However, it is our professional opinion that it is more important to have a higher Monthly Benefit and lesser Elimination Period than it is to have a longer Benefit Period due to importance of having access to claim benefits quicker versus access to claim dollars for a longer period of time. Be sure to help your client evaluate whether they have enough savings to cover a longer waiting period and/or will receive extended sick pay through your employer. Do not forget that all Disability Insurance policies pay claim benefits in “arrears”.

- Is there a prospecting system for Disability Insurance that works?
Yes!  Effective prospecting is more than mailers…it requires maximizing your current clients and simply talking to people, those who fit into the under 60 marketplace, about Disability Insurance.

- Can my client get Disability Insurance to cover a business loan?
See the Business Overhead Expense answer. However, do not make the mistake of purchasing Individual Disability coverage to protect a business loan if your bank or lending institution tries to require you to purchase Disability coverage before they will give you a loan for your business. Individual Disability coverage should be for personal use only.  If you let your client use their personal individual Disability coverage to payback a business loan, you have set your client up for a potential disaster. Have your client purchase a BOE policy, in addition to their personal policy. Should they ever become disabled, the BOE coverage will make payments on their monthly loan obligation, and their personal Disability coverage will be able to do what it was intended to do.

- My client has Group Disability through work; can we get them Individual Disability Insurance also?
Group Disability Insurance typically covers around 60% to 66% of base salary, with Monthly Benefits from $5,000 up to $10,000. Group Disability policy definitions are typically more restrictive than Individual Disability policies and if your client’s company is paying the premium for your client, then the benefits will be taxable. Also, usually Group Disability contracts have an “Own Occupation” definition for the first two years in a claim and then changes it to a “Any Occupation” definition of Total Disability. A Group Disability policy also has a limited Residual Disability benefit and generally does not offer a C.O.L.A. benefit. If that is not enough of a reason not to rely on Group Disability insurance, also realize your client cannot take their coverage with them if they ever leave employment. So, a policy that actually covers 45% (60% minus taxes) of your client’s income, with restrictive provisions and definitions and does not allow them to take their income protection benefit to any other company is in our opinion, not the best option for your client.

We recommend that you advise your clients to purchase an Individual Disability Insurance policy. This type of policy can increase your client’s percentage replacement of income from 45% (60% minus taxes during the claim) to 60%, can guarantee them the ability to be in control of their own Disability coverage, and can give your client better, more liberal definitions within the policy.


An Important Reason Not To Rely On Group Disability Insurance:
It is a huge mistake to think that your client will always be insurable. Individual Disability Insurance is not easy coverage for everyone to get due to underwriting. Even if your client is perfectly healthy now, there is no guarantee that they will be a year from now. Your client could develop back problems, diabetes or some other condition that prevents them from getting a policy. By purchasing individual Disability insurance, your client can be guaranteed that they always have income protection no matter how much money they earn, what company they work for, or what medical condition they may develop in the future.

- Can my client get Individual Disability Insurance to supplement their Group Disability coverage?
Yes.  However, remember that most Group Disability Insurance plans have very restrictive definitions that define when an employee gets paid for a disability claim. An Individual Disability insurance plan through one of the companies The Ark Group represents will allow for your client to “Top Up” their Disability coverage, but with limits.  We believe your client deserves access to a more comprehensive definition of Total Disability, a significantly better Residual Disability rider, and C.O.L.A. protection. The more Individual Disability Insurance your client purchases, no matter how many different companies they may work for, they will always be able to keep their coverage and have a better policy for income protection.

- Can an Employer pay for my client’s Disability coverage?
Your client’s Employer can pay for their disability coverage, but if the Employer pays for the coverage on a pre-tax basis, it will cause the benefit to be taxable to your client

- If my client has a Group Disability policy, do they need an Individual Disability policy?
Group insurance plans through an employer can provide needed coverage. An individual needs to know if the plan covers illness and injury, for how much and for what period of time. Some group policies provide coverage only if injured on the job and only for a short period of time. Some employers provide no group coverage at all. Many individuals have multiple policies that cover long term disabilities.

- What is the difference between Individual Disability and Group Disability coverage?
Group Disability Insurance:
  • Policy is connected to the employer and generally not portable
  • Policy can be changed or cancelled by the insurance company or your client’s employer at any time
  • Benefits based on a percentage of base income. Bonuses and commissions are typically not covered
  • Benefits are taxable if your client’s employer pays the premium
  • More restrictive definitions within the policy (qualification for benefits may require your client to be unable to work in ANY occupation)
  • Partial disability may not be covered
  • Benefits can reduce or go away should your client receive benefits from another source or work in a different occupation
  • There are no premium rate guarantees
  • No underwriting at the front end means that underwriting takes place at claim time

Individual Disability Insurance:
  • Your client owns their own policy and it remains in effect regardless of their job or occupation
  • Policy can’t be cancelled by the insurance company or an employer as long as premiums are paid and your client answered questions on the application truthfully
  • Higher monthly benefits are available
  • Your client receives benefits tax-free if they pay the premium with post-tax dollars
  • More liberal definitions within the policy to pay your client more money in more claims scenarios
  • Quality plans will cover your client in their own occupation/specialty
  • Benefits can increase with C.O.L.A. or additional underwriting
  • Rate guarantees to age 65
  • Is underwritten up front so there isn’t post claim underwriting challenges

- Why is Group Disability less expensive than Individual Disability?
Group Disability plans are less expensive than Individual Disability plans because:
  • They can be changed or cancelled by the insurance company
  • The insurance company can raise rates in the future
  • Benefits are offset by other sources of income and coverage
  • Claims are paid in fewer scenarios due to the limited definition of disability
  • There can be more people to spread the risk of claim
  • More and more people leave employment without making a claim
  • Post claim underwriting is a good gatekeeper for claim payments

- Are Disability Insurance benefits taxable?
Disability benefits received by an insured who has irrevocably elected, prior to the beginning of the plan year, to have the coverage paid on an after-tax basis for the plan year in which the employee becomes disabled and are attributable solely to after-tax employee contributions, are excludable from the insured’s gross income under IRC §104(a)(3).

Disability benefits received by an employee whose coverage is paid by an Employer on a pre-tax basis for the plan year in which the employee becomes disabled are includable in the employee’s gross income under IRC §105(a).

- What happens to my client’s policy if they change jobs or occupations?
Group Disability:
If your client’s policy is through their work, chances are, they will lose coverage. This obviously creates a problem if they can’t find another job with disability benefits and need coverage.

Individual Disability:
With a Non-Cancellable and/or Guaranteed Renewable Individual Disability policy, the benefits will not change as long as your client continues to pay their premiums. They will be able to keep their coverage regardless of job change or occupation change.

- What is the difference between Social Security Disability (SSDI) and Supplemental Security Income Disability (SSI)?
The Social Security Administration is responsible for two major programs that provide benefits based on disability: Social Security Disability Insurance (SSDI), which is based on prior work under Social Security, and Supplemental Security Income (SSI).  Under SSI, payments are made on the basis of financial need.

Social Security Disability Insurance pays benefits to disabled persons and certain members of their family if they are "insured," meaning that they worked long enough and paid Social Security taxes. SSDI is financed with Social Security taxes paid by workers, employers and self-employed persons. To be eligible for SSDI benefits, the worker must earn sufficient credits based on taxable work to be "insured" for Social Security purposes.  SSDI benefits are payable to blind or disabled workers, widow(er)s, or adults disabled since childhood, who are otherwise eligible.  The amount of the monthly disability benefit is based on the Social Security earnings record of the insured worker.

Supplemental Security Income pays benefits based on financial need. SSI is a program financed through general revenues.  SSI disability benefits are payable to adults or children who are disabled or blind, have limited income and resources, meet the living arrangement requirements, and are otherwise eligible.  The monthly payment varies up to the maximum federal benefit rate, which may be supplemented by the State or decreased by countable income and resources. 

- How does Social Security Disability (SSDI) work?
According to the Disability Statistics Center, over 19% of the people not already in a nursing home of some sort in the year 2000 are reportedly disabled. These people, if they receive funding at all, may receive it from Social Security. However, the pay is minimal, sometimes as little as $500 or $600 per month depending on how much a person paid into Social Security before becoming disabled. Additionally, it takes anywhere from 2 to 4 years to get approval to receive SSDI benefits. Many people go bankrupt or lose a home long before receiving a benefit that happens to not be enough when it finally does come. To make matters worse, it’s not entirely uncommon for a person to die before getting approved for disability benefits.

The Social Security Administration has very strict definitions of disability. A person generally must be unable to engage in substantial gainful activity in any occupation by reason of a physical or mental impairment that can be expected to result in death or last for a minimum of 12 months. SSDI benefits are not intended for temporary conditions. People should also note that SSDI rules are different from those of other government or private programs. So while a person may qualify for disability benefits under another program, they are not automatically eligible for SSDI benefits. There is also a 5-month waiting period for benefits and benefit payments may be subject to federal income tax.

SSDI benefits may be available to eligible individuals prior to age 65, depending on their income and how long they have been paying Social Security taxes. Generally, if they become disabled before reaching age 65 and they have a steady work history, a person may qualify for monthly SSDI benefits. Social Security disability benefits generally increase each year to keep pace with inflation.

- Can I Partner with The Ark Group to Sell Disability Insurance?
If you are an insurance agent looking to sell Disability products, you will want to contact The Ark Group to get appointed with each of the companies we are contracted with. We work with Insurance Agents and Financial Advisors in all 50 States.  Simply pick up the phone and call our office at 866-725-0777. We do not take building relationship with you for granted and look forward to earning your business!

- Why Should I Partner with The Ark Group to Sell Disability Insurance?
We are a National Independent Brokerage Agency and work with many of the best Disability Insurance companies. From white collar professionals to blue collar workers, we make sure your client has access to the most comprehensive Disability Insurance policies available on the market today. We understand that a Disability Insurance policy is a legal contract, and that your client needs to have the best coverage available based on their unique situation. Every Critical Insurance policy is different, and as such, will pay benefits based on the specific definitions within each contract.

Our agency makes recommending and selling Critical Insurance as easy of a process as it can possibly be for Insurance Agents and Financial Advisors. Not only do we assist in policy comparison and review, we also provide training that will cover sales, product and most importantly, concepts that will help you take care of your clients in the best way possible.  In other words, we provide you with everything you could possibly need to evaluate a policy, and help your client make an intelligent business decision, while making sure you are well compensated.





Product:

- What is considered a good definition of “Disability” in a Disability Contract?
A Disability is considered a sickness or injury which interferes with a person’s ability to work and earn income. There are several different definitions of "Disability" in a Disability Insurance policy and each definition will vary depending on the insurance company. The actual definition of Disability will be outlined in each company’s policy. That definition will determine whether your client will be able to receive benefits, and whether or not they will have the opportunity to go into some other line of work while still drawing on their disability benefits.

Possible Disability Insurance Claims

1.  Total Disability Definition - Because of sickness or injury your clients are unable to perform the material and substantial duties of their regular occupation, or occupations if more than one, in which they are engaged at the time of disability. For your physician and dentist clients, our carriers also offer medical specialty language in the definition of total disability.

2.  Residual Disability - Think of a Residual Disability as a partial disability benefit or in other words, a recovery benefit. A Residual Disability rider in a Disability Insurance policy can act as a recovery benefit for an entire benefit period, and most importantly, does not require a loss of time or duties in order for a benefit to be paid. For individuals who own their own business, are in sales, or are a Key Person to a company, there should be a Residual Disability rider added to their policy. The Ark Group will always include a Residual Disability rider when you request a Disability quote from us.

3.  Presumptive Disability - Should your client suffer the total and complete loss of hearing, speech, sight, or the use of any two limbs, the insurance company will pay benefits without your client having to wait through an Elimination Period before they become eligible for benefits.

- How much does Disability Insurance cost?
Disability Insurance is vital to the protection of your client’s financial plan. If your client does not have an income protection plan with Disability Insurance, your client’s finances and financial future is at stake. With Disability coverage, your client will ultimately get what they pay for because Disability policies vary greatly from company to company, which is why you should not compare on price or benefits alone. That being said, there are several factors that go into the cost of a Disability policy. These factors include, but are not limited to:

  • Your client’s gender
  • Your client’s health
  • Your client’s occupation
- policies covering specialty occupations with invasive procedures will cost more
  • The benefits and optional riders that can be added to your client’s policy
  • Will the Disability policy you sell be Non-Cancellable and/or Guaranteed Renewable?
  • Will the Disability Coverage you sell consider the client disabled if they can’t work in any occupation, or if their specific occupation?

A good policy can be as inexpensive, or as expensive as your client wants it to be based on the type of plan and the options chosen. As a general rule of thumb, your client can expect to pay between 1-3% of your annual income for good Disability Coverage.

A great question to ask your clients is: “If they were offered two identical jobs, the first offer will pay a $100,000 per year salary, but would pay nothing in case of a sickness or injury. The second offer would pay $97,000 per year, but approximately 60% of their income would be protected on a tax free basis in case of sickness or injury until your client reached the age of 65 or recovered. Of those options, which would be the most beneficial?”

- How does the Graded Benefit Disability Insurance (GBDI) product work?
GBDI is specifically designed for people who are fully employed but might have health issues that could or may already have precluded them from qualifying for Disability Insurance coverage in the past. With Graded Benefit Disability Insurance, people who have conditions such as: arthritis, cancer, cerebral palsy, coronary artery disease, diabetes, heart attack, hepatitis, lupus, sleep apnea, multiple sclerosis, are overweight, etc. If your client has been diagnosed with one of those conditions, they may be considered for coverage.

Graded Benefit Disability Insurance is an individual guaranteed-renewable disability income policy with a traditional definition of “Disability” but pays claims based on a graded benefit. So a claim in the first policy year will be 35 percent of the coverage applied for. A claim in the second policy year, the benefit will be 70 percent of the coverage applied for and for the third policy year and thereafter the total benefit on your client’s policy would be available.

Clients of yours might be considered eligible for GBDI and have the following health conditions:
Alcoholism
Anxiety
Arteriosclerosis
Angioplasty/By-pass
Cancer
Cerebral Palsy
Cholesterol (high)
Coronary Artery Disease
Depression
Diabetes
Heart Attack
Hepatitis
Intestinal By-pass
Overweight
Pacemakers
Poliomyelitis
Sleep Apnea
Ulcerative Colitis
These conditions can change at any time. We suggest you contact our office to see if your client can qualify and to get the most up to date listing of conditions that might qualify.

- How does the Simplified Disability Insurance product work?
This product is for agents and advisors who see the value of Disability Insurance, but have avoided it because of the amount of detail in selling the product.  Simplified DI is the perfect product in that scenario for clients. The product is an individual, guaranteed-renewable Disability Insurance policy but with simplified application and issue processes. It's ideal for individuals in the lower to upper-middle income markets who don’t want to bother with having a paramed exam.

- What is Business Overhead Expense (BOE) Disability Insurance?
In the event that a business owner is disabled, BOE Insurance provides funds that can be used to pay for operational expenses of the company, including payments on business loans. The income provided by a BOE policy will help allow your client’s company to continue operations during the business owner’s disability. These type policies are usually purchased for short term periods ranging from 12-24 months, depending on the particular needs of your client’s business. BOE plans are designed to “buy time” while the business owner recovers from a disability. So, if the disability is expected to be long term or permanent, the company can be sold at fair market value or dissolved.

- What is Key Man Disability Insurance?
Key man Disability Insurance is purchased on a Key Employee or Executive to protect the business if a disabling sickness or injury occurs. It provides peace of mind to a company and business owners alike, knowing that the business can continue operations without major disruption if a disability strikes a top salesperson or executive.

- What is Disability Buy-Out Insurance?
Disability Buy-Out Insurance is designed to provide a business with the funds needed to purchase a disabled owner or partner’s interest if they become disabled. Disability Buy-Out Insurance should be made part of any Business Continuation Plan or Business Succession Plan, as it will assure that the disabled business owner or partner receives a fair market value for their interest in the business. At the same time, it will protect the other business owners from the threat that a disability can impose on the company, by allowing them to buy-out the disabled owner’s interest at an agreed upon price which is set forth in a Buy-Sell Agreement.

- What are Benefit Periods on a Disability Insurance policy?
Benefit Periods represent the maximum length of time benefits can be paid. Benefit Period options are usually anywhere from 2 years, 5 years or “To Age 65”. The longer the Benefit Period, the higher the premiums will be on your client’s policy.

- What Benefit Period should I recommend for my client?
Most Disability policies are priced to favor the 90 Day Waiting Period.  However, it is important to remember that Disability benefits are paid in “arrears”.  This means that the actual benefit will not be paid to your client until 30 days past their chosen Waiting Period.  On a 90 Day Waiting Period option, your client wouldn’t technically receive their first benefit check until the 120th day.

- What are the Benefit Amounts on a Disability Insurance policy?
Benefit Amounts represent the amount of money your client will be insured for on a monthly basis.  The amount of monthly benefit your client applies for directly relates to the premium on their policy. The higher the Benefit Amount, the higher the premiums will be on your client’s policy.

- What Monthly Benefit Amount should I choose for my client?
We believe that your client should get as much Monthly Benefit as they can afford but in conjunction with having the proper amount of Life Insurance and Critical Insurance in force.

- What are Elimination Periods on a Disability policy?
Waiting Periods are the amount of time your client will wait before they receive their first disability payment.  This amount of time is in addition to the 30 days it takes for a benefit to get paid to your client due to disability benefits being paid in arrears. Usually the longer the Waiting Period, the lower the premiums will be on your client’s policy. Available Waiting Period options are: 30, 60 and 90 (there are longer Elimination Periods available but are only appropriate for a client that has substantial savings and wants to lower their premiums).  

- What Elimination Period should I choose for my client?
Most policies are priced to favor the 90-day Elimination Period. In many cases, the premium doubles by decreasing the Elimination Period to 30 days. However, a 60 day Elimination Period is usually not much more premium than a 90 day Elimination Period.  It isn’t a bad idea to check the premium difference to see if it makes sense based on your client’s particular situation.

- How does Cost Of Living Adjustment (COLA) work on a Disability Insurance policy?
COLA provides your client with an annual cost of living increase to your client’s Monthly Benefits once they go on claim…usually 12 months after they go on claim.  COLA does not increase your client’s Monthly Benefit prior to going on claim. 

- What is the difference between COLA and Inflation Protection?
Unlike Inflation Protection on Long Term Care Insurance that increases your client’s benefits each year whether they are on claim or not, COLA specifically does not increase your client’s benefits until they actually go on claim.

- What are the differences between Non-Cancellable and Guaranteed Renewable on a Disability Insurance policy?
"Non-Cancellable" disability policy: an insurance contract in which your client has the right to renew the coverage at each policy anniversary date, usually up to some stated age and guarantees that a company cannot cancel their policy or change their rates, as long as they continue to pay the premiums on time. Because rate increases on Disability policies are rare, we do not always recommend that your client spends an additional 20% in premium for a NonCancellable policy when it is not likely that an increase totaling 20% will take place.

"Guaranteed Renewable" disability policy: guarantees that the terms of your client’s policy can't be changed. However, premiums may increase but only if the increase applies to all policies with similar benefits in your client’s risk class. As previously mentioned, premium increases in Disability Insurance policies are very rare.

- How does a Residual Benefit rider work on a Disability Insurance policy?
The Residual Benefit pays your client a partial benefit in the event they suffer from a partial disability. The percentage of benefit paid is typically proportionate to the loss of income.

- What is the importance of adding a Residual Benefit rider to my client’s Disability Insurance policy?
Many times, clients will go back to work while still partially disabled because they can’t afford not to.  However, just because they are back at work doesn’t mean they will be working full time or be receiving the same income they did prior to being disabled.  With Residual Disability benefit, your client can go back to work and receive most of, if not all, of the difference in earnings loss.

- How exactly does a Social Disability Income Rider (SDIR) work?
To begin, the reason people choose this option is because SDIR offers Monthly Benefit coverage at a discounted premium rate.  It works like this: should your client become disabled, and they have Disability Insurance with an SDIR, they will begin receiving their regularly scheduled Monthly Benefit after satisfying their Elimination Period.  After being disabled for a minimum of 18 months and should your client end up applying and qualifying for Social Security Disability (SSDI), they will also begin receiving SSDI benefits.  However, upon qualifying for SSDI, the amount your client receives from Social Security will be subtracted from the SDIR benefit on their Disability Insurance policy.  But as long as your client is on claim, they are guaranteed to continue receiving the total Monthly Benefit they originally applied for.




Underwriting:

- How long does it take to get a quote for my client?
First, it is important to understand that we are more than just an agency that provides quotes.  In fact, the best way to utilize us is getting us involved in case development, research and implementation.  In most cases, we will be able to assist you in uncovering other needs for your client. We will then help you design the proper insurance protection plan for that client.

So, as long as you provide us with the appropriate information when you request the quote, we will turn your quote around within the next 24 hours.  Our Disability Quote Request form has a listing of the information we need from you to find the right company for your client’s unique need and provide you with a quote.

- How does The Ark Group’s application and new business process work?
  • Application is received by The Ark Group wither via email, fax or mail

  • We review the application and make sure it is complete

  • Our application review depends entirely on how well the applications are completed by the advisor
- if application is complete and was received before noon: same day submission to the company
- if application is complete but received after noon: the next morning it will submitted to the company
- if the application is not complete and was received before noon: same day request for outstanding information from the advisor
- if the application is not complete and was received after noon: the next morning we will request outstanding information from the advisor

  • Once the application review is complete, we submit the application to the home office
- it usually takes less than 24 hours from receipt to submission of application
- many times we get priority processing due to the amount of business we do
- if we receive a mailed application with a check, after proper review, we overnight the completed app and check to the company

  • We will begin following up on the new business the next week

  • Should a paramed exam be required and you request that we order all parameds for your office, we will order the paramed exam within 24 hours of receiving your application
- we primarily order parameds through APPS
- we get updates when the client is contacted, schedules their medical and completes their medical
- in most cases, we get immediate access to copies of the medical and lab slips online

  • When the paramed exam is completed and forms returned to our office, we will submit everything to the insurance company for underwriting

  • When we submit an application to the home office, it usually takes 24 to 48 hours for it to be processed, imaged and ready for the underwriting review team

  • The underwriting review team makes sure they have everything they need for the underwriter to review and then places the app into queue

  • From the time we receive an application to the time an underwriter begins reviewing the application is approximately 4 to 4 business days unless you did not complete the application properly

  • From time to time, a representative from the insurance company may call your client to confirm their answers on the application. These Phone Interviews usually take around 20 minutes.

  • Approximately 7 to 10 business days from when you submitted the application, you will begin receiving weekly emails from our office regarding each of your pending applications

  • New Business can take an average of 45 to 60 days in underwriting…just depends on health history and how thorough we are with the application up front

  • In our opinion, it is always wise to tell your clients that it will take an average of 45 to 60 days to receive a decision from the underwriter
- now, it isn’t often that it takes this long but we always like to under promise and over deliver
- in most cases, it takes less time but we always feel that is best to under promise and over deliver to your clients.

  • We will communicate with you once your New Business is approved.  If it is approved with a lesser rating than originally applied for, we are usually able to communicate that with you prior to the file getting issued and mailed.  However, some insurance companies issue and  mail the policy upon approval and before we have the chance to communicate with you.

  • We will continue updating you on your New Business until it is placed “In Force”

- What is underwriting?
Underwriting is the process of selecting applicants by which an insurance company examines specific risk factors by classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The underwriting process includes the possibility of rejection for those risks considered unacceptable. Insurance Companies price their products based on risks they consider acceptable and unacceptable. As such, one company might be more competitive with a particular risk than another.  We help you decipher which company will work best for your clients based on their unique situation.  Examples of what is considered in evaluating your client’s risk may include:
  • Previous Medical History
  • Family Health History
  • Driving Records (MVR)
  • Medical Information Bureau (MIB.com)
  • Financial Records
  • Occupation
  • Dangerous Hobbies
  • Height and Weight
  • Drug and Alcohol Use

- How long does underwriting normally take?
New Business can take an average of 45 to 60 days in underwriting from the time we receive all completed paperwork.  It depends on your client’s health history and how thorough we are with the application up front. Most of the time spent in underwriting is collecting information (medical records, tax returns, etc.) the underwriter needs to make an informed decision.  In our opinion, it is always wise to tell your clients that it will take an average of 45 to 60 days to receive a decision from the underwriter. It isn’t very often that it should take this long but we always like to under promise and over deliver. In most cases, it takes less time but if you provide your client with an underwriting answer in less than 45 days, they will be more impressed than if you told them less time up front.

- What are the usual problems that cause delays in underwriting?
There are a few common factors that can cause delays in the underwriting of your application. As a Professional Advisor, you can help reduce the delay time by providing a high level of detail when you complete the application, ask your client’s to communicate with their physicians to provide their medical records quickly, be respondent to outstanding requirements and if you schedule your own parameds, make sure to schedule it the same day you take the application. Here is a brief list of the most common problems:

  • How complete is your client’s application? - If you provide all of the details the insurance company needs up front, it takes us less time to keep coming back to you for clarification on the application. So it is always a good idea to provide a high level of detail when you apply for coverage through one of our companies.

  • How long will it take to obtain your client’s medical records? - This probably causes more delays than any other part of the underwriting process. The insurance company generally requests a copy of your client’s medical records from their general physician, a specialist or both. We are all at the mercy of their doctor’s office once the formal request has been made. Sometimes medical records are obtained within a couple days but that is not very normal…especially if your client’s doctor requires a special HIPAA Authorization to release records or is a part of Kaiser Permanente.

  • How respondent is the advisor to their pending business? Once our office begins forwarding emails to you regarding your pending business, we suggest you review, respond to requests as necessary and provide us with the outstanding requirement as soon as possible.

- What type of medical exam is required?
It is normal for paramedical exam to be required for Disability Insurance. The exam is paid for by the insurance company and can be completed in your client’s home or at any other convenient location. The exam can take around 15 to 30 minutes and is conducted by a licensed nurse or medical doctor. An exam generally involves collecting physical measurements, including height and weight, a blood and urine specimen, blood pressure reading, and a series of different questions regarding your client’s medical history.

- What your client needs to know about the medical exam

1. What kind of medical questions will be asked?
The examiner will ask your client about medications, surgeries, treatments, and current or previous medical conditions. They will ask for the names and addresses of any doctors your client has seen in the last five to ten years. To speed up the process, your client will want to have this information handy. It is also important that your client answer health questions exactly how they are asked. If an underwriter wants to know something they will ask about it.

2. How can I best prepare my client for the exam?
Here are some recommendations you will want to make to your client regarding the paramed:
  • It is best to schedule the exam in the morning.
  • Get a good night's sleep the night before the exam.
  • We suggest your client fast for 8 hours prior to the exam (the examiner will say 4 hours though)
  • Abstain from alcoholic beverages for at least eight hours prior to the exam.
  • If you use tobacco, do not smoke or chew tobacco for at least one hour prior to your examination.
  • Avoid drinking coffee, tea, or caffeine for 12 hours prior to your exam.
  • Limit salt intake and high cholesterol foods within 24 hours before your exam.
  • You should not engage in extremely strenuous physical activities 24 hours before the exam.
  • Be prepared to advise the paramed examiner of all medications they are taking.
  • Have their physicians’ names, addresses, dates of past visits, names of any prescribed medications (dosage and frequency as well), and any information regarding injury and/or major illness during the previous five years.
  • Drink a glass of water an hour or so before your appointment as this will help in obtaining a urine specimen.

- What determines the rate class my client will receive on their application?
In order to receive preferred rates, your client must be in excellent overall health, lead a healthy lifestyle and not participate in risky activities. Each company determines rate classes based on their unique underwriting requirements. Family health history, tobacco use of any type, a history of alcohol abuse or drug use will affect the rate class your client receives regardless of the insurance company. For underwriting questions regarding a particular client, please contact us for further assistance.


Simplified Issue

- What does Simplified Issue underwriting mean?
This means that the policy is issued based on answering basic health questions on an application, without requiring a medical exam or medical records from your client’s doctor.  The underwriting turnaround is 4 to 7 business days.  This is convenient but the premiums tend to be a little more expensive since the insurance company isn’t doing as much risk evaluation and the overall available benefit amount is lower…usually up to $2,500 for a Monthly Benefit and from 6 months to 2 years for Benefit Period options. Benefit amounts higher than that amount are always Fully Underwritten.

- What are the underwriting requirements for Simplified Issue?
  • “Yes” or “No” Application
  • Non medical (no parameds)
  • MIB check
  • Rarely will an APS be ordered (3-5% of the time)

- What is the average turn around?
4-7 business days (If an application is complete and has no MIB hit, Assurity guarantees a 4 business day turnaround or $100!)

- Is the process for Simplified Issue actually simple?
Yes, in fact, you are not required to be in person when taking an application, the company can draft the first month’s premium and the carrier doesn’t require an original signature.

- What are a few of the quirks to Simplified Issue Disability Insurance?
  • Limited access to a client’s health information, a person may be declined. Whereas if they would apply for Fully Underwritten coverage they may qualify
  • There tend to be more amendments to be signed by the client when delivering the policy
  • Less coverage available

- What are a few of the advantages to Simplified Issue Disability Insurance?
  • Shorter application
  • Quicker underwriting turnaround
  • No rate ups – pass or fail underwriting

Traditional Issue

- What does Fully Underwritten Disability Insurance underwriting mean?
This means that the policy is issued based on answering health questions, a medical exam is normally required, a phone interview is normally required and medical records can be ordered.  The underwriting turnaround is 30 to 45 business days. This is a little more tedious of a process but the premiums are usually a little less per thousand ($50,000 of Fully Underwritten is less than $50,000 of Simplified Issue) and there is access to greater benefit amounts…typically $500,000 or greater.

- Can a previously completed paramed and labs be used in place of newly requested paramed and lab requirements?
Yes.  However, underwriters always have the discretion to ask for your client to redo the paramed or labs.  However, the results of the paramed and labs are usually good for around 6 months, as a rule of thumb.

- Is the process for Fully Underwritten coverage tough?
No.  There are additional requirements than Simplified Issue but no more than any other type of coverage.  As long as the advisor completes the application properly and sends it through The Ark Group for review and follow up, the overall process should be simple.

- If my client has medical history, can they still purchase Disability Coverage?
There are people that insurance companies will not offer coverage to because they see them as being too risky. Many conditions require the insurance company to limit the Benefit Period, extend the Elimination Period, add an Exclusion Rider or give a more expensive rate class. If your client has a condition you’re concerned about, the best option may be to submit an application to multiple insurance carriers as they may still qualify. Just because one company denies or limits coverage, doesn’t mean they all will. Some pre-existing conditions may be accepted with an Exclusion Rider added to their policy (i.e. a previous knee injury, etc). Information such as chiropractic visits, arthritis, back problems, neck pain history, mental or nervous counseling, use of anti-depressant medication, and many other conditions will play a major role in the rate class or whether your client can even get Disability coverage.

- Your client just had a Life Insurance policy issued, is a Disability Insurance application likely to get issued?
It is important to keep an open mind going into the underwriting process. There are a number of significant differences between Life Insurance and Disability Insurance underwriting. Disability Insurance underwriting is morbidity based and evaluates the possibility of your client becoming unable to perform the material and substantial duties of their regular occupation for whatever period of time, after suffering from a sickness or injury. Disability Insurance underwriting does not evaluate mortality, which is based on the odds of your client dying, regardless of the cause.

- Are underwriters available for me to call with questions?
It depends on the carrier.  However, it is strongly recommended that you call The Ark Group first as we collectively have over twenty years of experience in Disability Insurance underwriting.

- Can my client get Disability Insurance for or during a pregnancy?
Most disability insurance does not cover “normal” childbirth. However, many will cover complications to pregnancies that can prevent your client from working. If your client is already pregnant, she may need to wait until she has delivered her baby and returned to work to obtain Disability Insurance.

Should your client be pregnant at the time they want to apply for Disability Insurance, the insurance company will either issue the policy with an Exclusion Rider for the current pregnancy, or they may even temporarily decline the application all together if the pregnancy is too far along.  Once the child is born, and the client is back at work, the insurance company would then reconsider the coverage.

- If my client has been declined Disability coverage with another company, can I submit an application through one of The Ark Group’s companies?
If another Disability Insurance Company has already declined your client’s application for individual Disability Insurance due to health concerns, it is likely that we will not get a different result. However, if the decline or poor rating was due to occupation class, it is likely we will be able to find a better option for you and your client.  If the decline was due to health history, there are a couple of product options we have available to us that may give your client another chance to secure Disability insurance. As a rule, please contact us and discuss the client’s health history and reason for decline prior to taking an application with one of our carriers.  This will save you and your client time, energy and money.

- When will my client’s Disability Insurance coverage begin?
Most companies provide temporary and conditional coverage at the completion of the medical exam provided a premium payment is made when the application is signed. This temporary coverage is subject to the conditions outlined in each company’s conditional receipt. If your client is replacing an existing policy, it is very important to continue coverage until a new policy is approved by the insurance company and accepted by your client. Without a premium paid up front, your client’s coverage will begin once the policy has been issued, placed “In Force” and premium has been received by the insurance company.

- When will my client make their first premium payment?
Your client can make their first premium payment with the application if they want temporary coverage during the time their application is being underwritten. However, your client can choose to pay their premium after coverage is issued and they have had a chance to review the policy to see if it is acceptable.




Claims:

- How do you file a claim?
The goal is to make the claims process as simple and easy as possible for your clients. Just have the client call you or someone call you on their behalf, as soon as reasonably possible after diagnosis and we will send you the necessary claims forms so you can help your client complete those forms.  You will be responsible for submitting the claim forms to the Claims Department and for following up on the claim for your client.

- What qualifications does my client need to meet to be considered “disabled”?
Not every claim is cut and dry. Sometimes the company requires an independent medical examination to assist them in determining the benefit due at claim. While there are definitive medical tests that can show a claims examiner your client just had a heart attack, a stroke, cancer or diabetes complications, there are some disabilities that are not so easy to verify such as depression, anxiety or other stress disorders. However, it is important to note that should your client’s injury or illness fall within the definitions disability in their policy, then they will be considered disabled.

The definition of “Disability” will vary depending on the terms of your client’s Disability policy. Some policies pay a benefit when your client is unable to perform the material and duties of their specific occupation, while another policy definition would pay only if your client is unable to perform in a job suitable for them based on their training, education and experience. However, some policies may require you to be qualified for Social Security Disability in order to receive benefits. 

There are policies and plans that will pay you a portion of your monthly benefit if you have lost a part of your income due to a disability. This is referred to as a Residual or Partial Disability benefit. Keep in mind that most policies and plans will not cover disabilities caused by suicide attempts, drug abuse, war or attempts to commit a crime. Disabilities due to pre-existing conditions are also frequently excluded.

- When will the benefits begin once my client is eligible for a claim?
Benefits will begin to accrue shortly after the end of your client’s Elimination Period but a benefit will not be payable until 30 days after the Elimination Period chosen is satisfied. All Disability Insurance policies pays benefits in Arrears and that is why it is important to consider how long your client can manage without a paycheck when evaluating what Elimination Period will be best for your client. If your client has significant savings, they may be willing to choose a longer waiting period.

- How long will my client be paid benefits?
With individual Disability Insurance policies, your client can select the maximum time their benefits will be payable. The most frequently offered benefit periods are 2 years, 5 years, and “To Age 65”.

- What is a medical exclusion?
A Medical Exclusion is an underwriting decision where the company will not cover a particular condition that existed prior to the purchase of your client’s Disability Insurance policy. Depending on the condition, the exclusion may be temporary or even permanent. Common exclusions are:
  • Mental/Nervous Disorder (sometimes companies will limit benefits to two years)
  • War or Act of War
  • Normal Pregnancy
  • Active Military Duty
  • Foreign Travel (in some policies)
  • Medical Exclusion (based on a pre-existing condition)

- Will my client be able to work part time?
Most policies we represent will allow your client to continue working but it completely depends on the policy’s definition of “disability”.  However, your client may have decreased benefits if they are able to continue working.

- If my client leaves the country, will they be able to keep their coverage?
Some policies will cover foreign travel. Some policies will suspend the contract while you are abroad. For clarification regarding a specific client, please contact us.

- My question is not listed, who do I contact at The Ark Group?
If you have already reviewed our list of the most Commonly Asked Questions and you did not find the answer you were looking for, please contact us. Our agency is open from 8:30am to 5:30pm CST Monday through Thursday and 8:30am to 4pm CST on Fridays.

Contact Information:
The Ark Group
1055 N. 115th St, Ste 200
Omaha, NE 68154
Toll Free: 866-725-0777
Local: 402-884-4777
Fax: 402-881-8337
Sales@arkgroup.com