How do you know if the disability insurance professional has your best interest in mind when shopping for disability insurance?
I recently worked with a physician in the South and discussed term life and disability insurance for her. We have special discounts available at her hospital. These include the unisex rates. I put together a spreadsheet of multiple companies for both the life and disability insurance and showed her multiple options.
Subsequently she met with an agent of a company in her hometown. She emailed me the information and I was blown away at the significant differences. I’d like to share the differences with you. I have changed the names of the company for anonymity.
Here is the summary I composed for the client. My company will be called SFL and the other one ABC for anonymity.
Dear Dr. Johnson,
Thank you for reaching out to me and allowing me to compare the proposals from your agent with the ones we discussed. There are some very significant differences I would like to bring to your attention:
1) Definition of disability. The SFL policy has a true own occupation definition of disability. This is the most important part of the policy as this is how they will determine if they will even pay a claim. Principal states they will pay you a benefit if you are sick or injured and can’t work in your occupation (or medical specialty) regardless of income earned elsewhere. If you decide to work in another medical specialty or occupation, you will still receive full benefits regardless of your income earned elsewhere. The ABC policy states it will pay you if you can’t work in your occupation and are not employed. (see page 5 under definition of disability). This means that they will not pay any claims if you are working in any capacity.
2) Cost. The SFL policy premium is fixed and guaranteed to age 67. The discounted monthly premium is $109/month. Total premium paid to age 60 would be $39,240. The ABC policy shown is is NOT a guaranteed premium. While it is initially less expensive, it increases each year. The best case scenario (assuming you receive all of the projected dividends) you would pay $120,476 until age 60. The guaranteed cumulative premium is $138,576. There are several reasons for this discrepancy. The SFL policy has unisex rates which reduces your cost by over 55%. The rates are also fixed.
Life insurance is very simple to compare for term insurance. SFL rates are $669/year. For the next 20 years you will pay $13,380. The ABC policy is $1093/year and over the next 20 years you will spend $39,384.
SFL disability premiums paid: $39,240 true own occupation definition, special unisex rates.
ABC disability premiums paid: $120,476 to $138,576. Own occupation, not gainfully employed
SFL life insurance premiums paid: $13,380
ABC life insurance premiums paid: $39,384
Agents are employed by an insurance company and have an incentive to sell only their products and don’t have access to other products (or are strongly discouraged to look elsewhere). These products may or may not be in the clients’ best interest.
At Set for Life Insurance, we work as independent brokers and have access to almost all policies in the marketplace and have already shopped around for you to find the most suitable and cost effective product available.
For more information about working with a disability insurance broker or agent or to request a quote comparison, contact Set for Life Insurance today!