The Goose or Golden Egg
In The DarkUnderstanding Ratings, Riders & Rejections
What Color is your Collar?
Oh Very Young
We Need To Change Our Image
Forget The Odds, Experience Speaks Volumes
Saturday, July 5, 2008
Disability Insurance - Forget the Odds: Experience Speaks Volumes
By Ron Cohen, RHU, RR
At the Inaugural Meeting of the International DI Society in Tampa, on October 7th, 2005, I made a statement which seemed to amaze the audience.
"My father, mother, sister, wife, both of my sons, mother-in-law, father-in-law, sister-in-law, brother-in-law and yes, even me, all had one thing in common. All of us had been disabled. Ironic? Horrifying is more like it.
Agents and home offices, brokers and articles, odds and salespeople can all tell you different stories, yet, personal experience speaks volumes. My view is simple. The odds of a disability happening to you are irrelevant. The reality of a disability destroying your life, been there, done that.
The last thing a disabled person should be concerned with is money. Plain and simple, disability insurance removes that problem. Is it needed? It can save a family and maintain the dignity of the disabled person who, (and I can tell you first hand,) feels "worthless" and "non-productive".
A disability normally follows patterns and stages.
Stage One:
The first stage is obviously being disabled. If it is permanent in nature, or terminal, the effects will be felt by those closest to the disabled person. It becomes an emotional rollercoaster that gets out of control. Personal feelings must be kept from the disabled person. Each person involved seems to go it alone. Thoughts run through each family member’s mind without stop. It is overwhelming! The burdens are not only emotionally and physically draining, but economically draining as well.
When you factor in the "economic loss" (if the disabled person is a bread winner), fear enters the picture. Fear of losing not ONLY the disabled person, but we are all human and human nature finds us fearing the loss of our homes, cars, tuition for the kids college and on and on. That’s what disability insurance takes out of the picture: Fear of economic loss. Having disability insurance lessens the burdens that can befall the entire family. It also allows the disabled person to know, (and this is crucial to understand) that the disabled person must maintain not only their dignity, but their contribution to the family must continue. If it continues by removing the family’s financial fears, the disabled person feels no loss to their role as bread winner and provider.
Stage Two:
Recovery (This stage could take weeks, months or even years.)
If the disability is not terminal or permanent, there usually is a period of recovery needed. During this transition, the family and disabled party find some adjustments to their normal routines and schedules might be needed. Perhaps, driving the recovering person to and from the attending physician or a rehabilitation site might be necessary. At a later stage of recovery, driving the recovering person to and from the workplace might also be necessary. Adjusting schedules again, as in today’s society, most husbands and wives both work. Typically, friends, other family members and neighbors all take part in this process. No one said it was easy and few realize how many people actually get involved. Been there, done that.
Stage Three:
Overcoming the "Worthless" stage and maintaining your dignity. Something happens to all of us when we are not productive. Our self esteem is lost and suddenly, and this is not unusual, suicidal thoughts enter our minds. I have seen it for the past 37 years. It is the most frightening stage of all.
Without personal contribution to our families and loss of ability to do our jobs, our careers gone, we assume the "pity mode" and thus withdraw into a shell of personal worthlessness. In the disabled person’s mind, they have lost their "human life value".
A true disability insurance salesman would say, "Your disability insurance becomes the rose that you can smell during your lifetime". Indeed, it will, indeed it does. It helps. More so than most know and here is why. The most important stage is the transition from helplessness and the feeling of worthlessness (and dependency) to recovery. This is what a good disability policy realizes and provides for. Recovery allows for the disabled person to get back to becoming an income producer and bread winner again.
Typically, disability policies will provide for some type of "partial" benefit and or "loss of income benefit" which pays the insured a percentage of the total benefits normally paid. Therefore, going back to work and trying to recover is in everyone’s best interest. The disabled person wants to go back and the insurance company wants them to as well. Without this provision, malingering (or not wanting to, or prolonging a disability because there is no provision for recovery) could run rampant at claim time.
Stage Four:
Back to work (If you’re lucky.)
At this point, one could be 100% recovered. Or, back to work in a new position, or back to their job working less time and doing less duties or even doing everything they did before but suffer a loss of income as a result of the disability. No one can predict what will happen. Good disability insurance will provide for all these scenarios and more.
The only thing that can be predicted, well, without disability insurance, no matter what the odds, the result is not pleasant. You see, of all the people I mentioned in the beginning, I was the only one to be lucky enough to have disability insurance.
Been there, done that.
Notation
Of those family members mentioned, 5 of the disabilities were permanent and terminal, two almost terminal but recovered within 6 months, three recovered within 90 days, and my own disabilities, well there were three:
One lasting 6 months, one lasting 12 months and one lasting 14 months.
Ron Cohen, RHU, RR: Ron has been specializing in individual disability insurance for the past 37 years.
Ron Cohen, RHU,RRPO Box 298Barker TX 77413-0298
800-398-0571
ron@roncohenrhu.com
http://www.roncohenrhu.com
http://www.internationaldisociety.com
At the Inaugural Meeting of the International DI Society in Tampa, on October 7th, 2005, I made a statement which seemed to amaze the audience.
"My father, mother, sister, wife, both of my sons, mother-in-law, father-in-law, sister-in-law, brother-in-law and yes, even me, all had one thing in common. All of us had been disabled. Ironic? Horrifying is more like it.
Agents and home offices, brokers and articles, odds and salespeople can all tell you different stories, yet, personal experience speaks volumes. My view is simple. The odds of a disability happening to you are irrelevant. The reality of a disability destroying your life, been there, done that.
The last thing a disabled person should be concerned with is money. Plain and simple, disability insurance removes that problem. Is it needed? It can save a family and maintain the dignity of the disabled person who, (and I can tell you first hand,) feels "worthless" and "non-productive".
A disability normally follows patterns and stages.
Stage One:
The first stage is obviously being disabled. If it is permanent in nature, or terminal, the effects will be felt by those closest to the disabled person. It becomes an emotional rollercoaster that gets out of control. Personal feelings must be kept from the disabled person. Each person involved seems to go it alone. Thoughts run through each family member’s mind without stop. It is overwhelming! The burdens are not only emotionally and physically draining, but economically draining as well.
When you factor in the "economic loss" (if the disabled person is a bread winner), fear enters the picture. Fear of losing not ONLY the disabled person, but we are all human and human nature finds us fearing the loss of our homes, cars, tuition for the kids college and on and on. That’s what disability insurance takes out of the picture: Fear of economic loss. Having disability insurance lessens the burdens that can befall the entire family. It also allows the disabled person to know, (and this is crucial to understand) that the disabled person must maintain not only their dignity, but their contribution to the family must continue. If it continues by removing the family’s financial fears, the disabled person feels no loss to their role as bread winner and provider.
Stage Two:
Recovery (This stage could take weeks, months or even years.)
If the disability is not terminal or permanent, there usually is a period of recovery needed. During this transition, the family and disabled party find some adjustments to their normal routines and schedules might be needed. Perhaps, driving the recovering person to and from the attending physician or a rehabilitation site might be necessary. At a later stage of recovery, driving the recovering person to and from the workplace might also be necessary. Adjusting schedules again, as in today’s society, most husbands and wives both work. Typically, friends, other family members and neighbors all take part in this process. No one said it was easy and few realize how many people actually get involved. Been there, done that.
Stage Three:
Overcoming the "Worthless" stage and maintaining your dignity. Something happens to all of us when we are not productive. Our self esteem is lost and suddenly, and this is not unusual, suicidal thoughts enter our minds. I have seen it for the past 37 years. It is the most frightening stage of all.
Without personal contribution to our families and loss of ability to do our jobs, our careers gone, we assume the "pity mode" and thus withdraw into a shell of personal worthlessness. In the disabled person’s mind, they have lost their "human life value".
A true disability insurance salesman would say, "Your disability insurance becomes the rose that you can smell during your lifetime". Indeed, it will, indeed it does. It helps. More so than most know and here is why. The most important stage is the transition from helplessness and the feeling of worthlessness (and dependency) to recovery. This is what a good disability policy realizes and provides for. Recovery allows for the disabled person to get back to becoming an income producer and bread winner again.
Typically, disability policies will provide for some type of "partial" benefit and or "loss of income benefit" which pays the insured a percentage of the total benefits normally paid. Therefore, going back to work and trying to recover is in everyone’s best interest. The disabled person wants to go back and the insurance company wants them to as well. Without this provision, malingering (or not wanting to, or prolonging a disability because there is no provision for recovery) could run rampant at claim time.
Stage Four:
Back to work (If you’re lucky.)
At this point, one could be 100% recovered. Or, back to work in a new position, or back to their job working less time and doing less duties or even doing everything they did before but suffer a loss of income as a result of the disability. No one can predict what will happen. Good disability insurance will provide for all these scenarios and more.
The only thing that can be predicted, well, without disability insurance, no matter what the odds, the result is not pleasant. You see, of all the people I mentioned in the beginning, I was the only one to be lucky enough to have disability insurance.
Been there, done that.
Notation
Of those family members mentioned, 5 of the disabilities were permanent and terminal, two almost terminal but recovered within 6 months, three recovered within 90 days, and my own disabilities, well there were three:
One lasting 6 months, one lasting 12 months and one lasting 14 months.
Ron Cohen, RHU, RR: Ron has been specializing in individual disability insurance for the past 37 years.
Ron Cohen, RHU,RRPO Box 298Barker TX 77413-0298
800-398-0571
ron@roncohenrhu.com
http://www.roncohenrhu.com
http://www.internationaldisociety.com
The True Value of Your Benefits
What You Need To Know
“The True Value of Your Benefits”
Ron Cohen, RHU, RR
When you receive proposals from an agent or broker, they should be clear and understood. Your understanding, in other words, should also be relative to “the times”. Many life insurance producers offer their prospects $1,000,000 of level term insurance death benefit, without realizing, they may be short changing the individual’s actual “needs” vs. their “wants”. As a consumer, here are some simple thoughts, which might prove very beneficial to you.
“If you died and your (wife or your husband) beneficiary was to receive $1,000,000, what would they do with the money?” Most individuals think their spouses would pay off their homes, but that typically seldom happens, as the money is usually needed for living expenses. Therefore, the beneficiaries normally invest the money in a vehicle, such as a CD.
Let’s assume that you could find a CD at a 5% interest rate. The annual interest your beneficiary would receive would be $50,000. Now, the tax must be paid on that, thus leaving them with an annual income of a lot less than one would believe $1,000,000 is worth. So, let’s use $3500 per month as a figure… (Which is allowing for a 3-5% fluctuation in the CD market?) How much money would your beneficiary actually need to live on? $3500 per month might not be enough.
Realizing the Value of Your Disability Policy
Once you understand and realize the “true value” of current dollars and then can compare the life insurance net CD income to a monthly disability benefit, it will become quite clear, how valuable your disability policy really is. In other words, your beneficiary’s $50,000 per year taxable income vs. a $5000 per month non-taxable disability benefit…..which you would receive during your lifetime. It’s easy to understand, using this example, that a $5,000 per month disability benefit (in current times), is worth more than having $1,000,000 invested in a CD!” The lower the country’s CD interest gets the more valuable the monthly disability benefits get. The other extremely important point here is that the disability benefits remain constant. Regardless of the fluctuating interest rates, fed cuts, stock market ups and downs, “If you become disabled, nothing will change your monthly benefits…Except for the fact that they could increase. By adding the Cost of Living Rider, your monthly benefits do indeed increase at the levels which you purchased: 3% or 6%....your choice!
So, if we were to compare benefits: Using age 40
$1,000,000 of life insurance = $3500 per month fluctuating:
Due to the varying interest rate, which your beneficiary will have to shop (and shop again, after each CD period ends) for the “best rates”. When your beneficiary(ies) is or are in this position (using the principal for monthly income), “risk” is typically avoided. Normally, guarantees are more in line with their needs. Yet, recession and inflation dictate the result….the monthly income can be lower, which is presently quite obvious. In other words, there are no guarantees.
Guaranteed Benefits: During Your Lifetime
Comparing “risk to a constant”: Disability Insurance
“The odds of you becoming disabled, are 3 times greater than dying prematurely, professionals understand that and as a result, they try to insure the maximum monthly disability benefit they qualify for!” Ron Cohen
$5000.00 per month of Disability Insurance =$60,000 per year
Payable to Age 65 without COLA = $1,500,000 non taxable
Compared to a taxable benefit: In a 25% Tax Bracket that would be the equivalent of: $2,000,000.
As an individual disability policy premium remains level and guaranteed to age 65, it avoids fluctuation in uncertain times.
The policy will also provide a waiver of premium provision, which eliminates the need to pay premiums during a claim.
(Note: The waiver of premium should also be added to your life policy.)
You should also understand the actual risk vs. cost element of a disability insurance policy. As most people cannot envision themselves as being permanently disabled,
The simplest way to understand the true value of a disability policy would be, by taking the annual premium cost for the disability policy and multiply it times the number of years until you reach age 65:
Example: Age 40 x 25 years (To Age 65) = Total Premiums
Now, take the monthly benefit they will receive if they were to become disabled for 1 year: The example we’ve already seen shows: $5,000 per month x 12 months = $60,000.
Now, compare the 2 figures and you will notice that in most cases, you normally will not pay as much (in total premiums to age 65) as you would receive for a one year disability claim. If in fact, you were to become permanently disabled, the total amount of benefits received, (non-taxable) could easily be in the millions. As life insurance is usually used to protect the “loss of the breadwinner’s income”, so too is the case of disability insurance….Yet, for the insured, it is a rose that you get to smell during your lifetime…….
Life Insurance & Disability Insurance
The face amount of a typical term life insurance policy remains constant. The monthly benefit in a disability policy increase will increase with the addition of the cost of living rider (COLA). Thus, the inflationary factor alone, dictates, that the $1,000,000 dollars of life insurance over time, will decrease in value. Again, another reason to consider greater face amounts.
All in all, understanding the “true value” of money and the “true value of benefits” can prove quite beneficial when considering both your current and future needs.
P.S.
Disability Policies also allow for increases: The Future Purchase Option Rider is worth consideration.
Best Regards,
Ron
Ron Cohen, RHU,RRPO Box 298Barker TX 77413-0298281-492-2295800-398-0571ron@roncohenrhu.com
Ron Cohen, RHU entered the insurance business in 1969 and began specializing in disability insurance. In 1977, he began his own firm, Ron Cohen Insurance, Inc. In 1977, Ron founded the Houston Association of Health Underwriters and is the only president to have served two terms. He is also a board member of the Texas Association of Health Underwriters. In 2005, Ron co-founded the International DI Society. He has been a guest speaker for many insurance companies, societies, clubs, and several Disability Income Training Council meetings. In the past 2 years, Ron has authored over 200 articles advocating disability insurance to the public and the insurance industry. Ron received the National Association of Health Underwriters Lifetime Presidents Achievement Diamond Award.
You can reach Ron at ron@roncohenrhu.com or 281-492-2295.
“The True Value of Your Benefits”
Ron Cohen, RHU, RR
When you receive proposals from an agent or broker, they should be clear and understood. Your understanding, in other words, should also be relative to “the times”. Many life insurance producers offer their prospects $1,000,000 of level term insurance death benefit, without realizing, they may be short changing the individual’s actual “needs” vs. their “wants”. As a consumer, here are some simple thoughts, which might prove very beneficial to you.
“If you died and your (wife or your husband) beneficiary was to receive $1,000,000, what would they do with the money?” Most individuals think their spouses would pay off their homes, but that typically seldom happens, as the money is usually needed for living expenses. Therefore, the beneficiaries normally invest the money in a vehicle, such as a CD.
Let’s assume that you could find a CD at a 5% interest rate. The annual interest your beneficiary would receive would be $50,000. Now, the tax must be paid on that, thus leaving them with an annual income of a lot less than one would believe $1,000,000 is worth. So, let’s use $3500 per month as a figure… (Which is allowing for a 3-5% fluctuation in the CD market?) How much money would your beneficiary actually need to live on? $3500 per month might not be enough.
Realizing the Value of Your Disability Policy
Once you understand and realize the “true value” of current dollars and then can compare the life insurance net CD income to a monthly disability benefit, it will become quite clear, how valuable your disability policy really is. In other words, your beneficiary’s $50,000 per year taxable income vs. a $5000 per month non-taxable disability benefit…..which you would receive during your lifetime. It’s easy to understand, using this example, that a $5,000 per month disability benefit (in current times), is worth more than having $1,000,000 invested in a CD!” The lower the country’s CD interest gets the more valuable the monthly disability benefits get. The other extremely important point here is that the disability benefits remain constant. Regardless of the fluctuating interest rates, fed cuts, stock market ups and downs, “If you become disabled, nothing will change your monthly benefits…Except for the fact that they could increase. By adding the Cost of Living Rider, your monthly benefits do indeed increase at the levels which you purchased: 3% or 6%....your choice!
So, if we were to compare benefits: Using age 40
$1,000,000 of life insurance = $3500 per month fluctuating:
Due to the varying interest rate, which your beneficiary will have to shop (and shop again, after each CD period ends) for the “best rates”. When your beneficiary(ies) is or are in this position (using the principal for monthly income), “risk” is typically avoided. Normally, guarantees are more in line with their needs. Yet, recession and inflation dictate the result….the monthly income can be lower, which is presently quite obvious. In other words, there are no guarantees.
Guaranteed Benefits: During Your Lifetime
Comparing “risk to a constant”: Disability Insurance
“The odds of you becoming disabled, are 3 times greater than dying prematurely, professionals understand that and as a result, they try to insure the maximum monthly disability benefit they qualify for!” Ron Cohen
$5000.00 per month of Disability Insurance =$60,000 per year
Payable to Age 65 without COLA = $1,500,000 non taxable
Compared to a taxable benefit: In a 25% Tax Bracket that would be the equivalent of: $2,000,000.
As an individual disability policy premium remains level and guaranteed to age 65, it avoids fluctuation in uncertain times.
The policy will also provide a waiver of premium provision, which eliminates the need to pay premiums during a claim.
(Note: The waiver of premium should also be added to your life policy.)
You should also understand the actual risk vs. cost element of a disability insurance policy. As most people cannot envision themselves as being permanently disabled,
The simplest way to understand the true value of a disability policy would be, by taking the annual premium cost for the disability policy and multiply it times the number of years until you reach age 65:
Example: Age 40 x 25 years (To Age 65) = Total Premiums
Now, take the monthly benefit they will receive if they were to become disabled for 1 year: The example we’ve already seen shows: $5,000 per month x 12 months = $60,000.
Now, compare the 2 figures and you will notice that in most cases, you normally will not pay as much (in total premiums to age 65) as you would receive for a one year disability claim. If in fact, you were to become permanently disabled, the total amount of benefits received, (non-taxable) could easily be in the millions. As life insurance is usually used to protect the “loss of the breadwinner’s income”, so too is the case of disability insurance….Yet, for the insured, it is a rose that you get to smell during your lifetime…….
Life Insurance & Disability Insurance
The face amount of a typical term life insurance policy remains constant. The monthly benefit in a disability policy increase will increase with the addition of the cost of living rider (COLA). Thus, the inflationary factor alone, dictates, that the $1,000,000 dollars of life insurance over time, will decrease in value. Again, another reason to consider greater face amounts.
All in all, understanding the “true value” of money and the “true value of benefits” can prove quite beneficial when considering both your current and future needs.
P.S.
Disability Policies also allow for increases: The Future Purchase Option Rider is worth consideration.
Best Regards,
Ron
Ron Cohen, RHU,RRPO Box 298Barker TX 77413-0298281-492-2295800-398-0571ron@roncohenrhu.com
Ron Cohen, RHU entered the insurance business in 1969 and began specializing in disability insurance. In 1977, he began his own firm, Ron Cohen Insurance, Inc. In 1977, Ron founded the Houston Association of Health Underwriters and is the only president to have served two terms. He is also a board member of the Texas Association of Health Underwriters. In 2005, Ron co-founded the International DI Society. He has been a guest speaker for many insurance companies, societies, clubs, and several Disability Income Training Council meetings. In the past 2 years, Ron has authored over 200 articles advocating disability insurance to the public and the insurance industry. Ron received the National Association of Health Underwriters Lifetime Presidents Achievement Diamond Award.
You can reach Ron at ron@roncohenrhu.com or 281-492-2295.
1%-3% Is the Answer
1% - 3% Is the Answer
Ron Cohen, RHU, RR
Doctors have been asking me the same question for 40 years. I thought it might be time to answer the question for everyone at the same time, but first, let me ask you some questions.
What percentage of your income is you mortgage?
What percentage of your income is (or are) your car note(s)?
What percentage of your income is your homeowner’s insurance?
What percentage of your income is your food?
What percentage of your income is your entertainment?
What percentage of your income is for gasoline?
If you are in business for yourself:
What percentage of your income goes to pay your overhead?
Now, the question docs ask, is what percentage of my annual income should a quality disability insurance policy cost? The answer: From 1-3% would be the normal price. Depending upon your monthly benefits, age, sex, specialty, etc. For argument sake, these percentages are just about on the money. Money, yes, that’s the key to all those questions. YOUR INCOME. Everything depends on your ability to earn an income. When that stops, forget the questions I asked and ask yourself one. Why am I spending 5% of my income on entertainment, when for about 2% of my income I can protect my income and my family?
Example: 40 Year old Doctor: Earning $104,000 per year
(I know that’s low, but let’s use that figure.)
Policy Benefits:
$5,000 Per Month
Non-Cancelable & Guaranteed Renewable Level Premiums To 65
90 Day Elimination Period Benefits Payable To Age 65
With Residual Benefits
Medical Specialty Coverage for the full Benefit Period
Annual Cost: $2570 Monthly Cost: (no fees) $214.21
Value of Benefits: $1,485,000 Non-Taxable
What percentage of your income do you spend on gasoline?
Well, that’s just about the same as the disability policy cost.
Ironic isn’t it.
Chances are, your homeowner’s insurance is more…..
If you’re in business for yourself, I guarantee your overhead is more and without you there, it really doesn’t matter.
So, when doctors ask me about percentages, I still think the same way as I did 40 years ago….1%-3% of your income guarantees your income will not stop when you are disabled. A small price to pay… for peace of mind.
Ron Cohen, RHU, RR
Doctors have been asking me the same question for 40 years. I thought it might be time to answer the question for everyone at the same time, but first, let me ask you some questions.
What percentage of your income is you mortgage?
What percentage of your income is (or are) your car note(s)?
What percentage of your income is your homeowner’s insurance?
What percentage of your income is your food?
What percentage of your income is your entertainment?
What percentage of your income is for gasoline?
If you are in business for yourself:
What percentage of your income goes to pay your overhead?
Now, the question docs ask, is what percentage of my annual income should a quality disability insurance policy cost? The answer: From 1-3% would be the normal price. Depending upon your monthly benefits, age, sex, specialty, etc. For argument sake, these percentages are just about on the money. Money, yes, that’s the key to all those questions. YOUR INCOME. Everything depends on your ability to earn an income. When that stops, forget the questions I asked and ask yourself one. Why am I spending 5% of my income on entertainment, when for about 2% of my income I can protect my income and my family?
Example: 40 Year old Doctor: Earning $104,000 per year
(I know that’s low, but let’s use that figure.)
Policy Benefits:
$5,000 Per Month
Non-Cancelable & Guaranteed Renewable Level Premiums To 65
90 Day Elimination Period Benefits Payable To Age 65
With Residual Benefits
Medical Specialty Coverage for the full Benefit Period
Annual Cost: $2570 Monthly Cost: (no fees) $214.21
Value of Benefits: $1,485,000 Non-Taxable
What percentage of your income do you spend on gasoline?
Well, that’s just about the same as the disability policy cost.
Ironic isn’t it.
Chances are, your homeowner’s insurance is more…..
If you’re in business for yourself, I guarantee your overhead is more and without you there, it really doesn’t matter.
So, when doctors ask me about percentages, I still think the same way as I did 40 years ago….1%-3% of your income guarantees your income will not stop when you are disabled. A small price to pay… for peace of mind.
Disability Insurance: I Should Have Listened
I Should Have Listened
Ron Cohen, RHU, RR
There are many things people will argue about. Most like to be right and have the final word…Yet, sometimes you might wish, you had been wrong.
When it comes to explaining the urgency about protecting one’s income in the event of a disability, several scenarios come to mind. You can imagine, after almost 40 years, I have seen and experienced quite a few. Truth be told, these experiences have taught me there is an urgent message here and it needs to be conveyed to the public.
Fifty percent of all business foreclosures are a direct result of a disability.
Many years ago, an accountant referred a business owner to me.
After almost one year of going back and forth with each other, this individual purchased a disability insurance policy. Six months later, I received a call from him. Keep in mind, this individual was about 6 feet 4 inches tall and visually one would never imagine anything could bring him to his knees. He said, “Ron, you did a great job convincing me to purchase the disability policy, but you made one mistake!” I had no idea where he was going, or what he was talking about. Then he said, “I was just diagnosed with MS and I suppose the mistake you made, was not selling me more!” Since then, I show everyone the maximum benefit they qualify for. By the way, he was 32 years old!
Heart attacks, aids, spinal injuries, strokes, cancer, polio returning, car accidents, on and on….even a loss of a thumb and that was the end of a dentist and a surgeon.
There is an irony to life and it continues to be, “Bad things happen to good people.” No one knows the future, but I can predict what will happen when a disability strikes….change. Currently, I am dealing with a disabled dentist, age 49. Rheumatoid Arthritis….he’s done! Ironically, he purchased the practice from a disabled dentist. Now, his partner, who is a client of mine as well, applied for additional coverage (seeing what can happen) and we noticed a change in his personal health. He is 33. “I should have listened to you when you told me to buy the maximum benefit 2 years ago!” Well, I had the foresight to put the Future Purchase Rider on his original policy and surprised him with that after he disclosed his current medical problems. Age has no bearing on urgency.
Countless times I have received a phone call from individuals that I have been working with and trying to relate the urgency to them but hesitation, for some unknown reason results in the same scenario. “I would like to go ahead and purchase the disability insurance now!” They say. Something usually happened and normally, these individuals get rejected, rated or find exclusions on policies that are issued. After the fact and now they see the urgency…but there is nothing I can do.
All or nothing attitudes: Many individuals want the maximum benefit they qualify for and look at the current cost and say it’s too expensive!
Truth be told, if you look at the cost realistically, you will find that all the premiums you pay for the policy to age 65, will not total the amount of benefits you would receive for a one year claim! Protecting your income demands understanding and acceptance. I know all too well what can happen. No one is invincible! If your argument is the cost, then buy less and add the Future Purchase Option Rider. Just in case you do find yourself among those statistics….as we age, our health does not improve. If you are thinking that disability insurance is for the old, I can tell you from experience, most of the long term claims come from the younger professionals. Imagine that! There is urgency here and my job is simply this…..to let you know what you can do about it. The rest, well, is up to you. “One thing is certain…..change. It is the preparation that makes all the difference.” I try to lessen the “I should have listened to you” phone calls and become your advocate.
Ron Cohen, RHU, RR
There are many things people will argue about. Most like to be right and have the final word…Yet, sometimes you might wish, you had been wrong.
When it comes to explaining the urgency about protecting one’s income in the event of a disability, several scenarios come to mind. You can imagine, after almost 40 years, I have seen and experienced quite a few. Truth be told, these experiences have taught me there is an urgent message here and it needs to be conveyed to the public.
Fifty percent of all business foreclosures are a direct result of a disability.
Many years ago, an accountant referred a business owner to me.
After almost one year of going back and forth with each other, this individual purchased a disability insurance policy. Six months later, I received a call from him. Keep in mind, this individual was about 6 feet 4 inches tall and visually one would never imagine anything could bring him to his knees. He said, “Ron, you did a great job convincing me to purchase the disability policy, but you made one mistake!” I had no idea where he was going, or what he was talking about. Then he said, “I was just diagnosed with MS and I suppose the mistake you made, was not selling me more!” Since then, I show everyone the maximum benefit they qualify for. By the way, he was 32 years old!
Heart attacks, aids, spinal injuries, strokes, cancer, polio returning, car accidents, on and on….even a loss of a thumb and that was the end of a dentist and a surgeon.
There is an irony to life and it continues to be, “Bad things happen to good people.” No one knows the future, but I can predict what will happen when a disability strikes….change. Currently, I am dealing with a disabled dentist, age 49. Rheumatoid Arthritis….he’s done! Ironically, he purchased the practice from a disabled dentist. Now, his partner, who is a client of mine as well, applied for additional coverage (seeing what can happen) and we noticed a change in his personal health. He is 33. “I should have listened to you when you told me to buy the maximum benefit 2 years ago!” Well, I had the foresight to put the Future Purchase Rider on his original policy and surprised him with that after he disclosed his current medical problems. Age has no bearing on urgency.
Countless times I have received a phone call from individuals that I have been working with and trying to relate the urgency to them but hesitation, for some unknown reason results in the same scenario. “I would like to go ahead and purchase the disability insurance now!” They say. Something usually happened and normally, these individuals get rejected, rated or find exclusions on policies that are issued. After the fact and now they see the urgency…but there is nothing I can do.
All or nothing attitudes: Many individuals want the maximum benefit they qualify for and look at the current cost and say it’s too expensive!
Truth be told, if you look at the cost realistically, you will find that all the premiums you pay for the policy to age 65, will not total the amount of benefits you would receive for a one year claim! Protecting your income demands understanding and acceptance. I know all too well what can happen. No one is invincible! If your argument is the cost, then buy less and add the Future Purchase Option Rider. Just in case you do find yourself among those statistics….as we age, our health does not improve. If you are thinking that disability insurance is for the old, I can tell you from experience, most of the long term claims come from the younger professionals. Imagine that! There is urgency here and my job is simply this…..to let you know what you can do about it. The rest, well, is up to you. “One thing is certain…..change. It is the preparation that makes all the difference.” I try to lessen the “I should have listened to you” phone calls and become your advocate.
Friday, July 4, 2008
Disability Insurance: The Good News Just Keeps On Coming
Disability Insurance
The Good News Just Keeps On Coming!
Ron Cohen, RHU, RR
Straight off the press! Physicians might like to know, the disability insurers have placed them in the “wanted” category again. A couple of years ago, “Regular Occupation” policies seemed to be a thing of the past….not any longer. $10,000 per month was also the maximum monthly benefit carriers would issue, not any longer. Things have changed to say the least. Competition is alive and well and getting better every day. Leap Frogging is back and the beneficiaries of this competitive fight among disability carriers are the physicians. Granted, there aren’t that many carriers out there in search of physicians, but those in play, well, they just do not want to get “outdone”.
Now, physicians in all specialties, have access to $20,000 of personal Individual Non-Cancelable and Guaranteed Renewable policies. Plus, if you have Group Coverage available, the carriers will now “participate” to $25,000 per month. Add to that, your ability to purchase the “hot product”, the pension protection DI plan (which protects your pension contributions: dollar for dollar) and the new IRS Contribution Ruling: $46,000 before age 50 and $51,000 for ages 50 and above…well, your new DI coverage total monthly benefit, could almost total $30,000 per month.
As most physicians prefer the Individual contracts and the guaranteed level premiums, we find ourselves in the “best of times”…a far cry from the mid 1990’s. Yet, the problem for most docs remains. Investigating these products is time consuming. Comparing them, well, let’s just say verbiage, contractual language, provisions, benefits, cost comparisons, it’s not an easy task.
What you need to know:
In order to obtain $20,000 of individual coverage, you will probably need to “stack” contracts. It will take a combination of policies (it can be done with 2 carriers), due to the current “ISSUE LIMIT” of a single carrier. For example: Carrier A has a maximum issue limit of $15,000 and carrier B a “Participation Limit” of $20,000. Thus, you must first obtain Carrier A’s policy for any amount up to $15,000 per month and then Carrier B’s policy for the balance of $20,000 per month.
During this procedure, you are also eligible for the Pension Plan Disability policy, which is considered “over and above” all other issue and participation limits noted above. Thus, if you are contributing $51,000 per year, the carrier will issue a policy for $4250 per month in addition to all other personal DI coverage.
The end result should be viewed in this manner. Your personal disability: $20,000 per month = $240,000 per year and is Non-Taxable.
Your pension contribution policy $4250 per month =$51,000 per year and is currently non-taxable. Your pension DI benefits will be paid into a “trust” each month and invested (you will dictate where and how) until age 65, just as if you had been working all along. Taxesare due each year on the gains in the Trust. Each year, the Trust willprovide the insured with a 1099 form, reporting capital gains and interest unless the policyholder chooses an annuity. Upon request, the Trust will reimburse the insured for any taxes paid.
The end result you not only protect your personal income, but also prevent your pension plan from being disabled! What will they think of next?
Change in the Residual Disability Rider
Some physicians might be familiar with “partial disability” benefits. This is where you return to work and the insurer provides a 50% minimum benefit for the first 6 months. Residual benefits have varied over the years, and the requirements have typically been: you are under the care and treatment of a physician, you are working in your occupation, and you have a loss of time and or duties and a loss of 20 percent of pre-disability income. The Residual rider also provided a minimum benefit of 50% and or the actual loss of income percentage (whichever is greater) for the first 6 months. The new “twist”, is the reduction of loss is now 15% and the carrier only requires a loss of income (no time or duties) and the medical care requirement. They will also continue these benefits as long as the loss of income continues, even to age 65. This is part of the “Recovery Benefit”, which is one of the, if not the most important features in a disability policy. A disability which allows you to return to “your occupation”, might find you struggling to pay your overhead and your income as well. Most physicians do not realize, that income as defined in these contracts, means after your overhead is paid the money left is your income. A typical doc will find a dollar earned means .50 cents in their pocket. In other words, you might be back to work and never financially recover…Residual is a must buy rider. Well worth the expense.
Cost of Living Rider
Over the past 20 years, the big issue has been inflation. Realistically, few physicians understand what their inflation riders really do and mean. If you base the inflationary factor into a disability policy (in other words, you purchased the COLA Rider) for 6% and the CPI (consumer price index) during your disability reports a 2 percent factor, your policy uses that 2 percent. End result, you overpaid for the rider. Using the last 10 years, the CPI hit 3 percent 1 time. Thus, the old COLA Riders were expensive and out of touch. The new twist is to guarantee a 3 percent compounded rate without using the CPI.
Add to that a 4 year set back (that’s when the benefits to not start inflating for 4 years) and your cost and benefits for this rider are more realistic and affordable. Nice twist!
The Most Important Feature
Read your policy and if you are not able to understand it, don’t buy it. It’s really that simple.
Ron Cohen, RHU entered the insurance business in 1969 and began specializing in disability insurance. In 1977, he began his own firm, Ron Cohen Insurance, Inc. In 1977, Ron founded the Houston Association of Health Underwriters and is the only president to have served two terms. He is also a board member of the Texas Association of Health Underwriters. In 2005, Ron co-founded the International DI Society. He has been a guest speaker for many insurance companies, societies, clubs, and several Disability Income Training Council meetings. In the past 2 years, Ron has authored over 200 articles advocating disability insurance to the public and the insurance industry. Ron received the National Association of Health Underwriters Lifetime Presidents Achievement Diamond Award.
You can reach Ron at ron@roncohenrhu.com or 281-492-2295.
The Good News Just Keeps On Coming!
Ron Cohen, RHU, RR
Straight off the press! Physicians might like to know, the disability insurers have placed them in the “wanted” category again. A couple of years ago, “Regular Occupation” policies seemed to be a thing of the past….not any longer. $10,000 per month was also the maximum monthly benefit carriers would issue, not any longer. Things have changed to say the least. Competition is alive and well and getting better every day. Leap Frogging is back and the beneficiaries of this competitive fight among disability carriers are the physicians. Granted, there aren’t that many carriers out there in search of physicians, but those in play, well, they just do not want to get “outdone”.
Now, physicians in all specialties, have access to $20,000 of personal Individual Non-Cancelable and Guaranteed Renewable policies. Plus, if you have Group Coverage available, the carriers will now “participate” to $25,000 per month. Add to that, your ability to purchase the “hot product”, the pension protection DI plan (which protects your pension contributions: dollar for dollar) and the new IRS Contribution Ruling: $46,000 before age 50 and $51,000 for ages 50 and above…well, your new DI coverage total monthly benefit, could almost total $30,000 per month.
As most physicians prefer the Individual contracts and the guaranteed level premiums, we find ourselves in the “best of times”…a far cry from the mid 1990’s. Yet, the problem for most docs remains. Investigating these products is time consuming. Comparing them, well, let’s just say verbiage, contractual language, provisions, benefits, cost comparisons, it’s not an easy task.
What you need to know:
In order to obtain $20,000 of individual coverage, you will probably need to “stack” contracts. It will take a combination of policies (it can be done with 2 carriers), due to the current “ISSUE LIMIT” of a single carrier. For example: Carrier A has a maximum issue limit of $15,000 and carrier B a “Participation Limit” of $20,000. Thus, you must first obtain Carrier A’s policy for any amount up to $15,000 per month and then Carrier B’s policy for the balance of $20,000 per month.
During this procedure, you are also eligible for the Pension Plan Disability policy, which is considered “over and above” all other issue and participation limits noted above. Thus, if you are contributing $51,000 per year, the carrier will issue a policy for $4250 per month in addition to all other personal DI coverage.
The end result should be viewed in this manner. Your personal disability: $20,000 per month = $240,000 per year and is Non-Taxable.
Your pension contribution policy $4250 per month =$51,000 per year and is currently non-taxable. Your pension DI benefits will be paid into a “trust” each month and invested (you will dictate where and how) until age 65, just as if you had been working all along. Taxesare due each year on the gains in the Trust. Each year, the Trust willprovide the insured with a 1099 form, reporting capital gains and interest unless the policyholder chooses an annuity. Upon request, the Trust will reimburse the insured for any taxes paid.
The end result you not only protect your personal income, but also prevent your pension plan from being disabled! What will they think of next?
Change in the Residual Disability Rider
Some physicians might be familiar with “partial disability” benefits. This is where you return to work and the insurer provides a 50% minimum benefit for the first 6 months. Residual benefits have varied over the years, and the requirements have typically been: you are under the care and treatment of a physician, you are working in your occupation, and you have a loss of time and or duties and a loss of 20 percent of pre-disability income. The Residual rider also provided a minimum benefit of 50% and or the actual loss of income percentage (whichever is greater) for the first 6 months. The new “twist”, is the reduction of loss is now 15% and the carrier only requires a loss of income (no time or duties) and the medical care requirement. They will also continue these benefits as long as the loss of income continues, even to age 65. This is part of the “Recovery Benefit”, which is one of the, if not the most important features in a disability policy. A disability which allows you to return to “your occupation”, might find you struggling to pay your overhead and your income as well. Most physicians do not realize, that income as defined in these contracts, means after your overhead is paid the money left is your income. A typical doc will find a dollar earned means .50 cents in their pocket. In other words, you might be back to work and never financially recover…Residual is a must buy rider. Well worth the expense.
Cost of Living Rider
Over the past 20 years, the big issue has been inflation. Realistically, few physicians understand what their inflation riders really do and mean. If you base the inflationary factor into a disability policy (in other words, you purchased the COLA Rider) for 6% and the CPI (consumer price index) during your disability reports a 2 percent factor, your policy uses that 2 percent. End result, you overpaid for the rider. Using the last 10 years, the CPI hit 3 percent 1 time. Thus, the old COLA Riders were expensive and out of touch. The new twist is to guarantee a 3 percent compounded rate without using the CPI.
Add to that a 4 year set back (that’s when the benefits to not start inflating for 4 years) and your cost and benefits for this rider are more realistic and affordable. Nice twist!
The Most Important Feature
Read your policy and if you are not able to understand it, don’t buy it. It’s really that simple.
Ron Cohen, RHU entered the insurance business in 1969 and began specializing in disability insurance. In 1977, he began his own firm, Ron Cohen Insurance, Inc. In 1977, Ron founded the Houston Association of Health Underwriters and is the only president to have served two terms. He is also a board member of the Texas Association of Health Underwriters. In 2005, Ron co-founded the International DI Society. He has been a guest speaker for many insurance companies, societies, clubs, and several Disability Income Training Council meetings. In the past 2 years, Ron has authored over 200 articles advocating disability insurance to the public and the insurance industry. Ron received the National Association of Health Underwriters Lifetime Presidents Achievement Diamond Award.
You can reach Ron at ron@roncohenrhu.com or 281-492-2295.
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