Principal's Transitional Occupation Rider

[wcireader]

I have been on my employer's group disability (own occupation to age 65, portable to $5000 without underwriting) but am applying for individual LTD insurance. Due to some past health issues, I did not qualify for Principal's own occupation policy but DID qualify for a to age 65 policy with a transitional occupation rider. The rider reads:

Transitional Occupation rider (HH771)
You will continue to receive disability benefits if you become totally disabled in your occupation, but are working in another occupation. Benefits will be paid up to 100% of your prior earnings, but will not exceed the total monthly benefit. Benefits are payable until the end of the transitional occupation period To Age 65. If your policy has both the Residual Disability and Recovery Benefit rider and the Transitional Occupation rider, benefits will not be paid out under both riders at the same time. If you meet the definitions and terms of both riders, your monthly benefit will be the great of either Residual or transitional occupation benefit.

Does anyone have any experience with this rider? In other words, is it worth getting a personal LTD policy with this rider over a group own occupation LTD policy that is only portable for $5000/month (and I don't know how long I'll stay)?

I also did get an offer for a 10 year max own occupation policy from Ohio National. However, I will probably have to get further underwriting from them to get the full 60% benefit as they require me to have no group LTD insurance, and I am not able to cancel until the fall.

Thank you so much for your thoughts on (i) Principal's Transitional Occupation rider, and (ii) my situation in general.

[SwanSong]

I purchased transitional own occ over own occupation, as with Principal it eliminated a mental/nervous exclusion that came with own occ. It is still an own occupation insurance, but you just can't make more in disability than you made in your career. For me, I was ensuring against losing my income--not paying for the possibility that I could make more than my current income. I also could not envision a scenario while disabled where I could make more than my current job.

Keep in mind most DI policies cap you out at 60% of your earnings. For me, I make roughly 29k per month. Am I going to find a job while disabled that pays more than 11k per month, anyway? Yeah, right. So I in all likelihood wouldn't receive any fewer benefits with transitional, anyway.

[DK Unger]

Hi wcireader,

To clarify some terms, I highly doubt your group disability insurance is a true own occupation plan. It's likely a modified own occupation plan which is also the base definition of total disability offered by Principal (if you do not add the transitional occupation or regular occupation rider). This means you receive your full benefit if you cannot practice your specialty due to disability and are not earning income elsewhere. The limiting difference with the group disability plan is that it is integrated with deductible sources of income which means your benefit is reduced by workers' comp, social security, auto liability insurance payments, etc. This leads to hassle and uncertainty at claim time.

This modified own occupation definition of disability may be sufficient for your needs. If you choose not to work after becoming disabled from your specialty, then you don't need to pay for the transitional occupation rider, just the residual disability rider. The other note about the transitional occupation rider and one that is often overlooked, is that it is integrated/offset with "other disability coverage" defined as:

1. Individual, association, or group disability coverage;
2. Benefits from an employer-sponsored plan or payroll deduction plan that provides sick pay,
salary continuation, salary replacement, disability income, disability retirement, or retirement;
3. Worker’s Compensation monthly benefits or settlement received in lieu of monthly benefits.

 

[loeffy]

SwanSong wrote:

I purchased transitional own occ over own occupation, as with Principal it eliminated a mental/nervous exclusion that came with own occ. It is still an own occupation insurance, but you just can’t make more in disability than you made in your career. For me, I was ensuring against losing my income–not paying for the possibility that I could make more than my current income. I also could not envision a scenario while disabled where I could make more than my current job.

Keep in mind most DI policies cap you out at 60% of your earnings. For me, I make roughly 29k per month. Am I going to find a job while disabled that pays more than 11k per month, anyway? Yeah, right. So I in all likelihood wouldn’t receive any fewer benefits with transitional, anyway.

Click to expand...

I have the same thinking, that's why I went with trans-occ w/o M/N limitation.  Plus, at the time, Principal was significantly cheaper for a female than other companies, so the cost savings was worth the 'sacrifice' of a trans-occ rider.

[wcireader]

Thank you, loeffy and SwanSong, for letting me know about your personal experiences with this rider.

 

Thank you, DK Unger, for the clarification that my employer policy likely is similar. In fact, as I have a copy of the LTD certificate, a quick search and skim seems to support what you say.

 

Thank you all again!