Help deciding between DI plans

[mgan]

Hi all,

I will be starting residency in June and want to get your advice on disability insurance. Due to a medical condition, I am not going to go through medical underwriting and instead I am considering two policies that do not require a medical exam.

The policies:

One is with Standard, $2000 monthly benefit with option to increase to $5000 in the last year of residency and also add FIO in the last year of residency.

It is guaranteed renewable, non-cancel-able, cola, own occ. It includes total, partial, presumptive disability benefits, rehab benefit. The cost is $1122/year.

 

The other one is with Guardian, $5000 monthly benefit with FIO to increase to 10,000.

It is guaranteed renewable, non-cancel-able, cola, own occ. It includes partial disability benefits. The cost is $4730. They have a graded premium.

Ideally, I would like to have 4-5K benefit during residency so the Standard policy seems like not enough but the Guardian policy is a bit expensive. I have not asked but I wonder if I should get the Guardian policy with only 2K benefit and just get both of them for a total of 4K benefit.

Thoughts? What would you do?

Thanks!

[LBKCLU]

I had a client in a very similar situation and had him do a combination of the two to allow him to potentially reach a higher level of coverage than either one of them would allow on their own. To reduce your initial premium outlay, I would do the graded premium with Guardian as Standard only offers a level premium structure.

Consider yourself very lucky to have more than one GSI option available where you will not be penalized as a result of your medical history.

[mgan]

Thank you for your sage advice, it is very much appreciated!

I just heard back from the agent offering the Guardian policy and they can offer a monthly benefit of $2500 with a FIO of $7500. The graded level would make this an affordable option at yearly cost of $1891 (well, for the first year.)

If I also take the Standard policy (with the $2000 monthly benefit at yearly cost of $1122), I would have together $4500 monthly benefit for the cost of $3013 during the first year.

This is something that I can afford and would give me peace of mind.

Now, for a last question: is it ever the case that one policy wont pay since the person being insured has two policies? Anything I should look for in the writing of the policies?

 

[LBKCLU]

No. It is common practice to combine carriers these days - especially for high income earning specialties. Just make sure that you disclose the coverage that you already purchased on the application when you are applying to the second company (I'm not sure which one you are doing first). In the event you are disabled, you could potentially collect under both individual policies, as well as, the group LTD provided to you by the hospital as a resident.

[AlexxT]

If you have two policies, isn't the first one usually primary?   That would come into play only if there were a partial disability, I would imagine.

[LBKCLU]

In the disability insurance world, unlike health insurance, there is no such thing as a primary or secondary policy.

As long as you disclose the coverage you already have inforce when applying for additional coverage, once approved, it is not an issue.

If you meet the definition of total disability found in the policies, you can collect under all of them.

If you are still able to work in your occupation but have a loss of income Residual Disability benefits would be payable under your individual Guardian and Standard policies proportionate to your loss of income.

[mgan]

Thank you so much for the responses. I had no idea I should disclose to the second insurer. (Perhaps is it part of the application process, but since I have not done it formally, I did not know!)

Is there an advantage of intially applying to one over the other? If the second insurer denies me, I would be stuck with only 2500 of benefit for the first three years of my residency. Is it common to get denied or is it just a formality to disclose the additional coverage?

Anyway, thank you for all the advice given so far!

[LBKCLU]

Yes, it is part of the application process. It won't matter which one you apply for first as you will be within the allowable limits of each. I assume one of the GSI plans is available to you from your medical school and the other from your residency program.

You will not be denied as long as you meet the (very minimal) conditions to qualify. A good example is that you have to have been working full-time (or in your case for one of the plans being a medical student) for 180 days prior to your application.

[mgan]

Thank you so much for all the information. I have learned so much about insurance/financial planning from this blog and contributors like you. Thanks!