Alternative To “To Age 65”
In the world of individual disability insurance sales, most insurance agents tend to prescribe monthly disability benefits payable to age 65. This “to age 65” benefit period has become expected and alternatives are rarely considered. Group LTD plans follow this same general pattern. The argument of whether or not benefits to age 65 is the best prescription for the consumer is inconsequential, since no one has a crystal ball to know whether recovery will be short or long-term. Providing for the worst case situation is probably prudent and one should secure the longest benefit period one can afford.
So, what happens at claim time? During the first few years of a disability, the insurance carrier pays the monthly benefit dutifully. The insured is required to see his/her doctor regularly to provide updated claims status reports. It is a taxing journey for both parties.
As time goes on, the insurer wonders when the insured is going to recover and the insured is troubled with the constant burden of submitting to the demands of the insurer. Typically, around the third, fourth or fifth year of a claim, the insurer decides that they would prefer to close the case and the company may approach the insured with a settlement offer. This is not a bad thing, provided the offer is sufficient. By agreeing to a settlement, the insurer is able to save the expense of maintaining an ongoing claim and the insured can avoid the continued requirements necessary to receive benefits.
Many of Petersen International Underwriters’ disability insurance plans offer monthly benefit periods from 60 to 84 months. Some agents object that we do not offer traditional benefits “to age 65” as they are so accustomed. Our solution to this problem has always been to offer a lump sum benefit following the last monthly benefit which is designed to “settle” the claim, effectively handling the situation like a traditional carrier. The major difference is that the PIU plan has been pre-negotiated in terms of the “settlement” amount and when it will pay, which makes it much easier to develop a financial plan.
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