May 2019 Volume LIV Number 3


Disability Insurance: The Good Old Days Are Here Again

September 2013 Volume XLIX Number 5

 John A. Adcock, ChFC, Clu Financial Services Professional Treloar & Heisel, Inc.

Isn't it funny how most trends in life appear on a cycle? From fashion to music, everything once old is new again. Interestingly enough, the same can be said of the disability insurance market for pediatric dentists.
In the 1980s and early 1990s, the number of insurance carriers offering competitive policies was dizzying. There seemed to be a race to see who could provide a more liberal contract with the lowest premium and the most lenient underwriting standards.
Unfortunately, a wave of claims ensued.
As a result, many carriers retreated from the disability marketplace. Those that remained dropped benefit limits significantly, restricted contractual provisions, and raised premiums. The good old days were gone. Luckily, dentists that bought non-cancellable, guaranteed renewable policies saw no changes to their existing contracts. 
After about a decade, however, a glimmer of hope appeared. While fewer in number than as before, carriers slowly but surely began reversing the trend. First, was a return to the "True Own Occupation" definition of disability, which allows dentists to work in another field while disabled and still collect full benefits—regardless of the new income. Requirements for claiming partial disability also improved.
Then, benefit limits increased. Dentists went from a maximum of $10,000 a month in coverage in 2003 to $30,000 a month in 2013. Concurrently, income-to-benefit ratios became more liberal. Typically, the percentage of income a company will insure now begins at 65 percent. 
(It's important to note, though, that as income increases, the percentage that can be insured decreases. For example, with earnings of $200,000 per year, one can carry $9,200 per month of benefit—or about 55 percent of income. At $400,000, the replacement rate drops to 48 percent).
Finally, carriers upgraded the risk classification for dentists. An occupation's risk classification is a key determinant for rates. Considering current costs and contractual provisions, value is as strong as it's ever been with many disability policies.
Indeed the sun is shining brightly on today's disability market. Reviewing your coverage to ensure it's as cost effective and comprehensive as possible is highly recommended. As summer gives way to fall and fall to winter, the disability market will almost certainly cool down and contract again. The question is: when?
For more information on your insurance planning needs, contact Treloar and Heisel, Inc at (800) 345-6040 or