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Recent Changes in Disability Insurance

There have been and will be several changes within the disability insurance industry in 2008. Some of these changes include price increases, price decreases, benefit increases, new policy features and expansion of disability definitions. This month we analyze and offer insight on how these changes from three insurance companies (Guardian, MetLife and Standard) may affect your clients.


Guardian’s disability contract has a reputation within the industry of being the “Cadillac” of disability insurance policies. This is because the policy automatically offers an own occupation definition of disability, long-term recovery benefits and the lowest loss of income requirement for residual claims. Guardian was one of the pioneering insurers that offered a lifetime benefit period. Several years ago, Guardian introduced their retirement contribution protection disability policy designed to replace retirement contributions in the event one was disabled. Guardian targets policy features and pricing toward capturing the business of high income earning executives, attorneys, physicians and dentists.

Guardian is revising their disability contract and pricing in the summer of 2008. The new policy reduces the residual disability rider benefits. The policy will no longer pay a residual claim if the loss of income is $500 or 20%, whichever is less. The policy will now pay residual benefits for an income loss of at least 15%. This change puts Guardian’s policy in line with other insurers residual disability benefits, however maintains a competitive edge.

Guardian has added several new and exciting riders and options that allow for lower premiums. The most notable new features are the 4-year delayed cost of living adjustment, 10-year benefit period and step-rate premium structure. These options allow agents to tailor policies to the exact specifications of each client.

There are also substantial pricing changes. Guardian has drastically lowered premiums for women and young professionals. The average reduction in nearly 20% for these people. The new policy pricing has many professional women reviewing their current coverage. The popular Retirement Protection Policy’s premiums are also lowering slightly. The new policy does increase premiums on the lifetime benefit period. The company is pricing this option at a higher level that may no longer be competitive to other insurers lifetime benefit periods. Existing policyholders with future purchase options will still be able to add to their benefit rich lifetime policy, but they must act fast for the current rates.

As the economy changes, insurers may react by tightening their risk pool. A lifetime benefit period is an unlimited risk to an insurance company. Therefore, if an insurance company increases pricing on this option they are more apt to discontinue adding to their unlimited risk pool. Guardian is shifting marketing efforts from the lifetime benefit period to the retirement protection disability insurance policy. This makes sense because this insurance policy has a limited benefit period, therefore a limited risk. We must understand that the replacement of a lifetime benefit period with a retirement protection policy does not allow maximum coverage. One can purchase a lifetime benefit period and retirement contribution protection to achieve the true maximum level of insurance. This will be a less competitive option in the future with Guardian. However, Guardian’s new policy is still a very strong disability contract with many superior features.


In 2008, MetLife introduced a new occupation class “6S”, which aims to be more competitive for attorneys, CPA’s, executives (regardless of travel) and pharmacists. This occupation class lowers premiums by nearly 10% and is now available in 34 states. In addition, MetLife has broadened the availability of its own occupation coverage to dentists and physicians, added a catastrophic benefit rider for non-working spouses and increased issue limits for business overhead coverage.


Standard recently announced increased issue and participation limits on their disability insurance product. Depending on the occupation, Standard will now issue up to $15,000 per month in individual disability insurance coverage. Standard will now participate with other individual disability insurance carriers up to $20,000 per month and up to $25,000 per month with existing group insurance. Standard continues to offer own occupation coverage, benefits to age 66 or age 67 (depending on the state), cost-of-living adjustments, and multiple policy renewal options. Recently, Standard began offering flexible policy dating to benefit insureds.

In summary

The present economy is driving changes within the disability insurance market. The only way to know how the current disability insurance climate may or may not benefit your clients is through a disability insurance review. A review of current policies and income will identify strengths and potential weaknesses in existing disability insurance, as well as afford the opportunity for premium savings based on recent pricing changes. Sample disability comparisons are available on our website in the financial advisor section.

Please call us at 800-942-4181 today to discuss you or your clients’ specific situation.