Aside from cost, only a few contractual provisions differ significantly from one policy to another. So why do so many residents and fellows get it wrong? They purchase the wrong policy; their policy is missing essential riders or contains unnecessary exclusion riders. The truth is they may simply be dealing with the wrong disability insurance agent. Here are three signs that this might be your situation.
1. A Guaranteed Standard Issue (GSI) Disability Insurance Policy Was Never Discussed
A Guaranteed Standard Issue (GSI) plan is an individual disability insurance policy that does not require medical underwriting1.
Surprisingly, it is the same individual disability insurance policy you would purchase from the insurance company offering it on a fully underwritten basis (which requires answering medical questions, a prescription drug check, and reviewing your medical records).
Some parameters are pre-selected for the offering, such as a 24-month limitation for claims resulting from mental/nervous and substance abuse disorders. There is also typically a $15,000 monthly maximum benefit between the base policy and the Future Increase Option (FIO) or Benefit Increase Rider (BIR).
Why would this be the case?
Currently, for Medical Residents and Fellows, I believe there are two types of disability insurance agents in the medical market – the “haves” and the “have nots.” When available, the “haves” can provide potential clients with their own GSI plan or access another insurance agent’s GSI plan if that agent is willing to split commissions or co-broker.
Non-endorsed agents often approach potential clients who are unaware of the GSI offer. Not knowing better, they apply on a fully underwritten basis. If their application is declined, modified, or withdrawn, they typically become ineligible for the GSI offer.
I recently spoke with a resident who applied for medically underwritten disability insurance. He had a history of anxiety and was taking an SSRI. He was offered a policy with an exclusion rider (no benefits payable) for claims resulting from mental/nervous and/or substance abuse disorders. He was distraught and did not take the policy. However, I think he was even more upset when I told him how GSI plans worked and that one was available at his institution. Unfortunately, he was no longer eligible as he was offered a modified policy. The same would have been true if he was declined or withdrew a pending application.
I have witnessed this first-hand with “internet agents” and those affiliated with blogs and websites that provide various products and services to physicians, including disability insurance.
According to the Milliman 2021 Annual Survey of the US Individual Disability Income Insurance Market, 50% of individual disability insurance policies are either modified (34%) or declined (16%).
As such, if I were meeting with an insurance agent to discuss disability insurance, the first question I would ask them would be: Do you know of or have access to discounts or GSI programs that others might not?
Finally, I want to emphasize that you do not need to provide your Social Security Number, Driver’s License Number, or place of birth to obtain disability insurance quotes. You should not sign anything – electronically or otherwise – that looks like an application for disability insurance. Doing so could inadvertently make you ineligible for a Guaranteed Standard Issue (GSI) offer. I cannot stress this enough and have had many potential clients reach out that were unaware that they even applied for disability insurance.
If you are being asked to do this, or the agent says something like, “We don’t even know if you are insurable at this point, so let’s apply and have the insurance company let us know.” – this is a big red flag.
2. You Were Given a Spreadsheet – But Deserve Much More!
First things first, remember that a spreadsheet is nothing more than a tool. Receiving something like this without the accompanying illustrations of coverage prepared using the insurance company’s software may be cause for alarm!
Don’t get me wrong, plenty of people in my industry believe they need to dumb things down for you and that researching insurance can be complicated and overwhelming. As a result, you were presented with a spreadsheet or grid that includes specific insurance companies and how certain policy provisions compare.
In my opinion, this is insulting. How can an agent know what is important to you prior to ever speaking with or engaging in conversation with you? I have reviewed hundreds of these over my career and they are often riddled with errors and inconsistencies. They may include one version of a policy but not another with no real reason behind it.
Finally, the language contained in it is not approved by the insurance companies, the logos are used without permission and the spreadsheet is designed with one goal in mind – to have you purchase a policy solely based on price.
Is this the way you want your insurance agent to differentiate themselves from others? As a physician, you deserve to be provided with more than a “boilerplate” sales tool.
Understanding Insurance
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3. All Insurance Agents Are Not Created Equal
Unlike medicine, which has a standardized path for physicians to gain the education, training, and experience necessary to obtain board certification, the insurance and financial services industry does not. In fact, for the most part, anyone can call himself or herself a “financial advisor.”
Believe it or not, according to LIMRA (Life Insurance and Market Research Association), the actual fourth-calendar-year Financial Planner (Agent) retention rate for 2022 was 15% 2. This number represents the percentage of FPs (agents) still under contract through December of their fourth year after hire.
What does this mean to you? It simply means that if you are a resident or fellow and choose to work with a newly licensed insurance agent, the odds are that by the time you complete your training, that agent is no longer working for the same company or is no longer in the profession.
Imagine for a moment if this was true in the medical profession. Out of a class of 100 medical students, only 15 graduate and go on to practice medicine! This statistic is alarming in and of itself.
But wait, you did a Google search and requested quotes or were referred from a well-known website or blog in the physician marketplace. What does this mean? Not much.
Some companies are designed to be “plug” and “play”. Meaning, you cannot find much, if any, information about the insurance agent that will be responding to your request or you must enter your information before you can receive anything.
When you visit the company’s website, are their names and biographies listed?
How long they have been in the industry?
What about their credentials? Besides having an insurance license, do they have any professional designations or certifications?
Like banking, the insurance industry is heavily regulated. As a result, you will not be paying anything more by purchasing your policy from an “experienced” insurance agent than by purchasing your policy from a newly licensed or “less experienced” insurance agent. Finally, if the policies are structured the same way and include the same discounts, the price will be identical – regardless of how many agents you contact.
Parting Thoughts
Your ability to earn an income is your most valuable asset. It allows you to repay your debt, accumulate wealth, and create a lifestyle for yourself and your family. With significant income potential at risk, a long-term disability may leave you financially devastated. Don’t take the purchase of disability insurance lightly – your entire financial future may one day depend on it.
Footnotes
1. For Eligible Applicants
2. 2022 FP (Agent) Production and Retention Report 2022, LIMRA, 2024.
These are the personal views of the author and may not represent the views and opinions of The Guardian Life Insurance Company of America or its subsidiaries or affiliates thereof.
Individual disability income products underwritten and issued by Berkshire Life Insurance Company of America (BLICOA), Pittsfield, MA. BLICOA is a wholly owned stock subsidiary of The Guardian Life Insurance Company of America (Guardian), New York, NY. Product provisions and availability may vary by state. Optional riders are available for an additional premium. Some policy benefits and features are not available to all occupations.
Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 355 Lexington Avenue, 9th Floor, New York, NY 10017-6603, 212-541-8800. Securities products and advisory services are offered through PAS, 1-516-677-6200. Financial Representative, The Guardian Life Insurance Company of America, New York, NY (Guardian). PAS is an indirect wholly owned subsidiary of Guardian. Physician Financial Services is not an affiliate or subsidiary of PAS or Guardian. AR Insurance License #1057229, CA Insurance License #0C37340.
PAS is a member FINRA, SIPC
Lawrence B. Keller, CLU, ChFC, CFP® is the founder of Physician Financial Services, a firm specializing in disability insurance and term life insurance for physicians. He can be reached at (516) 677-6211 or by email to [email protected] with comments or questions.
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