To The Editor
The article in the July 29 issue written by Mr. Foley of UNUM/Provident has in it a serious mistake, namely in how he describes “Some Definitions of Disability” in his chart. The mistake has to do with omissions. While he prefaces the chart by saying “some definitions,” he left out several other important ones, such as some split “own-occ” definitions, e.g., unable to do the substantial and material duties of your occ (say five years) thereafter, either not working elsewhere or unable to work elsewhere.
These definitions are not uncommon and should have been prominently mentioned in the chart. However, his real mistake goes to the “The Loss of Earnings” definition, whereby he somehow believes this definition blends in with the referenced “own-occ” definitions. This is completely erroneous. It never has and probably never will be, unless, it is part of some unknown “split”!
Furthermore, he refers to “Loss of Time or Duties” as a “definition” of disability, which it is not. This reference is normally a sub-set of either a “Loss of Earnings” definition, or in a residual (proportionate/loss of earnings) optional benefit which is part of a Total Disability Contract.
Furthermore, why anyone would want a “Loss of Earnings” contract is beyond me, unless they just want to initially to save a few bucks, or they have applied to a carrier who didnt have an own-occ definition and alternatively only offered a loss of earnings!
The reason for my belief has previously been published in one of my articles by the National Underwriter. In any event, my reasoning is short and sweet–there are compelling reasons for own-occ, and these are due to the limited amount of coverage the carrier will issue, based on income. It is a fact that the higher the income, the lower the benefit amount (percentage-wise, which can be anywhere from 55%-30%) especially on a tax-free basis. Therefore, why shouldnt the claimant work in another occupation (if they can), to make up for the shortage?!
Disability Insurance Specialist
Disability Insurance Resource Center
To The Editor
It is always good to hear from folks who have more insight on how to deal with the LTC issues we are and will be facing. However, there are life policies available today that work with more sophistication than what Mr. Bobo is suggesting to consider. The problem with his recommendation is that it does not address the issue of an “early” claim occurrence. If that were to happen, there would most probably not be sufficient cash value in the whole life policy one purchased to pay a LTCI benefit. Whereas, with certain Life carriers, you can buy a Life policy, that also has an automatic LTCI benefit attached, without having to “wait” for cash value buildup, thus, protecting the younger person for either event from the beginning of the contract.
There now also exists in the LTCI arena, “cash benefit” LTCI contracts that pay similarly to a DI model contract, just with different triggers. Younger (30s to 50s) buyers find these hybrid contracts very attractive and at the very young ages, they are very affordable.
Peter S. Gelbwaks, CLTC
President, Gelbwaks Insurance Services, Inc., Plantation, Fla.
Reproduced from National Underwriter Life & Health/Financial Services Edition, September 9, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.