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Insurance Issues Not So Simple for Women

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You undoubtedly already know your female clients pay as much as 30% more for disability insurance than your male clients. They’d better get ready for sticker shock on the long-term care insurance front, since some companies will have put gender-specific pricing in place by mid-October. Term insurance, however, is still a bargain, according to John Ryan of Ryan Insurance Strategy Consultants in Greenwood Village, Colo., who has some suggestions for clients’—and advisors’—insurance needs.

The disability situation has a couple of bright spots. First is a new product from the Standard Insurance Company of Oregon. Ryan said that the company has come out with a new product that is within the reach of blue- and gray-collar workers.

Protector Essential doesn’t offer all the bells and whistles of more expensive products. However, Ryan said it has potential for white-collar female workers as well, since its lower price “will help some female clients afford disability coverage they might otherwise forgo.”

“It’s always a challenge for women to get competitive disability coverage,” Ryan said, because “claims are longer in duration for women than men, statistically.” That accounts for the 30% higher premium. One of the best places for women to get coverage is at work where they can take advantage of unisex corporate rates, he said.

The second bright spot is that there’s another way for women to get that corporate rate and still buy privately: Three or more women at the same employer can band together to buy coverage from the insurer. The company doesn’t have to collect premiums or be involved in any way; the women seeking coverage simply “have to show that they have a common employer and have to buy at the same time. They don’t even have to buy similar coverage. One can buy a $500 a month [benefit], and another can buy $15,000 a month.”

Ryan added, “A female business owner who wants really good coverage [can do this] and add just a secretary and a salesperson with minimal coverage, [since] coverages don’t have to be alike. A lot of women do it; even a lot of women who are executives and have disability coverage offered by their employer, especially if their earnings are over $150,000 a year.”

Some female business owners, said Ryan, will even pay for the coverage for the two other employees, since the discount on the owner’s policy will be so large that it pays for the other two premiums and still saves money. He gave an example: “A female business owner could buy a full-blown program for herself and offer a $1,000 per month benefit with a two-year benefit period to coworkers … and give coworkers the opportunity to [increase their coverage] and pay the difference. Her premium might be $4,000 per year, and with the 30% savings, she can pay [their] $300 per year multilife premium discount. Agents who are not experienced don’t explain that to them, so they’re out buying coverage on their own.”

The LTC picture is not so bright. There are still opportunities to take advantage of the unisex rates till mid-October, but women who hesitate could pay as much as 50% more than the current rate. Ryan said there is a possibility that even those who get in under the wire will get a rate increase later to offset the “bargain” that today’s rates have become. For such a sizeable increase, it pays to ask female clients whether they’re interested in an LTC policy and, if so, to submit an application to stop the clock on the rate increase.

Ryan pointed out that California, Connecticut, Washington, D.C., Florida, Hawaii, Indiana and New York “are the only jurisdictions that do not have any gender-distinct pricing yet.” He added that Montana “will not migrate to gender-distinct pricing.” Elsewhere, prices are going up.

Term life insurance, cheerily enough, remains a bargain, Ryan said. “Things are very good for women on the life insurance front; rates are at an all-time low.”

Advisors may not be aware of an opportunity through the FPA and NAPFA for disability coverage for themselves that offers “a terrific discount for women.” Both organizations, Ryan said, “sponsor a voluntary group long-term disability plan that we administer for them. For current or prospective members of those two organizations, the discounts are probably about 30%–35% for men and 50%–60% for women off the cost of a private individual policy.”

We invite you to read all the articles and opinions in Investment Advisor’s special report on Women in Wealth Management.