Case in point: One of my clients is a small (3 person) high-end carpentry business, made up of three brothers. One is the owner, the other two work for him. The owner asked me to put together a disability income program for them. After reviewing their needs and goals, I proposed that we write 3 individual plans (primarily because each had such different cash flow issues). They agreed, and we completed and submitted applications.
So far, so good.
Okay, 6 weeks later, the underwriter decided that only one of the three was insurable (medical issues). Great.
Back to square one*.
Okay, I thought, let’s go with Plan B: a group DI plan. Requested quotes for Short and Long Term Disability from a handful of carriers. Prepared to wait patiently for said quotes.
Surprise! Got answers right away. That’s the good news.
The bad news is that all but one declined to quote, and that one would only quote STD. Oooookay, what gives?
Well, about half the declines were due to the industry: carpentry. Note that I could write a garage; that somehow mechanics are a better risk than carpenters. Un hunh.
The other half said no because, and you’ll love this, the three employees are brothers. But hold on a sec….it’s not like they’re 23 years old living at home with mom. They’re all grown men, with wives and kids and mortgages.
Doesn’t matter, rules are rules.
So, now on to Plan C ½: We’ll take the STD (with a 6 month benefit), and write a special risk DI policy with a 6 month waiting period. The cool thing about being an independent agent is that I at least have a plan C ½. But IMHO, the carriers are being pretty shortsighted in not even looking at the case because they can’t see past two rules which make no sense (to me).
Just my $.02 for today.
*Why we passed on the insurable one will be the subject of another post
So far, so good.
Okay, 6 weeks later, the underwriter decided that only one of the three was insurable (medical issues). Great.
Back to square one*.
Okay, I thought, let’s go with Plan B: a group DI plan. Requested quotes for Short and Long Term Disability from a handful of carriers. Prepared to wait patiently for said quotes.
Surprise! Got answers right away. That’s the good news.
The bad news is that all but one declined to quote, and that one would only quote STD. Oooookay, what gives?
Well, about half the declines were due to the industry: carpentry. Note that I could write a garage; that somehow mechanics are a better risk than carpenters. Un hunh.
The other half said no because, and you’ll love this, the three employees are brothers. But hold on a sec….it’s not like they’re 23 years old living at home with mom. They’re all grown men, with wives and kids and mortgages.
Doesn’t matter, rules are rules.
So, now on to Plan C ½: We’ll take the STD (with a 6 month benefit), and write a special risk DI policy with a 6 month waiting period. The cool thing about being an independent agent is that I at least have a plan C ½. But IMHO, the carriers are being pretty shortsighted in not even looking at the case because they can’t see past two rules which make no sense (to me).
Just my $.02 for today.
*Why we passed on the insurable one will be the subject of another post
If I might surmise as to the "problem" with writing disability on a small group comprised primarily of family members, bear in mind that "family is family". Consider the familial pressures which could come to bear with respect to a taxable disability benefit of 60% of some amount of income, ultimately affected by family offsets. The disabled family member is not only struggling physically, but financially now, as well. Might the brothers (not necessarily the particular ones described here) be likely to offer, or be pressured to continue some type of payment to the affected member, thereby easing the burden and possibly, unintentionally, extending the disability? Does such a circumstance circumvent the offset language within the policy?
ReplyDeleteThis is certainly a frustrating situation when trying to assist a client, but it must be kept in mind that insurers DO like to write policies and assume risk...that IS their stated purpose. Years of experience within the LTD industry has taught carriers many lessons and some have been difficult to swallow.
I suspect that experience with small family businesses has taught LTD carriers that such cases just aren't acceptable risks.
Assurity has a Graded Benefit Disability Income product that may work here. They will even insure diabetics.
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