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Nobody wants to plan for the worst, but when it comes to an unexpected disability on the job, you don’t want to be digging in your savings account just to cover the rent. With the right coverage, finances are immune to expenses and you can focus on your recovery (without worrying about missing work). 

In this episode, you’ll learn how Principal disability insurance preserves your career today while protecting your wallet from the unexpected tomorrow.

  • How Principal disability insurance immediately saves you from massive penalty fees and lost income during a disability leave. (0:58)
  • Why you should frequently update your disability insurance and how this affects your income right now. (2:15)
  • The discounts you need for psychiatric benefits and how to get support in your career for a lifetime. (6:03)
  • The real reason cancer or a stroke messes with your disability coverage – and how to protect your bank account from catastrophic expenses today. (8:39)

To ask questions on insurance coverage or to get a quote, please don’t hesitate to call us anytime at 704-270-2376, and I’d be glad to discuss your specific situation with you.

Read Full Transcript

Hi, I'm Billy Gwaltney and this is the CYA podcast. This show is for the physician who understands the importance of protecting everything you've worked so hard to achieve. Each week I'll bring you tips and advice to help you cut through the clutter and misinformation and show you exactly what you need to preserve your income and way of life. If you're ready to achieve the peace of mind that only financial security can bring let's get started.

(00:28): Welcome to today's episode of the cover, your assets podcast. This is Billy, Gwaltney your host. And once again, I'm very happy to be with you today. We're going to talk about another one of the top disability contracts in more detail. This one is with principal financial group, and this is not meant to be a comprehensive or exhaustive analysis that should give you a good idea. You would certainly want to explore it in your particular situation to see which company makes the most sense for you.

(00:57): Principal is an excellent contract and excellent company. The company was founded back in 1879, which is a while back. They're a stock company. So they're traded on the stock exchange. Their policy is a non-cancelable and guaranteed renewable which is important for physicians. They will provide. What that means is that the definitions cannot change. The policy can not be terminated without your authorization, and the rate can never increase. And that's a lot of security because a lot of our clients that are young physicians in training get this, and then we'll have the coverage for, for quite awhile. The definition of disability is the first element that allows principle to be one of the top contracts on the marketplace. They do have a true own occupation. Definition of disability with principle. This is called the regular occupation rider. And what this means is essentially two things.

(01:51): One, if you cannot perform your occupation, then you are considered to be totally disabled. And two there's no penalty for working in a different occupation for any income you earn from that other occupation, you'll still collect your full disability benefit. That is what's called the true own occupation. Definition of disability is an important feature to have, and it is certainly provided in the principal contract. Another feature of the principal contract, is there a future insureability option? They call this the benefit update rider. What this does is allows you to increase coverage as your income goes up over the course of your career. Currently their cap is 20,000 per month. That's been lower, they've raised it and it can go up again. So just depending on at the time you do the increase, what the cap is, what's important about that. The benefit update rider is that when you go to increase your health status at the time of the increase does not matter, does not factor in.

(02:48): And so once you're approved, if you're approved to have the in your policy, has the benefit update rider on it. Then when you go to increase your health particulars, at that point, don't matter to the rate structure. If you have a discount included that as well will be automatically included on the increase as well. And so that's really important to know that everything's fixed, the definitions are fixed, and those can't change either. There's a bit of a cork to their increase option or their benefit update rider, and that they do it generally in three-year increments. And what that means is that every three years we go through a step with our clients where we get their updated income information and any group long-term disability they have through their employer, provide that to principal and they confirm what the additional coverage options would be and whatever additional coverage that you have available to you based on your current income and what you're eligible for now, will that amount will be made available to you.

(03:48): The discounted rate will be provided. What's different about it is that there's a requirement that you accept at least 50% of that increase in order to keep the benefit rider, excuse me, benefit, update rider on your policy. So what that means is let's say that somebody has $5,000 per month, and we fast forward three years that they're ready to increase coverage and it's their time to increase it because principal requires you to go through this step at least every three years. And they're now eligible for 10,000 per month. Well, principal will provide what that additional benefit amount and rate will be. And then they have a requirement where you if you don't want 10,000, you need to at least increase up to 7,500, or they're going to require you to stay at 5,000 for the life of the policy. And in order to increase again in the future, you would have to go back through medical underwriting.

(04:40): So just a bit of a guardrail around how they do their increase. If you're a trainee and you graduate before that three-year interval there, that's, there's a trigger to it that would allow you to increase right away as your income goes up significantly. And so there are exceptions to the three-year rule that you'll want to understand before you purchase it, but it is there. And the point being that it does help you keep pace with where your income is over the course of your career. Also included on the principal contract is a residual benefit that pays for partial disability. If you are partially disabled and suffer, at least a 20% or greater loss of income than whatever that percent is, loss of income is your policy will pay that percentage of your benefits. And that's important. So it's not all or nothing. You don't have to be totally disabled to collect benefits.

(05:27): If you're partially disabled, residually disabled, and you would receive a residual benefit, also included as a recovery benefit, which if you've heard me talk about this before, this is a very important feature. It pays if you medically recover from a disability and return to work, but when you return to work, your income does not recover to what it used to be before you were disabled. And if you suffer at least a 20% loss of income, when you come back to work after a recovery, then they'll pay that whatever that percentage of your loss of income is, they'll pay that percentage of your policy. Again, another important feature to have regarding the psychiatric benefit principle has a couple of options. The one that most of our clients tend to gravitate to is the two year psychiatric benefit that would pay benefits for addiction, depression, and anxiety, up to a maximum of 24 months over the life of the policy.

(06:18): If you accept that to your psyche Patrick benefit limitation, there's an additional 10% discount on your policy. If you want a longer psychiatric benefit, say two for the full benefit period, age 65 or 67 or 70, you can get that assuming medical underwriting qualification, and it would pay benefits for those, you know, anxiety and depression and addiction disabilities for the full benefit period, you would lose the 10% discount. So the costs would be different for that. It's not available for emergency medicine and aims theology and pain medicine specialties. But generally speaking, it's available outside of that. Again, look at your particular situation to determine if that's important to you or a good fit for what you're trying to accomplish next. When it, with a principal, they have a presumptive disability benefit, which pays if certain events happen, they're going to presume that you're totally disabled.

(07:13): Even if you keep working. And those events are a loss of eyesight, loss of speech, loss of use of both hands or both feet or a loss of hearing. And again, pay benefits. If you kept working, they'd pay your full benefit. Anyway, they do require that the situation is permanent. In other words, if you've lost your hearing, that you're not likely to recover your hearing in order to activate it, if you have a benefit period to age 65 or 67 or 70 than the benefit could be extended to lifetime. And so that's a good feature to have on your policy. They also provide a cost of living adjustment or Cola, a rider that's an optional benefit that would pay benefits and actually increase your benefit while your own claim to offset inflation kicks in at the time of claim. So it's not an increase while you're working.

(08:06): If we kick in or activate wants disabled, it would pay your initial benefit for the first 12 months. And then it would bump it up each year. From that point forward, based on the consumer price index, they have a co-option, there's a cap of 3%. So it would be zero to 3% or a coal option with a cap of 6%. So it'd be zero to 6% and it would compound each year. The principal contract provides a couple of perks that are automatically included in your policy. If you have a policy with them, one is called a capital sum benefit that would pay a lump sum. In addition to your policy, your monthly benefit, if you have a total loss of use without possibility of recovery of the sight in one eye or the use of a hand or a foot. And so if that were to occur, they would pay you an additional lump sum.

(08:57): In addition to your disability benefit, another perk is what's called a supplemental health benefit rider. We've had clients collect from this, you'll receive a lump sum benefit that would pay in addition to your disability benefit. If you became disabled and are diagnosed with coronary artery bypass, graft surgery, cancer or stroke, okay. So if you have cancer and you're disabled, they would pay an additional benefit through the supplemental health benefit rider. And again, there's no additional fee for that. This kind of a neat perk, something to keep in mind, if you're considering principal, they have a supplemental rider that you can add call a catastrophic benefit. That is an extra fee that would pay benefits. If you're catastrophic, disabled, which would be two activities of daily living. If you're unable to perform two or more, it would pay an additional benefit above and beyond your base policy benefits.

(09:55): Again, you do pay extra for that. It's usually, you know, seven to 10% more depending on your age something to consider. Again, this is not meant to be an exhaustive analysis, but it should give you a really good idea that principal's an excellent contract. They're good at what they do. We have a lot of clients with them. We've had claims experience with them. They're very solid and at least one of the options you should consider when you're looking at true specialty coverage. As, as a physician, I hope you found this helpful. If you have additional questions or would like to discuss your situation, please feel free to text me anytime. My number is (704) 270-2376. Again, that's (704) 270-2376. And I'd be happy to talk with you until next time. This is Billy Gwaltney. Thank you as always for carving out a few minutes. I do appreciate that

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