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To get disability insurance, your provider needs to review your medical history. That history is your medical underwriting. It determines your insurance rates. And once that insurance cost is set, it only covers your income at the time of that review.

What happens when you make more money? With a Benefit Update Rider, you have the option to increase your coverage to match your income.

These Benefit Update Riders have limits that you must know if you want to maximize your coverage.

Don't get stuck with an outdated policy. Discover how a Benefit Update Rider gets you the most out of your disability insurance.

Listen now to find out how to keep your insurance costs low and coverage high.

Show Highlights Include:

  • Why you want to buy a Benefit Update Rider early in your career (1:11)
  • The “gotcha” clause that can cancel your Benefit Update Rider (and what you need to do to keep it) (2:58)
  • How to avoid a review of your medical underwriting to keep your insurance costs low (4:15)
  • Why your insurance provider sees you as a statistic — and how to use this to your advantage (6:20)
  • The three exceptions to your Benefit Update Rider that allow you to upgrade your insurance coverage early (7:17)

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 happy to be with you today. Today, we're going to talk about principles, benefit, update rider, and go, go into detail about what this rider means and how it works. The benefit update rider for specialty disability coverage. And I work with physicians all over the country regarding this private specialty coverage principle is one of the top tier contracts on the marketplace currently and has been for a while. They have like the other top contracts, essentially what falls into the category of a future insureability option. And what this does is it allows you to increase coverage over the course of your career, perhaps as you transitioned from a residency or fellowship into being an attending. And then maybe once you're in an attending, you become partner or go out on prac into private practice, or you kind of hit your sweet spot and your income continues to go up.

(01:30): What the future insureability option does. Generically speaking is allows you to increase coverage at the time when your income goes up without having to go back through medical underwriting and as part of the original base policy, hopefully with the, if you've done it correctly, with the same definitions, the same discounted rate structure, and what principal calls this in their contract is the benefit update rider. And what this does is it allows you to increase coverage over the course of your career. Every three years in general, what will happen is at the every third policy anniversary, you will be asked to provide your updated income information and any group long-term disability that your employer provides and any other disability coverage that you have in place, and they will make whatever additional amount of coverage you have available to you, or that you're eligible for based on your current status or the current situation, your income factoring in your income and other disability coverage, they'll make that additional coverage available to you.

(02:37): At that point. Their total cap currently is 20,000 per month. That could increase. It used to be 15,000 than it was 18,000 or 17,000. Then it increased up to 20,000, which is where it is currently. It could be higher, but the point is still the same, any amount up to that point that you're eligible for. They make that amount of coverage available to you. They have a stipulation in the, in the benefit update rider that you need to at least increase by 50% of your eligible amount, or if you don't, they will remove the benefit update rider. Okay? And this is where some of the confusion sets in. So let's say that you have just using an an example. If you have 5,000 a month of coverage, you never get around to increasing your coverage three years from now, the benefit update rider is activated.

(03:28): You provide your additional or updated income information and disability coverage information. You're now eligible for 10,000 per month of coverage. Okay? They're going to make the cost, the discounted rate. Hopefully if you have a discount, they'll make that cost available to you for what it costs to go from 5,000 to 10,000, then included in that. They're going to say, you need to at least increase up to 7,500, or we're going to require you to stay at 5,000. Okay? So if you have 5,000, you're eligible for 10,000, here's the cost for 10,000. And by the way, you need to at least increase up to 7,500. You don't have to increase the 10, but you'd need to at least increase the 7,500. Here's the rate for that? Or if you don't at least increase the 7,500, we're going to require you to stay at 5,000 forever. Okay?

(04:15): Now you could potentially later down the road increase, but you would have to redo the medical underwriting at that point. And that's a big deal. We've had situations where clients just for whatever reason, decided that they did absolutely. We're not going to increase their coverage. At least by the 50% amount at their third policy anniversary, they just weren't going to do it. They weren't in the mood, the timing wasn't right, whatever the situation, they just didn't do it. And so the benefit update rider was removed from their policy. And then later this particular client, this happened in about three or four months ago. This client contacted me, was ready to increase their coverage because they went out to private practice. They were in a partnership or part owner of the practice, their income, and going up substantially, they needed to increase coverage, but their health status had changed.

(05:01): Some things were, were not the same. And so the underwriter opened the file. They had to sign a HIPAA. They went and reviewed the medical records and they declined the increase. They could not get it. Now. They couldn't do anything to the existing amount that was already in place that stayed in intact. And nothing has changed with that. But this particular client was not eligible or able to increase his coverage. Currently. Now we can revisit it in a year or two, hopefully as things stabilize, but having the ability to increase coverage without having to update medical underwriting is an important asset over the course of your career. And so generally for the vast majority of our clients at the third policy anniversary, they're about ready to increase by at least the 50% amount, if not a hundred percent. But if you're at a spot where the benefit update, third anniversary comes along, please, please think long and hard before you decline.

(05:54): At least the 50% increase because you never know when you might wish you had not done that. Generally, if you're eligible for additional well coverage, what you need to understand yeah. Is that insurance companies will not let you get rich off of a claim. Okay? Generally speaking, they are not going to give you more coverage than your income support. They do not want people having too much of an incentive to get creative about how to become disabled. And so if an insurance company is allowing you to increase by whatever amount, what they're saying is that, Hey, if you become disabled, statistically speaking, based on your income, this is the amount of income you're going to need to maintain your lifestyle. This is the amount that you're going to need to cover the increase in medical expenses and other expenses that continue to come in. And so you should strongly consider increasing by the maximum, but certainly you should at least consider increasing by the 50% amount to not do that and just stay at a lower amount.

(06:52): If you do become disabled, it could get painful really quick. And so it's advisable to consider. There are exceptions to the three-year anniversary, where if certain events happen before the third policy anniversary comes up, that principal will allow you to, to increase coverage before that third anniversary comes and there are three scenarios and I'm going to read them directly from the insurance contract. The first one is your current employer has a group long-term disability policy that you're, that you participate in, but they discontinue it. So if you had disobey long-term disability through your employer, and now you don't, that's the first one or the second one is you've had group long-term disability with a previous employer. And you now go to a new employer that does not offer group LTD. If that happens, then you would be eligible for an increase right away. Or the third one is you have at least a 20% or greater increase in your earnings since the last adjustment.

(07:59): Okay? So, or at an employer, they get rid of their group LTD, or you switch employers and you don't have group LTD or wherever you're employed. You have a 20% or greater increase in earnings since the last increase benefit update anniversary, then they will allow you to move up the increase and do it right away. Okay. So there are, again, there are exceptions, the maximum age that the benefit update can be exercised for any reason is age 55. The benefits to the principal's benefit update rider is that there's no additional medical review required at the time of the increase, whether you do it at the anniversary, or if you are a third anniversary, or if you move it up, you get the same discounted rate structure. So whatever training discount you had to have in place in your policy or any other discount, it would be applicable to the benefit update, increase amounts as well.

(08:55): And also the same definitions are guaranteed to be included. So if you have the true own occupation, definition of disability, long-term residual and recovery benefits, those are going to be automatically included on your benefit update, increase amounts as well. The other important factor is there's no ongoing fee for this benefit update rider. They're not charging you for the right to be able to increase coverage in the future. The downside to principal's benefit update rider is that it is a bit more restrictive than the other top contracts, future charitability option. And that restriction is that you are required to accept at least 50% of the increase. Anytime you do the increase. So they have some handcuffs of guardrails, I guess you could say around their benefit update rider. But again, you're not paying an ongoing fee for it. I hope you found this helpful. This is meant to be a summary and an overview of the benefit update rider and how it functions. I would be happy to discuss your particular situation in more detail regarding this or any other questions you have. My number is 7 0 4 2 7 0 2 3 7 6. Again, that's 7 0 4 2 7 0 2 3 7 6. I'd be happy to answer questions or chat with you further until next time. This is Billy Gwaltney. Thank you as always for carving out a few minutes.

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