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Disability Insurance Case Study #2: Anatomy of Group vs. Individual

Most physicians are offered long-term disability insurance through their group as a benefit that is employer-paid. This looks like a great offer considering you do not pay for it but that is not the case.

What you may not realize is that group disability insurance is hard to collect on. Have you ever wondered why applying for private individual plans requires an analysis of your medical history? The simple reasoning for this is to offer you an individual plan that is much easier to collect on. These individual policies are fully underwritten at time of application so that they do not reassess your health history at the time of claim. If you are disabled and as long as the claim is not fraudulent or frivolous, the plan will pay out. With employer-paid plans, you are not submitting any information about your pre-existing conditions and past health when joining the group. This is because the group plan will complete the medical underwriting at the time you submit a claim.

Group long-term disability insurance policies may not be the most ideal plans but they also shouldn’t be forgotten. These plans are great options for physicians who have their individual plans already and need to supplement their individual plans to cover a bit more of their income. We had the opportunity to fully analyze a client’s options between his Unum group plan as well as his Ameritas disability insurance offer.

Case - Unum vs. Ameritas

Unum is one of the most common insurance companies that offer group disability insurance. Typically, there are two types of group long-term disability insurance plans; Supplemental Individual Voluntary Plans or Group Employer-Paid Plans. You have to opt in for the supplemental group coverage and you usually are required to pay for the coverage yourself. The employer-paid plans are the long-term disability benefits your employer automatically enrolls you in when you start your employment.

One of our valued clients had just gotten an Ameritas offer for his own individual private policy. Before placing his policy inforce, the client learned that Unum offers a supplemental individual long-term disability insurance plan through the employer. The Unum plan had the same disability benefit but for lower the cost. After going through the entire process with Ameritas to get an offer, this client was considering moving forward with Unum instead.

It is our responsibility and duty to fully analyze the Unum offer, so we prepared an analysis comparing Ameritas vs Unum. This is what we came up with:

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Best Course of Action

The Unum plan’s monthly premium was approximately $259.58 for $7,500 monthly benefit. Ameritas has approved the client for a $6,000 benefit for a monthly premium of $378.12. Considering the income, the maximum amount of monthly coverage the client could have with individual plans is $7,500, therefore, both plans could not be taken if it exceeds that amount. Considering this information and the benefits described above, the client finalized his plan to continue with Ameritas for $6,000 monthly benefit and to take the Unum plan for $1,500.

This outcome would insure the client’s income under multiple LTD plans. Group plans can be great options to supplement on top of your individual coverage as they could be more cost effective but the individual private plans you could obtain will have better benefits and easier ways of qualifying for coverage.

We highly do not recommend relying solely on your group coverage but it is important to have an individual plan that will follow you for the rest of your career if you decide to start your own practice or change to an employer with no coverage at all.

What Will Happen If I Only Have Group Coverage & They Deny My Claim?

Group policies are issued under ERISA Law. Adjudication of a claim under ERISA Law falls under federal guidelines. The way it’s designed is if an insurer denies a claim, your only recourse is to hire an attorney and file a lawsuit in federal courts where you are allowed only a summary presentation. The plaintiff cannot be present, there is no jury trial and the judge issues a summary judgement. Best case scenario, if the judge rules in favor, you will only be entitled to get what the insurance company should have paid to begin with. You cannot claim any damages or attorney fees. These private plans are Non-ERISA, meaning you are protected by the state. The policy is Non-Cancelable and Guaranteed Renewable and the insurance company cannot deny you for a claim unless it’s fraudulent or frivolous.

It will be a financial burden to depend on group coverage only to get denied for coverage at a later date when you cannot perform in your specialty. Disability Insurance is one of the most important safety nets to protect your income in case you cannot perform in the field that you trained so hard in. It is extremely important for physicians to consider individual long-term plans to make sure they are protected from disability.