One of the hottest topics of the current U.S. disability insurance industry is guaranteed-issue (GSI – guaranteed standard issue) coverage. GSI products are quite popular and are expanding in scope. Even though the benefits platforms take time and diligent effort to achieve corporate approval and efficient administration from a human resources standpoint, they offer substantial group discounts, and they provide income protection without the hassle of intrusive medical exams and blood/urine draws, saving a board of executive directors and their employees time, money, logistical headaches and unnecessary breaches of privacy.
From an agency and advisor point of view, GSI programs do require hard work and good connections, but they are pure gold. Commissions, especially in the high-limit market, can be enormous and long lasting.
Many group carriers are now providing low-limit guaranteed-issue disability income protection policies as supplements to existing group LTD plans. The Surplus Lines market is also heavily marketing high-limit excess GSI coverage to accounting firms, C-Suite executives, physician groups and law firms.
The personal income protection GSI market is all abuzz and is just beginning to be exploited, but the business GSI market remains relatively unsaturated. Have you ever come across a guaranteed-issue key person DI plan? What about guaranteed-issue BOE coverage? Ever heard of GSI buy/sell or severance insurance? While extremely uncommon and with limited scope in the traditional disability market, these programs do exist in the secondary DI markets like Lloyd’s of London. High-limit, robust benefit structures make for unique and exciting corporate solutions.
Encompassing the same incredible attributes and large multi-life premium discounts of more familiar guaranteed-issue group personal DI products, business insurance plans are great sales tools and door openers when approaching large to small companies with multiple proprietors or with a number of key personnel. Business GSI benefits aren’t readily known to anyone outside the specialty DI world which makes them new and exciting. And it doesn’t hurt that these benefits platforms can be true saviors to companies affected by the unforeseen and premature disablement of employees and employers.
Here are some examples and ideas for business uses of disability coverage on a GSI chassis:
Key Person
A pharmaceutical company employs 33 regional sales reps who are experts in business development and maintaining client relationships. A loss of any one of them would certainly cause, at the very least, short-term fiscal concern for the company. A properly deployed Key Person GSI plan would be able to financially indemnify such a loss of any one or more strategic personnel.
Business Overhead Expense
A medical practice management firm oversees 16 separate physician groups under a shared corporate structure. Maintaining the usually large monthly overhead of any one of the individual practices, should one of the physicians become disabled, would be a collective financial hardship. A BOE GSI plan would be the best solution in covering the monthly expenses of all participating practices over and above their individual policies.
Buy/Sell
A law firm of 127 attorneys, many of whom are included in a stock option program, provides an average of 7% ownership of the company to each equity partner. An appropriately devised Buy/Sell GSI plan would fund a buy/sell agreement to cover each of the stake holders on a guaranteed-issue basis.
Severance
A property insurance company was acquired by a foreign conglomerate. The acquisition brought about some corporate restructuring that culminated in the layoff of seven department heads. Each severed executive was provided with an agreement promising the continuation of long-term disability insurance. A Severance
GSI plan would be the most efficient and economical method of providing disability benefits to recently severed employees.
The GSI benefits platform has also proven to be very useful with regards to buy-in funding, contract guarantees, loan indemnification and salary continuation funding. The Lloyd’s market has the rare ability to financially protect a business, virtually no matter the size, on a multi-life chassis with a guaranteed issuance of high-limit disability insurance.
Joseph Russo is an Underwriter and Account Executive at Petersen International Underwriters. With over 15 years in the financial services industry, Russo is a “specialty market” life and disability insurance expert. He is also the Editor-In-Chief of Petersen International’s weekly publication The Communicator. Russo can be reached at Petersen International Underwriters, 23929 Valencia Boulevard, 2nd Floor, Valencia, CA 91355. Telephone: 800-345-8816. Email: joe@piu.org.
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For roughly the last dozen years, MetLife has been an integral part of our operation. We are wholesalers in disability insurance. We only do one thing, and we do it very well. At DIBroker East-Eskra & Associates, we add value by providing access to nine or so insurance carriers (the number changes a bit depending upon the year—Pan American also exited the market a few years back and we do very little business with Guardian at this point), by providing expertise in case design and approaches to selling, and by providing consistent top quality service. We make it as easy as possible to complete what can be a complicated sale. We focus on the professional, the small business, and the executive markets, but provide products for all walks of life and all circumstances related to disability insurance.
Recently a good producer by the name of Brock Jolly came to me for help with a group of Podiatrists he works with. Brock’s primary company is Mass Mutual, but Brock shops every case for his clients to find the best fit. His clients all had personal disability insurance and were now looking to insure their business. More specifically, they wanted to fund the buy-sell agreement their attorney had recently drafted for them.
