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Session One:

INDIVIDUALDISABILITY INCOME

PROTECTIONPresented by:

Benjamin K. PerezDisability Resource Group, Inc.

800.945.9719www.drgdi.com

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The Three Major Points of Discussion:

1. The Need

2. The Reality

3. The Solution

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The Need

• How long can you survive without an income?

• Where will the money come from?

• How long will that money hold out?

• What will be sacrificed by using that money?

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FoundationINCOME

Disability Insurance

•Personal &

Business Assets

• Business Ownership• Retirement / Investments

Property

Auto & Home

Life Health

What will happen to your Dreams and Prioritieswithout an income?

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Debt

Savings Depleted!

Disability

Normal Income

Normal Expenses

Savings

Healthy

When disability strikes, your financial picture changes

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What is your most important asset?

Income

Retirement

Home

Automobile

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Protect Your Most Valuable Asset

Current Age

$25,000 $35,000 $50,000 $60,000 $100,000 $125,000 $150,000

30 875,000 1,225,000 1,750,000 2,100,000 3,500,000 4,375,000 5,250,000

35 750,000 1,050,000 1,500,000 1,800,000 3,000,000 3,750,000 4,500,000

40 625,000 875,000 1,250,000 1,500,000 2,500,000 3,125,000 3,750,000

45 500,000 700,000 1,000,000 1,200,000 2,000,000 2,500,000 3,000,000

50 375,000 525,000 750,000 900,000 1,500,000 1,875,000 2,250,000

55 250,000 350,000 500,000 600,000 1,000,000 1,250,000 1,500,000

60 125,000 175,000 250,000 300,000 500,000 625,000 750,000

Average Income to Age 65Average Income to Age 65

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Disabled? Me? Never!

No one ever thinks they are going to become “disabled,” which in their minds means:

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The Reality• 30% of all people 35 to 65 will suffer a

disability for at least 90 days and one in seven will be disabled for five years.*

• There is a disability caused by a motor vehicle crash every 30 seconds. **

• One out of every two Mortgage foreclosures is due to a disability.***

* Health Association of America; * Health Association of America; The New York Times, 02.02The New York Times, 02.02

****National Safety Council Accident Facts, 02.02National Safety Council Accident Facts, 02.02

*** National Safety Council Report On Injuries, 01.01*** National Safety Council Report On Injuries, 01.01

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The Good News and Bad News

Good NewsGood News

People are People are living longer.living longer.

Bad NewsBad News

Diseases that used to Diseases that used to cause death are now cause death are now leaving people disabledleaving people disabled..

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Disability On the Rise

70%44% 36% 36%

55%

-73%

-29%-48%

-27% -32%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Death

Disability

Hypertension

Cerebrovascular

DiabetesAll

Four

HeartDiseases

Source: National Center for Health Statistics - 1999

DisabilityDeath

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The Solution

Savings

Expenses

Income

DisabilityIncome

XXDisability

$

$

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COMPLETE PORTFOLIO OF DISABILITY PRODUCTS

AND SERVICES

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COMPLETE DISABILITY PRODUCT PORTFOLIO

• Individual CoverageIndividual Coverage• Business Overhead ExpenseBusiness Overhead Expense• Buy-SellBuy-Sell

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• Residual/Recovery BenefitsResidual/Recovery Benefits

• Retirement CompletionRetirement Completion

• Catastrophic BenefitCatastrophic Benefit

• Return of PremiumReturn of Premium

• To Age 67, 70, Lifetime BenefitsTo Age 67, 70, Lifetime Benefits

COMPLETE DISABILITY PRODUCT PORTFOLIO CONT.

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• Mortgage/Loan Protection Mortgage/Loan Protection

• Long Term Care Purchase OptionsLong Term Care Purchase Options

• Home Based Business Home Based Business

• Newly Self-EmployedNewly Self-Employed

• Government EmployeesGovernment Employees

COMPLETE DISABILITY PRODUCT PORTFOLIO CONT.

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• Impaired RiskImpaired Risk

• High LimitHigh Limit

• Professional Athletes/EntertainersProfessional Athletes/Entertainers

• Blue CollarBlue Collar• Police and Armed ForcesPolice and Armed Forces

COMPLETE DISABILITY PRODUCT

PORTFOLIO CONT.

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• Young Professional Limits Young Professional Limits

• Qualified Sick PayQualified Sick Pay

• Group Supplement / ConversionGroup Supplement / Conversion

• Executive Carve OutExecutive Carve Out

• Key PersonKey Person

COMPLETE DISABILITY PRODUCT PORTFOLIO CONT.

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• Spousal /Multi – Life DiscountSpousal /Multi – Life Discount

• Association ProgramsAssociation Programs

• Work Site Marketing PlansWork Site Marketing Plans

• Simplified UnderwritingSimplified Underwriting

• Guaranteed Standard IssueGuaranteed Standard Issue

COMPLETE DISABILITY PRODUCT PORTFOLIO CONT.

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Defining Disability

What does What does “Totally Disabled”“Totally Disabled” mean ? mean ?

What does “What does “True Own OccupationTrue Own Occupation” mean?” mean?

What does What does “Partially Disabled” “Partially Disabled” meanmean??

What is “Transitional Own Occupation” ?

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Basic Definitions

• Unable to perform the material and substantial duties of your occupation.

• Unable to perform the material and substantial duties of your occupation and not working in any other.

• Unable to perform the material and substantial duties of any occupation based on education, training and experience.

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Cognitively Impaired or Unable To Cognitively Impaired or Unable To Do 2 of 5 “Activities of Daily Living”Do 2 of 5 “Activities of Daily Living”

5A -5A - 2A2A 24 Months24 Months Own Occ &Own Occ & Not EngagedNot Engaged

24 Months 24 Months Own OccOwn Occ5A5A - - BB Reasonable OccupationReasonable Occupation

**N/A to 4A physicians > 50.N/A to 4A physicians > 50.**N/A to 3A medical personnel/dentists > 50.**N/A to 3A medical personnel/dentists > 50.

Various Definitions AvailableVarious Definitions Available Various Definitions AvailableVarious Definitions Available

60 Months Own Occ 60 Months Own Occ & Not Engaged& Not Engaged

5A - 3A5A - 3A Reasonable OccupationReasonable Occupation

6060 MonthsMonths Own OccOwn Occ5A - 3A5A - 3A Reasonable OccupationReasonable Occupation

5A- 4A*5A- 4A* To Age 65 True Own OccTo Age 65 True Own Occ

5A - 3A**5A - 3A** To Age 65 Own Occ & Not EngagedTo Age 65 Own Occ & Not EngagedTransitional Own OccupationTransitional Own Occupation

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Modifiers

• 2 year, 5 year, or To Age 65 True Own Occ Rider

• Transitional Your Occ Rider

• Residual or Extended Partial Riders

• 2 year, 5 year, or To Age 65 Your Occupation Period

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Defining Partial Disability

• The inability to perform some but not all of the material and substantial duties of your occupation.

• The inability to perform the material and substantial duties of your occupation, yet working in another with a 20% loss of income.

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Residual or Partial Riders

– If you return to work in your own, or a new occupation and experience a minimum 20% loss of income due to your disability, or if you return to work on a part-time basis, after a disability, a minimum 20% of your benefit can be paid.

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The Importance of the Residual Rider

• Can change the definition of Disability

• Can provide Recovery Benefits

• Allows you to return to work while still receiving benefits

• Especially important for self-employed and fee-for-service employees.

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Defining the Disability Contract

““Non Cancelable”Non Cancelable”vs.vs.

““Guaranteed Renewable”Guaranteed Renewable”

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Two Types of Contracts

Non Cancelable:

• Premiums are guaranteed level for the life of the contract unless benefits are increased.

• Coverage is never cancelled as long as premiums are paid.

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Two Types of Contracts

Guaranteed Renewable:

• Coverage is never cancelled as long as premiums are paid.

• Company reserves the right to increase premiums should they experience unfavorable claims with entire occupational class in state of issue.

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Issue and Participation Limits

• 60% of Income – Not Necessarily a Rule!

• Max issue up to $15,000 per month

• Max participation to $25,000 per month

• Limits per Occ Class

• $10,000 issue limit for Medical Professions

• Lower limits for certain states

• Taxable vs. Non-Taxable

• High Limit Carriers

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Issue and Participation Limits

$100,000 income = $5,000 non taxable benefit

(60% of income)

$100,000 income = $6,250 taxable benefit

(75% of income)

$100,000 income: $5,000 taxable group benefits

+ $1,950 in non taxable benefit = $6,950 total

(83.5% of income)

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The Underwriting Process

• Life Insurance: General Mortality

• Long Term Care: Ability to Perform the Activities of Dailey Living

• Health Insurance: General Morbidity

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The Three Areas of Disability Underwriting

• Occupation

• Compensation

• Medical Complications(Past, Recent, Current, or Potential)

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Other Underwriting FactorsOther Underwriting Factors

• GenderFemales are 20% more expensive to insure

• AgeSome benefits may be denied due to age

• State of ResidenceAvailability and benefits can vary from state to state

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The Importance of Field UnderwritingThe Importance of Field Underwriting

• Ask about Medical History• Get details of any Medical Complications and

Medications taken• Ask for Height and Weight• Get an exact description of actual duties• Ask for details on how they are compensated• Get as much information as possible before

taking an application.

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Individual/BOE Proposal Request Form • Client Name: M F

• Date of Birth:• Tobacco Use: Y / N • State Lives: Works:• Occupation:• Title:• Duties:• Annual Salary: Bonus: Commissions: Unearned: • SELF-EMPLOYED, OR BUSINESS OWNER? Y / N • NET INCOME: (AFTER EXPENSES) $• WORKS FROM HOME? Y / N # Of Years As Owner? • If less than 1 full Year: Former Position: Former Salary: • C- Corp S-Corp Partnership LLC • # of Full Time Employees:

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COVERAGE IN-FORCE: (check all that apply )

GROUP LTD: • What % of Income Covered:• Benefit Maximum: • Premium Payer: Employer % Employee %• Income Covered: Salary, Overtime, Bonus, Commissions • Waiting Period:• Benefit Period:

INDIVIDUAL DI: • Carrier:• Benefit Amount:• Waiting Period:• Benefit Period:• Taxable Benefits?• Replacing? Y/N

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Page 2

Health Problems (Past 5 yrs.), Taking Medications, Height / Weight?

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Automatic DeclinesAutomatic Declines

• Recent Diagnosis of Depression or Anxiety

• Hepatitis C

• Juvenile Diabetes

• Most cases of Rheumatoid Arthritis

• Obesity

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Medications to watch for:

• Prozac, Zoloft, Welbutrin, Paxil, Celexa• Interferon• Coumadin • Neurontin• Methotrexate or Rheumatrex

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Disability Income Protection

• The Need, the Reality, the Solution

• Full Portfolio of Disability Products

• Two Types of Contracts

• Various Definitions Available

• Issue and Participation Limits

• Occupation, Compensation, and Medical Complications

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Benjamin K. Perez800.945.9719 Ext. 303

bkp@drgdi.com