Shortcomings of life / disability insurance plans from professional associations

Various professional associations offer quite cheap health and life insurance for their members. However, especially if you are in good health, have good family health history, and do not have risky pastimes, it is worthwhile to check out the prices of available individual policies also, before deciding for the association plan. It’s not a matter of course that you will always find the premium lower for an association plan than that of an individual coverage.

Even more important than the possible price differences are certain quality features. In this regard, association plans have definite disadvantages. Below you can see several points of comparison, collected from association disability plans for accountants, doctors, lawyers, veterinarians, engineers, dentists, chiropractors, and optometrists. Because of this method of collecting, one would not find all the disadvantages enlisted below in any of the particular plans; but you can find the majority of them in each. Check it out yourself, and make informed decision of your liking!

Even if you reject the idea of obtaining an association group plan, you might take advantage of association membership. For accountants, e.g., one can find an individual D.I. policy where a 15% discount is provided as long as you maintain membership in the association.

At the end of the page, you can find a summary of the most important factors to consider when shopping for a disability policy.

TYPICAL ASSOCIATION PLANS

INDIVIDUALLY OWNED POLICIES

The premiums are not level, nor guaranteed, to age 65.

Individual plans offer affordable, level and yearly renewable term premiums which are guaranteed to age 65.

The plan may be changed by either the association or the underwriting insurance company in the future.

Individual plans are non-cancelable, and guaranteed renewable for the life of the contract.

Coverage is portable providing the insured maintains membership in the association.

Individual plans offer portability without having to satisfy any association membership requirements.

In some policies, benefit will be paid only if you are 'gainfully employed' when the disability occurs.

Individual plans provide coverage regardless of whether or not you are gainfully employed at the time of disability.

The plan is not renewable for lifetime if you should choose to work beyond age 70.

Individual plans offer renewability for life

Some plans are not indexed, therefore your monthly benefit will not keep pace with inflation.

Individual plans do offer benefit indexation.

The definition of disability does not allow you to receive full benefits if you are totally disabled and choose to work in another occupation.

Individual plans offer "own occupation" protection that allows you to collect full benefits above and beyond earnings from another occupation.

Even if there is an 'own occupation' coverage, you will get benefit only for 3 years, should you decide to work outside your original field.

Individual plans offer 'own occupation' definition of disability for the entire benefit period.

The benefit amount is limited and would rarely protect your full personal income.

Individual plans offer higher, or unlimited monthly benefit, based on total earnings and occupational category.

Premiums are refunded only after 180 days of disability.

Individual plans offer a premium refund after 90 days or the elimination period, whichever is less.

In some cases, you do not have a choice regarding the length of the elimination period, that is the initial period after which payment of the monthly benefit commences.

You can decide whether you want a 30, 60, 90, 120, 180, 365, or 730 day elimination period, and pay the premium accordingly.

Your benefit may be reduced by a relationship of earnings to insurance at the time of claim.

Individual plans do not have this limitation.

The days of disability must be consecutive, or the days must be accumulated within quite short a time period, in order to satisfy the elimination period.

Individual plans offer accumulation of days over an unlimited period, provided the periods of disability are separated by less than 365 days.

Guaranteed future indemnity increases, that would allow for future income growth regardless of insurability, are either not available, or are limited, regarding amount and/or age.

Individual plans offer the ability to purchase additional monthly increases, up to 100% of your purchase amount, in addition to the monthly indemnity, available to age 55.

Increases in benefit amount paid during a disability will not be made available as coverage once the disability ends.

Individual plans allow for coverage increases equal to indexation increases following a disability.

Sometimes a guaranteed insurability option cannot be exercised and paid during a disability.

Individual plans allow you to exercise, and receive benefits, from an insurability option while you are on claim.

There is no indemnity payable over a recovery period immediately following a disability, or if there is such benefit, it is linked to participation in an approved rehabilitation program.

Individual plans offer continuous benefits after a disability and a loss of income of 20% or more.

Previous income determination for residual benefits will only take into account earned income immediately preceding
disability.

Individual plans allow an average of the best two consecutive years of the past five or the best 6 consecutive months of the past 24 to be used in prior income determination.

Residual benefits are sometime limited to 50% of indemnity after a certain age.

Individual plans offer the full percentage loss.

There is no lump sum benefit payable to your beneficiary if you were to die while on claim.

Individual plans pay up to three times the monthly benefit to your beneficiary in the event of your death while on claim.

There is no benefit payable beyond a certain age (65 or 71, e.g.) in the event of a disability due to sickness.

Individual plans offer benefits that are payable for lifetime in the event of a disability due to sickness.

Sometimes there is benefit payable beyond age 65 in the event of a disability due to an accident; but for this the accident has to cause total disability within 60 days of the accident.

Individual plans offer benefits that are payable for lifetime in the event of a total disability due to an accident, regardless of relation between the date of injury and the onset of disability.

Benefits will not be payable for disabilities resulting from "psycho neurotic and behavioral disorders" as they are specifically excluded from the contract.

Individual plans offer coverage for all types of mental and nervous disorders for the entire benefit period.

Pension contributions will not continue, or are quite limited, when you become
disabled.

Individual plans offer up to $1,250 monthly, in addition to your basic benefit, designed to allow for continuing retirement contributions.

To qualify for part-time work benefits you must show a loss of time or duties and have a loss of income of 20% or more. If you are working 48 hours per week, you are not eligible for residual benefits.

Most individual plans do not require a loss of time and duties to collect residual benefits.

With some policies, you can get partial benefits only if you have had a period of total disability first.

Individual plans do not require a period of total disability to qualify for benefits.

Partial benefits are payable at 50% of the monthly indemnity up to three months.

Individual plans offer 50% of the monthly benefit for the first six months.

Even if there might be a professional overhead expense rider in an association plan, it has a short (12-18 month) benefit period and a limit of $4,000/month, and it does not allow unused expenses to be carried forward or paid beyond the maximum benefit period.

Individual plans offer longer (24 month) benefit period, up to $20,000/month limit, and the provisions for both the carry over of unused expenses and payments beyond the maximum benefit period.

Coverage is not available to repay outstanding principal and interest for deductible partnership loans.

Individual plans offer complete coverage of loans associated with the operation of a business.

PURCHASING DISABILITY INCOME INSURANCE

Here are some of the benefits associated with owning an individual policy.

PEACE OF MIND.

COMPLETE PORTABILITY. Having the ability to take your coverage with you in today's transitional climate is a definite asset, especially if you become uninsurable.

AFFORDABLE GUARANTEED LEVEL PREMIUMS. With a level premium contract your insurance costs are locked in to age 65.

GUARANTEED NON-CANCELABLE CONTRACT. Many plans reserve the right to modify and/or cancel coverage at any time, whereas with a guaranteed non-cancelable contract, you are in complete control of the future of your coverage.

ANNUAL GUARANTEED FUTURE COVERAGE OPTIONS. You have the right, on an annual basis, to increase your level of coverage as your income grows regardless of insurability.

GUARANTEED INDEXATION OF BENEFITS. Once you need to use your policy, we guarantee that the plan will be indexed in order to keep up with inflation.

GUARANTEED PENSION PROTECTION. After basic coverage looks after today's expenses, there is seldom anything left to contribute towards tomorrow. Pension protection allows for monthly contributions above and beyond the basic monthly disability benefit.

COMPLETE FINANCIAL SECURITY. When it comes to insuring your ability to earn an income, only the best will do...

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These web pages are for information purposes only. The information contained and presented, while based on and obtained from sources we believe to be reliable, is not guaranteed either as to its accuracy or completeness. The content of these web pages is solely the work of the author, Laszlo Kramar.

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Frequently Asked Questions

TYPICAL ASSOCIATION PLANS	INDIVIDUALLY OWNED POLICIES
The premiums are not level, nor guaranteed, to age 65.	Individual plans offer affordable, level and yearly renewable term premiums which are guaranteed to age 65.
The plan may be changed by either the association or the underwriting insurance company in the future.	Individual plans are non-cancelable, and guaranteed renewable for the life of the contract.
Coverage is portable providing the insured maintains membership in the association.	Individual plans offer portability without having to satisfy any association membership requirements.
In some policies, benefit will be paid only if you are 'gainfully employed' when the disability occurs.	Individual plans provide coverage regardless of whether or not you are gainfully employed at the time of disability.
The plan is not renewable for lifetime if you should choose to work beyond age 70.	Individual plans offer renewability for life
Some plans are not indexed, therefore your monthly benefit will not keep pace with inflation.	Individual plans do offer benefit indexation.
The definition of disability does not allow you to receive full benefits if you are totally disabled and choose to work in another occupation.	Individual plans offer "own occupation" protection that allows you to collect full benefits above and beyond earnings from another occupation.
Even if there is an 'own occupation' coverage, you will get benefit only for 3 years, should you decide to work outside your original field.	Individual plans offer 'own occupation' definition of disability for the entire benefit period.
The benefit amount is limited and would rarely protect your full personal income.	Individual plans offer higher, or unlimited monthly benefit, based on total earnings and occupational category.
Premiums are refunded only after 180 days of disability.	Individual plans offer a premium refund after 90 days or the elimination period, whichever is less.
In some cases, you do not have a choice regarding the length of the elimination period, that is the initial period after which payment of the monthly benefit commences.	You can decide whether you want a 30, 60, 90, 120, 180, 365, or 730 day elimination period, and pay the premium accordingly.
Your benefit may be reduced by a relationship of earnings to insurance at the time of claim.	Individual plans do not have this limitation.
The days of disability must be consecutive, or the days must be accumulated within quite short a time period, in order to satisfy the elimination period.	Individual plans offer accumulation of days over an unlimited period, provided the periods of disability are separated by less than 365 days.
Guaranteed future indemnity increases, that would allow for future income growth regardless of insurability, are either not available, or are limited, regarding amount and/or age.	Individual plans offer the ability to purchase additional monthly increases, up to 100% of your purchase amount, in addition to the monthly indemnity, available to age 55.
Increases in benefit amount paid during a disability will not be made available as coverage once the disability ends.	Individual plans allow for coverage increases equal to indexation increases following a disability.
Sometimes a guaranteed insurability option cannot be exercised and paid during a disability.	Individual plans allow you to exercise, and receive benefits, from an insurability option while you are on claim.
There is no indemnity payable over a recovery period immediately following a disability, or if there is such benefit, it is linked to participation in an approved rehabilitation program.	Individual plans offer continuous benefits after a disability and a loss of income of 20% or more.
Previous income determination for residual benefits will only take into account earned income immediately preceding disability.	Individual plans allow an average of the best two consecutive years of the past five or the best 6 consecutive months of the past 24 to be used in prior income determination.
Residual benefits are sometime limited to 50% of indemnity after a certain age.	Individual plans offer the full percentage loss.
There is no lump sum benefit payable to your beneficiary if you were to die while on claim.	Individual plans pay up to three times the monthly benefit to your beneficiary in the event of your death while on claim.
There is no benefit payable beyond a certain age (65 or 71, e.g.) in the event of a disability due to sickness.	Individual plans offer benefits that are payable for lifetime in the event of a disability due to sickness.
Sometimes there is benefit payable beyond age 65 in the event of a disability due to an accident; but for this the accident has to cause total disability within 60 days of the accident.	Individual plans offer benefits that are payable for lifetime in the event of a total disability due to an accident, regardless of relation between the date of injury and the onset of disability.
Benefits will not be payable for disabilities resulting from "psycho neurotic and behavioral disorders" as they are specifically excluded from the contract.	Individual plans offer coverage for all types of mental and nervous disorders for the entire benefit period.
Pension contributions will not continue, or are quite limited, when you become disabled.	Individual plans offer up to $1,250 monthly, in addition to your basic benefit, designed to allow for continuing retirement contributions.
To qualify for part-time work benefits you must show a loss of time or duties and have a loss of income of 20% or more. If you are working 48 hours per week, you are not eligible for residual benefits.	Most individual plans do not require a loss of time and duties to collect residual benefits.
With some policies, you can get partial benefits only if you have had a period of total disability first.	Individual plans do not require a period of total disability to qualify for benefits.
Partial benefits are payable at 50% of the monthly indemnity up to three months.	Individual plans offer 50% of the monthly benefit for the first six months.
Even if there might be a professional overhead expense rider in an association plan, it has a short (12-18 month) benefit period and a limit of $4,000/month, and it does not allow unused expenses to be carried forward or paid beyond the maximum benefit period.	Individual plans offer longer (24 month) benefit period, up to $20,000/month limit, and the provisions for both the carry over of unused expenses and payments beyond the maximum benefit period.
Coverage is not available to repay outstanding principal and interest for deductible partnership loans.	Individual plans offer complete coverage of loans associated with the operation of a business.