Extra Disability Benefits Help Boomers Fill Gaps

Some disability insurance experts are skeptical about the idea of marketing special disability benefits at a time when most boomers lack adequate disability benefits of any kind.

"As you add bells and whistles to a product, you simply make it more confusing and difficult to underwrite," says Robert McDonald, president of CTW Consulting L.L.C., Minneapolis, and chairman of Allianz Life Insurance Company of America, Minneapolis. "We need to keep it basic and fundamental."

Down in the trenches, "theres been less interest in the exotic forms of benefits," says Brian Ashe, president of Brian Ashe & Associates Ltd., Lisle, Ill., who served as 2000 president of the Million Dollar Round Table.

But John Newell, manager of disability income training at Berkshire Life Insurance Company of America, Pittsfield, Mass., a unit of Guardian, says the relatively low-risk nature of a benefit such as a 401(k) plan contribution replacement benefit should make the benefit a success.

Berkshire introduced its Retirement Protection Plus program in January. The program uses ordinary disability insurance to replace up to $40,000 per year in employee and employer retirement plan contributions, on top of Berkshire Lifes usual issue limits.

The Berkshire Life benefits go into a special trust rather than the original 401(k) plan. The trust offers claimants many investment options, Newell says.

So far, the program is too new for Guardian to know what the claims experience really will be. But the retirement income replacement trusts will start paying benefits only when claimants turn 65 or die.

"That in itself avoids anti-selection," Newell says.

The boomers who use the program tend to be more mature than the average boomer who buys disability insurance, and the producers who sell the program tend to be more comfortable than the average producer with discussions about concepts such as trusts, Newell says.

"This is a second sale, not a first sale," Newell says.

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 19, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.