Going Long, Staying Covered

Surveys have shown that many people either plan to delay retirement or aren't planning on ever retiring. Gallup reported at the end of last year that not only has the expected retirement age increased to 66 from age 60 in the mid-1990s, but 49% of boomers say they're either going to retire past the age of 66 or just forget about retiring altogether.

While some fear they may not be able to afford to retire, others stay because they love their work. Still others are determined to make a difference. Whatever the reason, the end result is the same—older workers are hanging in there.

If your clients are among them—even if they aren't continuing to work out of financial necessity—you may have some concerns about whether they are able to obtain disability insurance. Normally coverage terminates at age 65 or at the individual's retirement age for Social Security eligibility.

That's no longer necessarily the case, thanks to products such as MassMutual's MaxElect13 individual disability income policy. Launched in January, the product includes an increased maximum issue age to 80 and decreased rates for workers between ages 65 and 75. It also provides the opportunity for employers to offer coverage to key employees who, under a regular disability policy, might find that not all their income is covered, such as bonuses or commissions.

According to the company, while a few of its competitors—Guardian, Metropolitan and Unum-Provident among them—issue policies to insureds as old as 70, MassMutual is the only company that issues coverage to people up to 80.

Kevin Sheridan, vice president for worksite product management at MassMutual, said that while the new policy works for employees under 65, the new features really play out for the older worker. Sheridan said, "Effectively, under 65, MassMutual does not have the right to cancel unless someone doesn't pay the premium. After 65, it's conditionally renewable, [and the condition is] simple—you need to be working and not disabled."

Not only is coverage available for variable income, employees can increase their coverage as their incomes rise without having to go through a separate application process. "Generally speaking, [we're] looking at executives: people earning in excess of $75,000 per year," Sheridan said.

The new policy offers a larger discount for employer-paid coverage and is available on a guaranteed standard issue basis. Also, the policy is individually owned and portable, according to MassMutual; "you can take [the] policy with you when you leave an employer." You will, however, need to change the premium billing if it's automatically deducted.

For a claim to be paid, Sheridan said the policyholder either has to stop working or have a 15% income loss as a result of disability. "The nice thing here is that if you elect this extended partial disability rider that triggers that 15% disability loss, you don't have to be completely disabled to collect. If you're a salesman and work half time, you could qualify for a partial benefit," Sheridan said.

Among the administrative features of the new policy, he said, "the biggest is a pretty seamless annual increase process, where an application is no longer required. Under the old contract, […] you had to fill out an application each year. With the new contract, the employer can select the method, but can set it up so that coverage automatically keeps pace with increases [in income] or choose a sign-and-return" option that allows coverage to automatically increase.

Potential disqualifications include failure to have been actively at work at your own occupation for the 90 days prior to applying. "If you've been ill and out of work, we'll look at the individual circumstances. It's the same test regardless of age, whether on the application or the claim side. Age is immaterial in the decision-making process," Sheridan said. There are, of course, certain events that aren't covered on the benefits side, such as self-inflicted injuries.

Coverage can be paid for by the employer or employee. If the employer pays for it, there's a 10% discount on the cost of coverage. Also, as with many policies, coverage costs are lower when the policy is purchased at a younger age. Premiums vary based on occupation, amount of coverage and other factors.

—Read more on ThinkAdvisor.

Going Long, Staying Covered

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