Scott and I touch on the differences between FIO and the FPOs on Disabilty Insurance Contracts.
Generally speaking, you have these types:
FIO = ones you can buy, if you qualify for them.
FPO = ones you don't buy, if you qualify for them.
There are some similarities and a lot of differences. This episode should be able to help you out. Let us know if you would like some help to determine what you have in place!
Scott and Amber 0:00
Today we're going to talk a little bit differences between the Future Purchase option and Benefit Update features.
Contracts that offer a free increase right or they do have some strings attached you have to be mindful of the different requirements that are mandatory as part of the contract. So typically a future purchase option that is free is only offered once every three years. And in addition, you have to go through that checkpoint with the carrier and if you don't meet if you don't participate in the checkpoint, check-in and do the anniversary requirements, you can actually have your Benefits Increase Rider or benefit update writer or otherwise known as a purchase writer, that can be forfeited. So you really need to be mindful of every three years what your steps are, and what you have to do to keep that satisfied as far as the carrier's guidelines.
Yeah, that's true on or you refer to the like this. When you buy an option, you control it, whatever. So be sure that your address is always updated so that you get mailed and they're gonna send to you make sure your email and phone number with your representation as they when they get notices that they're able to get with you. But some BPR says they've got a couple of little extra features on that I do I can I always like to make mention so that we don't miss opportunities or obligations as one might have. But they are simple things. You move from one job to another where you lose group insurance. That's an accelerator that allows you not to have to wait for three years. If you have a large income increase. Some contracts have a 20% of greater income increase the trigger on others at 50. Others yet have not enough. So yeah, it's important to really pay attention to what you're getting. Because once again, free is free, but free doesn't really necessarily mean you control everything and significant careful.
One other thing to think about when you're looking at a Purchase Option that's free. This is on the contract for free. When you get to the point that you're actually eligible to buy more coverage, you have two choices they give the insurance company or the advisor should help you run some of these calculations, the amount that they propose that you're eligible for if you don't want to take that increment, you must be at 50% of that maximum amount that they propose to you. And if you feel like buying something in the middle, you technically can but then you're going to forfeit your purchase writer for future use.
Because a typical number is you have to have to maintain 75% of the eligible benefit. Some years we'll get up to 50. So it just depends. Once again, it's a matter of trying to explain to your representation. What is it you think going to happen economically? And tailoring the contract is gonna fit your growth model along with your bottom line. We're big fans of Biogen optionally you might want But be careful, because sometimes those options may or may not fit. And the more foresight you've got into what you're trying to get accomplished. Sir, any representation represented the best option to tailor it really can be built for you.
There's no right or wrong it's really just what works for you and looking at the price per dollar and what your needs are. Would you agree with that? Yeah, certainly the airflow process where you're buying pooled assets to be utilized in the future based upon you know, financial justification. You get to control it, you know, you might be eligible for $15,000 a month and you might say, I'm not interested in that, you know, I want six. That's my absolute ability to do that.
With FIO, there are no mandatory requirements. So that's another thing that might be nice for some of you. So that's another thing to consider as part of that flexibility that comes with the FIO. But there is a cost associated with that.
Where do not have any obligations, sometimes we find the highest push that opportunity off and sometimes they end up with a claim, and now they're potentially underinsured. So even though you may not have to do anything, you may not be compelled or contract. You probably still want to have a very quick review to understand what are your needs, and whether those are policy satisfy those needs for the client's work to happen.
So although there's no mandatory requirement, we recommend you evaluate that on an annual basis and just check in. The important thing to know is what the Free Purchase Riders that you have to follow some steps depending upon certain years. You want to keep track of that.
Let us know if you would like some help to determine what you have in place!
Transcribed by https://otter.ai
Thank you again for joining me, Amber Stitt, in this episode of The Physician's Edition. I’ll see you next time, podcasters!