The Physician's Edition: Ethan & Amber discuss COLA and FIO Riders

In this episode, my guest Ethan Abramowitz and I discuss Own Occupation Disability Income Insurance Contracts again. 

**This time, we have a larger focus on the COLA rider = Cost of Living Adjustment Rider as well as the Future Purchase Options.**

COLA riders would allow for your monthly benefits to keep up with inflation if you were on a total disability claim.

Future Increase Options have a  cost associated with buying the rider.
-These are available annually.
-Not every carrier offers this type of rider.

Future Purchase Options may also be called:
-Benefit Updates
-Benefit Increase Riders
-Benefit Purchase Riders

These are typically every third year and have no costs associated.

It is great to get insight from an attorney's perspective! If you have a question for Ethan, you can reach him here:

Website: SeltzerLegal.com
Email: EAbramowitz@seltzerlegal.com
Phone: 215-735-4222

Articles for reference: 

https://www.seltzerlegal.com/blog/healthcare-professionals-mental-nervous-long-term-disability-claims-jumped-in-2020/

https://www.seltzerlegal.com/blog/how-erisa-may-affect-your-long-term-disability-benefits/

https://www.seltzerlegal.com/blog/physician-burnout-factors-and-consequences/

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Transcript

NOTE: This podcast was transcribed by a free AI transcription tool called Otter. Please forgive any typos or errors.

Amber

Hello, and Welcome to the Amber Stitt Show. In another episode of the Physician's Edition, I am your host, Amber Stitt, and today we welcome back Ethan Abramowitz, an associate at Seltzer and Associates.

We are so excited to have him here to discuss very important topics, such as by having disability insurance is so important and we will cover the legal aspects of Own Occupation contracts and whether or not to have the COLA rider but before we dive in, I thought if you have it that he said already in the first episode, let's talk about his back up just a little bit here to kick things off.

Bio on Ethan:

So Ethan started his practice working as an insurance defense attorney working with some of the nation's largest insurance companies down in Florida. And he worked hand in hand with claims departments handling disputes, and investigations and then transitioned about a decade ago to help highly skilled professionals representing primarily physicians and dentists with individual disability claims.

Ethan, I appreciate you being here to help our audience, bringing some clarity to the topic of cola writers, those cost of living adjustment writers, and whether or not we need these 100 disability insurance contracts. I really appreciate you being here again, Ethan. Let's dive in!

Well, that'd be a good thing to talk about today just to get people your perspective on whether or not we need that COLA rider.

Ethan
It's one of the most important riders in a policy aside from the Own Occupation rider or total occupation.

So the first thing you look at is protecting your Own Specialty. Right, if you become disabled, whether it's total or partial, then that's your disability. That is gonna say that you're totally disabled. Some COLAs are dependent on a certain percentage dictated by the contract the other definitions are based on the CPI index maxed out at a certain percentage.

What was nice about the COLA rider as time passes, your benefit grows. And I've read a number of clients right now who have seen their benefit increase significant declines, but I'll claim since 2012, we started out with a $15,000 loan.

This is called its compound, meaning that it takes the $30,000 month back in year one. After the first year, the writer kicks in and the increase occurs and then that increased baseball supplement 1000 to $60,000.

Unknown 4:17
The next call increases based on the $60,000 and then 70 in shape, so that won't harm it started off with a $50,000 mark. It's now north of $21,000 a month over a 10 year period. So you see when it climbs the avenues riders that first step on the ladder significantly increase the market basket. Even clients that are all climbing for short periods of time, typically

Unknown 4:50
about your clients that are just starting out, or the boys Yes. And typically we see clients in the 50s and 60s but we're seeing and I've worked with a number of clients or employees and they're going to ask especially if they have a tool and I'm finding the color palette. That is the genre that nature has now that's going to keep them out each year left if it's going to grow. And as we're running inflation right now these are unprecedented times.

Unknown 5:23
But if you had a 510 $1,000 a month benefit today, today's money is less valuable than it was a year ago.

Unknown 5:34
It's not going to go as far as you thought it was but when you're analyzing what your financial plan would be, and how to structure and budget and it provides a great deal of flexibility and an added layer of financial security. And I know you can speak to this better than I can but I'm sure one of the things you see is is it worth X amount more for it.

Unknown 6:04
And

Unknown 6:08
I'm sure that's about the conversation.

Unknown 6:12
And I think with any writer, any writer The question is, how many months of benefits to me not that question.

Unknown 6:24
So, you're talking about a total disability rider.

Unknown 6:36
That's, that's going on.

Unknown 6:40
Right? Yeah.

Unknown 6:42
Yeah, some of these things we can build into the budget. You're saying in my mind is one less dinner a month? That can certainly be helpful.

Unknown 6:51
You were talking about the CPI index. So some of these polar writers, there are 3% fixed compounding and then some are floating from zero to three. Some carriers have simple interest on one version, and then they'll do a compounding on a kind of a higher floating version of zero to 6%. It could probably change that five years, there's gonna be some enhancements or more differences but typically you want to try to go if you're going to pay for it for compounding version, because that'll grow quicker, faster and prosper. In my experience with clients, I've worked with I've seen significant increases the base back was sought out versus what they're looking at now. And it triggers within a year.

Unknown 7:38
So yeah, so I know though some carriers do not kick in their cola unless you're fully disabled. Have you seen both play out and click Claim dice?

Unknown 7:51
Again, everything in this world is contrast.

Unknown 7:54
So I learned I was one that person elected when I signed up to get recovered. So if someone does have a cola, increase taxes keep apart from disability claim that sometimes we come to a convoluted topic when you don't show up how the partial disability claims work. But there's two components on disability claim. One is the indexing on the pre disability monthly gains which is the calculations to quantify the loss of earnings was able to calculate the cost of living increases. So what you can have a situation where, again, I'm a simple math person and if you've heard this conversation on $40,000 A year pre disability, their pre disability model

Unknown 8:49
that's the litmus test for loss.

Unknown 8:53
What percentage loss do they have based on the current model compared to ours? What's the index in this as time passes and of course is still working.

Unknown 9:04
Indexing will increase that 10,000 proportionately as defined.

Unknown 9:09
What that also does about a cola and a residual disability provision applies to COVID. Increases is that they still are

Unknown 9:26
increases by 3% a year.

Unknown 9:29
Even with the loss of earnings remains the same or residual disability backup will still increase from 2% a year. As long as that loss remains the same. The loss goes down, goes up even more the loss of revenues decreases the benefit shifts, but that cost adjustment riders still will protect and grow the partial disability claim and the other thing that's nice with some of those kinds as well, is that the as we've talked about previously, it started off as a partial disability kind of event transitions are totally if they have the cola adjustment, right.

Unknown 10:08
And it affects that it attaches to residual disability rider.

Unknown 10:12
Then when they do eventually turn transition to total disability, the maximum benefit has already increased. So someone's been out disabled for three years. It hasn't gotten two years because there's your period before the cost of a radical two years of increases when it becomes home.

Unknown 10:32
So it's very

Unknown 10:36
it's a very valuable add on when analyzing data out there. And again, I don't like to add $200 A year is not but when we look at the fact that in essence that cola rider to potentially pay for itself, if not disability for a year and five loss kicks into your end but like I said, I've got a client, multiple clients 1000s of dollars and otherwise they understand our clients. A lot of the clients that walk into my office, the first thing they say is well my based on my cost of living right you know your policy.

Unknown 11:28
Let's talk about that because we don't always sell Scotland and sometimes people will forego the cola just to afford the basic coverage. So it's tough because if they're starting out like we've talked about before in a previous episode, if they're younger, they're buying this. A lot of times being younger can help that call the cost. Sit on the contract is less expensive. Females are a different story because their costs are higher.

Unknown 11:58
I would say I would say often to people it's better to buy something without cola than just nothing at all. Or potentially and I know that sounds nuts based upon everything you just said, but maybe take a higher base benefit and forego the add on versus going lower just to have cola.

Unknown 12:18
What do you think about that? If we're going to do something, get a plan. A cola would be obviously a good idea, all depending upon the person's scenario, but is it wild to think that we might recommend to go without it given what do you think about that? First thing that people need to consider is true own occupation, or disability policy.

Unknown 12:47
A true rider is preferred.

Unknown 12:54
When you're talking about whether it's money, there are trade offs and you do what you can afford to do will make sense to you. Now

Unknown 13:09
first things first is someone who get a policy right now that makes up financial means that they can also maybe set the benefit a little lower and have a policy of future increase options. That allows them to increase the monthly benefit and the premiums will go up accordingly. That also has the cold right.

Unknown 13:30
The other would be yes. And for those who qualify and get the policy that makes sense to you right now. We're maxing that policy out with a police officer. They can then circle back to you and supplement it with another policy. So they have to do a lot of multiple disability policies. So they're there are a lot of roads you can go down to make sure that if you don't have this policy, do supplement in the subsequent policy that you get because your incomes gonna

Unknown 14:04
change per year years old, New York 20 30,000 on policies as well policy as late 90s, early 2000s colonies really cut back the enrollment limits to 10,000. We've seen my view on this, that companies are opening that up a little bit more so you can get a policy right now

Unknown 14:29
that you have an increase on the stack on another 10 or 15,000.

Unknown 14:40
But I executed the FiOS as my baby and it's a great thing dad in your back pocket. So they're raising structural size number 30. The focus should be on true or not true visibility. And then call it and then the

Unknown 15:02
the FAA Oh, so usually when I teach this to clients, I'll say First you have the true on occupation that your foundation. We talked about how that works. And then part two would be that residual, right or for the income loss and we talked about the components of that. And that's usually pretty tricky. There's a couple moving parts with recovery as well as the return to work being your full time that your incomes not restored. There's a couple of different levers we can pull now with different carriers to turn things on and off. So it's really teaching what's out there with own occupation plans with the residual writer. And then there's the future purchase options is the third part in my when I teach this because some are available annually. Some are every three years with some rules, and there's no right or wrong answers just what works and what's the price point and what state are we in and what do we do and then for me, I'll go like that fourth component would be the call writer and then catastrophic, but the fundamentals of the three are, you know, the true own occupation definition residual and how does that that increase option work and as we're, we're live July 2022. Almost all carriers are going up to that 30,000 option with some other rules for the group insurance and income levels and depends on the specialty there's other variables but yeah, they're, they're really picking back up. I know that although 30,000 is available with the plans that charge for the FIA, yo I work hard to talk with people about their specialty and the type of compensation model they'll have because we only want to buy what we will qualify for based upon it. If we're buying a rider that cost money, because we don't tend to just say yes everyone go buy 30,000 Because there's income guidelines and someone might not want to buy all of that. But we talked about that in our analysis just to be sure people understand and they're structuring this correctly. So increase office vehicle. When you get your policy, your initial policy.

Unknown 17:07
So let's say for your for your record,

Unknown 17:15
purchase one of these products you're getting How is this 56,000 but the companies understand that in five years, you're going to make multiples.

Unknown 17:27
And it allows you to lock in a coverage right now.

Unknown 17:33
And then as your income grows, you're no longer subject to medical underwriting.

Unknown 17:40
The only thing that matters moving forward is Dahshur Cognito substantiate that increasing the policy that she bought today. That's $5,000 a month, next five years

Unknown 18:00
is 50,000.

Unknown 18:02
You can have it out there too.

Unknown 18:06
Even if you saw so we have additional medical issues that arise when purchasing and when we exercise that options are possible.

Unknown 18:23
Exercising, short lived climbing or something on a shoulder surgery, or procedure document keeps you out of work from six months to a year. When you go back and you come up clean you're now eligible to exercise and again, so isn't always optional, versus getting a $5,000 policy.

Unknown 18:45
Suddenly your income quadruples in two years and you want to get a another policy not electromedical Guyana

Unknown 18:59
think that's a reason to have some of us

Unknown 19:05
as we're always encouraging people to start as young as they can to really consider this and and females have a few other things to consider when it comes to family planning and other other other possible issues that can cause exclusions for us. So that's why trying to get this all done before any that medical history is presented can help us have that nice FBO option there for you don't have to worry about those life changes as we grow up and go through our careers. So, Ethan, thanks for being on the amber Stitt show again for another episode. And we really appreciate your expertise and spending some time with us today in your busy schedule. We always love talking about cola and the future increase options so thanks for making it easy and bringing some clarity to those components of the contracts. For our listeners, thanks for being here today. And we'll see you next time.

Unknown 19:59
Thank you for joining us on today's episode of the amber Stitt show physicians edition. For more information about this podcast books, articles and more, please visit me at Amber stitt.com. For more information about physician insurance contracts, please listen to the entire physician edition podcast series or visit us at MD disability quotes.com Thank you for listening.
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