Looking for an easy path to a multi-life account? Guaranteed Standard Issue (GSI)

disability insurance is just the ticket. Designed for the multi-life market, GSI plans

offer a guaranteed issue product and help replace income not covered by group

long-term disability (LTD) plans. While these plans are attractive to employees

of all income levels, executives and other highly-compensated employees often

benefit most.

Guaranteed Standard Issue Disability Insurance:

A Sure Path to Easier Multi-Life Sales

All parties benefit from guaranteed issue disability insuranceThe guaranteed feature usually means no or limited exclusions for pre-existing conditions. Even employees diagnosed with diabetes, heart disease, cancer, or other conditions that would typically be excluded as a covered condition is guaranteed coverage with no exclusions. GSI means no medical exams, blood work, or inspection reports. Unlike group long-term disability (LTD), policies are owned by the insured, not the employer; portable and usually retain the many premium discounts available. The own-occ definition is standard and, the salary definition often includes bonuses and other compensation.

Agents benefit when cases are enrolled more easily and issued faster without the risk of exclusions or denials. A multi-life case provides a stream of new revenue to the agent from employees added to the plan and from increasing salaries. Multi-life GSI pays full commission and introduces the agent to new, highly compensated clients who may need other financial services and products.

The value to the employer is the ability to provide additional income protection especially for executives who have a larger portion of their income unprotected. With multi-life GSI, the employer chooses how premiums will be paid, employee-pay, employer-paid, or a combination. Premiums are deductible as a benefit expense for employers who contribute to premium. Guaranteed Standard Issue policies may also be used in an Executive Bonus program (Section 162). Although often associated with life insurance, an individual disability policy works equally well.

Replacing a greater percentage of incomeGroup LTD policies are a good starting point for income replacement protection. But remind clients that a common LTD benefit of 60 - 65 percent of salary and a monthly benefit maximum of $5,000 may leave the insured with a considerable income gap, especially highly-compensated employees. Let’s look at two examples of the income gap when group LTD is the only income protection.

A middle-income employee earning $60,000 annually, participating in a typical employer-paid group LTD plan would have coverage for 65 percent of monthly income up to a maximum monthly benefit of $5,000. If the employee becomes disabled, as an employer-paid coverage the benefit the insured receives is subject to income tax and FICA deductions. Employees often underestimate the actual benefit amount.

The maximum monthly benefit cap of group LTD puts highly-compensated employees and executives at a disadvantage. The chart below shows how much more of the executive’s income is unprotected compared with the employee’s income.

MIDDLE INCOME EMPLOYEE - $60,000 ANNUAL SALARY HIGH EARNING EXECUTIVE - $250,000 ANNUAL SALARY

Annual Group LTD Bene�t

Annual Group LTD Bene�t

UnprotectedIncome

UnprotectedIncome

46%

54% 76%

24%

Sharing a similar comparison makes it easy to persuade a benefit decision maker of the value of a GSI program. Because Guaranteed Standard Issue programs are multi-life individual disability products, not group products, the employer can easily offer the benefit to a select group, even if employer paid. The guaranteed issue feature eliminates the concern that an eligible executive may not be approved for coverage.

How to identify prospectsDeveloping a new market takes time. You spend time to learn about the products that serve the market so let’s increase the return on your investment by targeting employer groups that we know are a good fit for GSI. Group LTD benefits come with a maximum monthly benefit amount that limits the paycheck protection offered to high earners. Groups that by nature of the industry include well compensated employees are a good fit: law practices, accounting and CPA firms, engineering and architectural firms, and technology companies. Group LTD benefits often base the benefit calculation on base salary only, which in effect, excludes bonus or commissions. A GSI plan is appealing to companies with employees whose total income comprises base salary commissions and bonus: financial practices, bankers, software firms. Employees of software firms may add upwards of $70,000 to their annual salary due to commissions.

With or without group LTDGuaranteed Standard Issue (GSI) disability plans are often combined with an existing group LTD benefit. Target employers known to include LTD coverage in the employee benefit package. Background information from current clients may provide some insight to which employers in your area offer group LTD coverage. Even employers in the target markets that don’t currently offer group LTD can be a good prospect for two reasons. First, a GSI program will provide paycheck protection and can do so without adding to the employee benefit expense. Secondly, a GSI program may give the employer a reason to reconsider offering group LTD. When a GSI plan is in place, the employer has more flexibility to reduce the group LTD maximum benefit amount, which in turn reduces the premium, making the benefit more affordable. Either way, group LTD coverage or not, you are in a strong position to make a case for GSI as sole coverage or supplemental coverage.

The numbers tell the storyGroup LTD alone leads to a form of reverse discrimination. An employer-paid benefit of 60 percent with a $5,000 maximum benefit provides 60 percent of income that is then reduced by State, FICA, and Federal withholding. An employee earning $99,000 or less is not impacted by the $5,000 benefit maximum. On the other hand, the highly-compensated employee has considerably less income protected.

With supplemental individual disability income provided by a GSI program, the protected income in the highly-compensated example now looks like this. If the supplemental disability is paid by the employee with after-tax dollars, the benefit is not subject to State, FICA, and Federal withholding.

When confronted with the real protection gap, decision makers (who may also be highly-compensated) will see the benefit discrimination. The second chart can also be a powerful representation to share with employees enrolling in the plan.

Gross MonthyIncome

Monthly IncomeAfter Taxes

Group LTDBene�t (Gross)

Group LTD After Taxes

(ER Paid Bene�t)

28%of grossincome

42%of grossincome

Gross MonthyIncome

Monthly IncomeAfter Taxes

Group LTDBene�t (Gross)

Group LTD After Taxes

(ER Paid Bene�t)

$12,500

$8,750

$5,000

$3,500

$8,250

$5,775

$4,950

$3,465

PROTECTED INCOME OF HIGHLY-COMPENSATED PROTECTED INCOME WHEN SALARY BELOW BENEFIT MAX

Gross MonthyIncome

Monthly IncomeAfter Taxes

Group LTDBene�t (Gross)

Group LTD After Taxes

(ER Paid Bene�t)

66% of gross income

$12,500

$8,750

$5,000

$3,500

$4,750IDI

PROTECTED INCOME OF HIGHLY-COMPENSATED

Lloyd’s

MetLife

Omni Select & Omni Essential

(some features vary by plan)

Principal The Standard

Number of lives (actively at work)

3 or more lives 5 or more lives when ER paid

10 or more participating lives

5 or more lives when ER paid

Eligible occ classes Contact DIS for details 6S/5A, 4A/, 3A, 2A 3A and above Most classes except some medical professions

Premium pay options

Employer-paid (mandatory)

Employee paid (voluntary)

Combination

ER-paid (mandatory)EE paid (voluntary)

ER-paid (mandatory)EE paid (voluntary)

ER-paid (mandatory)EE paid (voluntary)

Issue ages Under 71 18 - 70 18 - 64 Contact DIS for details

Elimination periods 30, 60, 90, 180, 365 90, 180, 365, 780 30, 60, 90, 180, 365 60, 90, 180, 365, 730

Benefit periods 12, 24, 36, 48, 60, 84 months

To age 65, To age 67, To age 70

2 year, 5 year, to age 65, to age 67, to age 70 2 year, 5 year, to age 67

Maximum monthly benefit per person

Up to 75% of income / $250,000 benefit

Varies by salary, EE or ER paid, and other

disability coverageContact DIS for details

Based on census and participating lives

$2,000 - $10,000 varies based on number of

participating lives

Standard occupation definition

Own-occupation including specialties

Any occOwn-occ with limited

benefit periods if ER paid

Own-occ with limited benefit periods

Any occOwn-occ available as

optional rider

Salary definition All salary sources considered

Variable compensation plans (bonus, commissions,

K1 income, etc.)Contact DIS for details

Includes variable compensation sources,

bonus

Available discounts Contact DIS for details Up to 35%; varies by case size and ER vs. EE pay

Up to 30%; varies by case size

35% discount on standard rates

Portable policy Yes Yes Yes Yes

Required participation Contact DIS for detailsEE paid: minimum 50 lives and 30% participation or

15 written policies

EE paid: 30% participation Contact DIS for details

Pre-existing exclusions

Any condition occurring or treated with 3 months of effective date will not

be covered until 12 month from effective date

None None None

Optional riders available • COLA• Residual benefit

• Optional own- occ available only when employer-paid

• Transitional own-occ• Catastrophic benefit• MNAD limitation

modification• COLA• Residual disability

Varies by underwriting program

• COLA• Catastrophic benefit• Own occupation• 24-month regular

occupation• 24-month limitation

for Mental Disorder/Substance Abuse

Information may vary by state. Contact DIS for specifics.

4444 ZION AVENUE • SAN DIEGO, CA 92120800-898-9641 • www.diservices.comDI Done Right

©2017 Disability Insurance Services, Inc.

Multi-Life Guaranteed Simplified Issue Product OptionsNo exams, bloodwork or inspection reports

4444 ZION AVENUE • SAN DIEGO, CA 92120800-898-9641 • www.diservices.com

©2017 Disability Insurance Services, Inc.

DI Done Right

Case In Point:The Golden Opportunity of Multi-Life Disability

The client:

The Vegas Strip is known for glitz, glamour and gambling. And, at one prominent Vegas hotel/casino, employees are getting in on the action with a rich disability insurance plan to enrich their overall benefits package. Here are a few details:

• The hotel/casino offers group long-term disability to all full-time, regular employees.

• In addition, the company offers an Executive Plus plan for highly-compensated team members who exceed a salary threshold. The Executive Plus plan is 100% paid by the employer and yields 100% participation from the executive team. The plan is well-regarded because:

• It addresses reverse discrimination (details below).

• Benefit levels insure bonuses and commission unlike LTD which is usually based on base salary only.

• The benefit is not taxed, unlike group LTD benefits that are taxed.*

• The benefit is portable. Executives can choose to take the coverage with them if they leave their jobs.

How this plan addresses a common issue of reverse discrimination:

Many employers offer group long-term disability insurance – typically with a 60% benefit up to a $6,000 a month maximum. This plan provide a nice safeguard for those earning less than $100,000. On the flip side, it creates “reverse discrimination” for anyone earning more than $100,000 as their benefit level can be as low as 25% or even less!

By adding an Executive level benefit tier, companies can boost benefit levels, eliminate reverse discrimination and increase executives’ overall satisfaction with the benefit plan. This keeps executives whole and the broker is protected with vesting. It also opens the door for other executive benefits such as deferred compensation or life insurance.

*Pursuant to IRS code section 162, Executive Bonus Plan.