Guardian LTD and Other Options 2nd Business

[jcc]

Hi,
I have a Guardian LTD around 8K/mo payout to maximum term (think 67) and includes many of the better riders (COLA, and a few others, don't recall), purchased a few years ago. I'm self-employed technical/ engineering consultant, make a good living, but thinking of starting a second business that eventually is more apt to grow. Not for sure, but thinking about it.

One of the things I hate about that policy (as with pretty much any LTD I could find) is that it bases payouts on last three years income closest to disability. Not ideal if you want to start another business and split some of your time/efforts and therefore might have a temporary drop in income or a split in your income sources whereas the primary occupation may not be at it's full earnings capacity. I did like the "your occupation" feature, which is one of the main reasons I went with Guardian.

So, if I start another business how can I remain protected? Businesses sort of start out sometimes as a bit of a hobby, you see how viable things are, and then they grow. But in the mean time, you may not instantly earn high dollars, yet it is plausible resources from the primary business could decline. It could be argued that aspects of the second business are related to the first business, but ultimately this will be a new company with a different strategy, and even if it does start out similar, I think it will change substantially over time.

Intent is to keep both businesses going, but should the second business (related to real estate) take off fantastically, than I may continue with the first business on a much more limited basis. Or either could be sporadic. Just don't know yet.

BUT what happens if tragedy strikes and I become disabled? If the timing is right (or wrong depending on how you look at it), perhaps I wouldn't be able to collect the benefits, or full benefits? What can I do to avoid being in this situation?

Can't afford two high dollar separate policies. Already paying for a very expensive LTD and now adding Life..but do want to be protected to not lose income for life. Any good options?

Thanks.

 

[scagnt83]

As long as the risk is not substantially higher in the new job then you should most likely be fine. I would recommend informing Guardian of the additional occupation to ensure that there will be no issues if a claim hits. As long as you expect your cumulative income to stay close to the same then I doubt they will make any changes to the policy. But you are allowed to change occupations with DI, especially if you are staying in the same field or an extension of your field. Just inform them of the addition.

As long as your cumulative income is near the same, and you have informed them of the additional career, then you should be fine at claims time.

Guardian has a "start up business" program that will actually use your previous career/business income (past 3 years) to calculate the benefits for the new start up business. So you should be able to keep the same benefit level you have now. Just call your agent or call Guardian directly and give the appropriate updates.

 

[dgoldenz]

OP - Assuming this is an individual policy and not a group policy, the total disability monthly benefit is an indemnity benefit so your current earnings don't have any bearing on the amount paid out while total disabled. If you took a job working as a cashier with a $2k/month salary, they would still pay your $8k/month benefit if you became totally disabled from the duties of a cashier (since that would be your occupation at the time of claim). The only time actual earnings change the payout is for a Residual Disability claim where there is a loss of earnings due to the disability, but you are not totally disabled.

Where did you get the info about three years of prior earnings?

As long as the risk is not substantially higher in the new job then you should most likely be fine. I would recommend informing Guardian of the additional occupation to ensure that there will be no issues if a claim hits. As long as you expect your cumulative income to stay close to the same then I doubt they will make any changes to the policy. But you are allowed to change occupations with DI, especially if you are staying in the same field or an extension of your field. Just inform them of the addition.

As long as your cumulative income is near the same, and you have informed them of the additional career, then you should be fine at claims time.

Guardian has a "start up business" program that will actually use your previous career/business income (past 3 years) to calculate the benefits for the new start up business. So you should be able to keep the same benefit level you have now. Just call your agent or call Guardian directly and give the appropriate updates.

The insurance company does not need to be informed when a new occupation is started or when income changes. Guardian's individual DI policy is guaranteed renewable/non-cancellable so they have no right to change any terms of the policy once it has been placed in force, including the benefit amount or occupation class assigned.

 

[scagnt83]

Read the specimen contract. When you file for a claim they ask for proof of the past 3 years earnings... so why is that if they do not care about current earnings being substantially different from prior earnings?

I always thought the same thing about earnings, but another agent pointed that out to me recently so it makes me wonder...

 

[dgoldenz]

Read the specimen contract. When you file for a claim they ask for proof of the past 3 years earnings... so why is that if they do not care about current earnings being substantially different from prior earnings?

I always thought the same thing about earnings, but another agent pointed that out to me recently so it makes me wonder...

You are probably referencing the "Prior Income" clause under the Income section, which says:

"Prior Income means Your average monthly Income for either the last 24 calendar months just prior to the date on which You became Disabled, or for the two calendar years with the highest earnings in the three calendar years just prior to the date on which You became Disabled, whichever is greater"

So when you have a residual disability claim, they are giving you the benefit of using the top two of the past three years for measuring the loss of income. The Residual Disability clause states:

"Residual Disability or Residually Disabled means that You are Gainfully Employed and are not Totally Disabled under the terms of the policy, but, solely because of Injury or Sickness, Your Loss of Income is at least 15% of Your Prior Income"

The Total Disability benefit is an indemnity benefit, so the amount does not change.

 

[scagnt83]

You are probably referencing the "Prior Income" clause under the Income section, which says:

"Prior Income means Your average monthly Income for either the last 24 calendar months just prior to the date on which You became Disabled, or for the two calendar years with the highest earnings in the three calendar years just prior to the date on which You became Disabled, whichever is greater"

So when you have a residual disability claim, they are giving you the benefit of using the top two of the past three years for measuring the loss of income. The Residual Disability clause states:

"Residual Disability or Residually Disabled means that You are Gainfully Employed and are not Totally Disabled under the terms of the policy, but, solely because of Injury or Sickness, Your Loss of Income is at least 15% of Your Prior Income"

The Total Disability benefit is an indemnity benefit, so the amount does not change.

I will have to go back and lookup the contract to find it. But this was under general claims and not under the Residual Rider.

 

[dgoldenz]

I will have to go back and lookup the contract to find it. But this was under general claims and not under the Residual Rider.

Maybe to verify that the claimant was still working, but the insurance company can't reduce the total disability benefit based on current income or change the occupation class, ever.