Tag Archives: individual disability insurance

Are Benefits Taxable?

 

The Answer Is: It Depends

Whether your disability benefit payments are taxable depends on what type of policy or plan you have and how your premiums are paid.  This post is not intended as tax advice—we’ve outlined some basic information below only.  You should always speak with a tax professional regarding your particular situation.

Individual Policies:  These are policies that you purchase yourself.  Generally speaking, if you pay the premiums with after-tax dollars, the benefits you receive are tax free.  However, if you pay with pre-tax dollars or deduct your premiums as a business expense, then your benefits will likely be subject to federal income taxation.

Group Policies: Group policies are those offered through associations such as the ADA or AMA.   These types of policies offer special terms, conditions, and rates to members and function much like individual policies, with similar tax consequences.  Generally speaking, if you pay the premiums (with after-tax dollars) then the benefits you receive are tax free.

Employer-Sponsored Policies: These types of policies can be less straightforward when it comes to taxes, as the payment of premiums can be structured several ways.  According to the IRS website:

  • If your employer pays the premium and does not include the cost of the premiums in your gross income, then benefits you receive will generally be fully taxable.
  • If the employer only offers a policy, but you pay the entire premium without taking a tax deduction, then the benefits you receive will generally be tax-free.
  • If both your employer and you pay the premiums then the tax liability will generally be split.

If you are unsure what type of policy or plan you have, and you think your employer might be paying the premiums, you can look at your application (there is typically a portion that states who is responsible for the premiums) or talk to your HR department.  For more information, talk to your accountant.  You can also go to to the IRS website on disability insurance proceeds to find additional information.

It may be tempting to save money by enrolling only in a plan solely paid for by your employer, paying premiums with pre-tax dollars, or deducting premiums as business expenses.  But keep in mind that, if you do become disabled, the amount of your benefits actually available to you will substantially decrease if you are required to pay income tax on them.

Selecting a policy is an important decision, and how benefits will be taxed is a significant factor to consider. With statistics showing that one in four dentists will be disabled long enough to collect benefits at some point in their careers, choosing to save now could hurt you financially down the road.

MetLife to Exit Individual Disability Insurance Market

MetLife, Inc. the fourth largest provider of long-term disability insurance by market share[1], is suspending sales of its individual disability insurance policies.  In an internal memorandum to producers, MetLife Client Solutions Senior Vice President Kieran Mullins announced that the company would be suspending the individual disability insurance block of business effective September 1, 2016.  In the memo, Mr. Mullins cites the goal of creating a new U.S. Retail organization for its insurance products and the “difficult, but strategic” decisions that led to the shutdown of their individual disability insurance product:

This was not an easy decision to make, given the growth and strength of our IDI business. However, we believe it is the best course of action for the immediate future. While there is tremendous opportunity in this market, the suspension provides us with the time and resources needed to properly separate the U.S. Retail business from MetLife. There is a significant amount of work to be done to retool existing systems – and implement new systems – that will ultimately provide the most value to our customers and sales partners in the years to come.

Insurance news websites are already speculating that the shutdown could put pressure on the remaining thirty-one companies selling individual disability insurance to raise premiums.  Because MetLife controls such a substantial share of the individual disability insurance market, their departure effectively reduces the size of the pool in which the risk can be spread.  Cyril Tuohy, writing for Insurancenewsnet.com, points to the move as an opportunity for the remaining companies in the market to innovate and attract the business MetLife will be leaving behind.  The company’s departure will favor the insurers whose individual disability policies cater to physicians, dentists, and other high-income professionals, such as Guardian, Principal, The Standard, Ameritas and Northwestern Mutual.[2]

In an accompanying FAQ, MetLife assured producers that existing policies would not be affected by the change, and that they would continue to support policy increases by the terms of the Guaranteed Insurability Option, Automatic Increase Benefit, and Life Event riders.  The memo also noted that MetLife would continue sales of its group, voluntary, and worksite disability products.

It is important to remember that even though MetLife must continue to service its existing policies, shutting down sales of new policies can still affect current policyholders.  Absent the need to sell new policies, an insurer may have less incentive to provide customer service or avoid a complaint from the state insurance board.  Additionally, once a block of business closes, the easiest way to maintain profitability of that product is through claims management.  In real terms that is typically accomplished through claims denial and benefits termination.  We discussed these very tactics in a 2012 blog post about Unum’s management of its closed block of individual disability insurance products.

If you have a MetLife individual disability insurance policy, pay close attention as the business focus shifts away from selling new policies and toward the management of existing policies.  If you have a question or concern regarding your MetLife policy, contact our office.

[1]http://www.statista.com/statistics/216499/leading-long-term-disability-insurance-carriers-in-the-us/

[2]“Will MetLife’s Suspension Send DI Prices Soaring?” Cyril Tuohy, insurancenewsnet.com. http://insurancenewsnet.com/innarticle/agents-split-di-pricing-wake-metlife-suspension

Disability Insurance Policies: Which type do you own?

The type of disability insurance policy you have can affect the benefits you receive and the legal rights to which you are entitled. Below is an overview of the basic types of disability insurance policies.

Individual Disability Insurance:

As the name suggests, individual disability insurance policies are purchased by individuals directly from the carrier and provide long-term disability benefits in the event of sickness or injury. Individual polices fall into two categories: “general” and “occupational.” A “general” disability policy insures against sickness or injury that precludes the insured from performing all work while an “occupational” policy provides relief if the insured cannot perform the material and substantial duties of his or her own occupation. Thus, an “occupational” policy will provide greater coverage to the insured, who will be entitled to benefits even if he or she is able to engage in another occupation. Individual policies usually provide coverage in set amounts, e.g., $5,000 per month, rather than as a percentage of the insured’s salary.

Group Disability Insurance:

Group disability insurance polices are made available to participants of organizations, such as members of the American Medical Association. Unlike most individual policies, group policies typically confer benefits calculated as a percentage of the insured’s base salary, usually from 50-75%. These policies may limit the maximum amount of benefits payable, e.g., no more than $5,000 per month, regardless of base salary. Further, group policies often reduce benefits when the insured receives income from other sources such as Social Security disability benefits or worker’s compensation.

Employer-Sponsored Disability Insurance:

Employer-sponsored disability insurance policies are typically the least expensive policies and are similar to the “group” policies described above, providing employees with disability insurance based on a percentage of their base salary as part of the employer’s overall benefits package. Unlike group policies, however, employer-sponsored policies are governed by the Employee Retirement Income Security Act of 1974 (ERISA), which has significantly affected the administration and litigation of disability insurance claims. Unfortunately, ERISA deprives insureds of significant rights to which they would normally be entitled under state law. These include the right to a trial by jury and the possibility of punitive damages where the carrier has acted unreasonably or maliciously.

Comitz | Beethe: Proud in its Continuing Support of the Western Regional Dental Convention

Ed Comitz and Phoenix-based Comitz | Beethe were pleased to show our continuing support for the Arizona dental community by participating in this year’s Western Regional Dental Convention held in Phoenix, Arizona.  Dentists, orthodontists, oral surgeons, pediatric dentists, endodontists, periodontists, prosthodontists, oral pathologists,  dental hygienists, dental practice administrators and others gathered at Arizona Convention Center for two-and-half days of continuing education. Attorney Ed Comitz’s topic at the Convention was ”Disability Insurance Litigation and the Disabled Dentist,” which has been written on extensively in Inscriptions.

Ed Comitz – My Own Story

Living an active lifestyle has always been important to me. It was not until I suffered a severe neck and head injury that I wondered if I would ever be able to enjoy sports or be active again.

Within months of my injury, I began experiencing constant, agonizing pain in my neck and shoulder, lost manual dexterity and fine manipulation skills with my left hand, and had difficulty moving, all of which caused a precipitous decline in the quality of my life. I felt physically distressed – as if I were constantly being injured.

MRI’s revealed two large disc protrusions. From there, I embarked on a year-and-a-half journey of treatment options without success: sports medicine, physical therapy and rehabilitation programs, consults at the Mayo Clinic and throughout the country, surgical consults, multiple epidural injections (interlaminar and transforminal), facet injections, trigger point injections, massage, chiropractic, traction, Ibuprofen and muscles relaxers. Despite my unrelenting commitment to get better, my condition unfortunately progressed to the point where the entire left side of my body was enormously tense, including my hip, leg and foot. I started losing proprioception in my foot and ambulated with an irregular gait, and my functionality was becoming worse by the day.

This was enormously shocking. I then consulted with another neurosurgeon and had more MRIs, which now revealed possible spinal cord involvement. I was admitted to Barrow Neurological Institute, where I underwent a multi-level discectomy and fusion. I have spent over a year rehabilitating and the process has been self-revealing, always too slow, but with significant progress over time. I now enjoy skiing, playing tennis, hiking, biking, swimming and jogging in moderation. While I have improved exponentially since the surgery, I still have limitations and struggles, and know that my condition can be aggravated if I do not take very good care of myself.

Most of my clients are physicians and dentists, and many have conditions similar to mine. As an attorney, I can keep working – if I drop a pen or get a cramp in my side, I can take a break or stretch, then resume working.  If I were a medical professional, though, I would not be able to sustain positioning for long periods of time, each and every day, and would be concerned about patient safety.

I am strongly committed to my clients and practice, am sympathetic to physical limitations and restrictions that others may not fully understand, and use my experience to provide my clients with the results they deserve.  My firm, Comitz | Beethe, provides representation to professionals nationwide and throughout metropolitan Phoenix, Scottsdale, Tucson, Flagstaff and Yuma.

Comitz | Beethe: Solid Record With All Major Disability Insurance Carriers

Phoenix-based Comitz | Beethe and its attorneys have resolved cases in Arizona and nationally with all of the leading disability insurance companies and third-party administrators  in the country, including, among many others: Berkshire, Boston Mutual, CIGNA, Disability Management Services (“DMS”), Disability Reinsurance Management Services (“DRMS”), Equitable, First Unum, Great-West Life and Annuity Insurance Company, Guardian, The Hartford, Integrated Disability Resources, Jefferson Pilot, Liberty Mutual, Lincoln Financial, Mass Mutual, Met Life, Monarch, New York Life, Northwestern Mutual Life, Paul Revere, Penn Mutual, Provident, Prudential, Reassure America Life Insurance Company, Reliance, Royal Maccabees, Standard, Swiss Re, and Unum (formerly UnumProvident).  We have also litigated and resolved cases against third-party vendors of insurance companies, including Behavioral Medical Interventions (BMI) and PsyBar.

Planning for Possible Health Problems: How Much Disability Insurance Should You Have?

As Chris Clark writes in a DoctorPlanning.com article “Planning for Possible Health Problems: How Much Disability and Long-Term Care Insurance Should You Have?”, health problems are one of the most common reasons people retire before they intended.  But knowing how much and which disability and long-term care coverages to purchase can be complicated.  Disability attorney Ed Comitz provides some advice in Mr. Clark’s article:

Edward Comitz, an attorney who leads the health and disability insurance practice for Phoenix law frm [Comitz | Beethe], recommends buying individual policies instead of the typically cheaper group ones, because employer-sponsored plans are subject to employment-law restrictions that include limits on jury awards if a claimant ends up in court fighting for benefits.

And don’t pay the premiums from the practice, he says, because an individual policy could be characterized as a group one if the practice is paying the bills.

The full article is available here:  Planning for Possible Health Problems

Tempe, Arizona Hosts “Different From What?” Film Festival Re Perceptions of Persons with Disabilities

On January 29-31, 2010, the Equity Alliance at Arizona State University and a group of doctoral students in ASU’S special education program hosted a unique film festival entitled “Different From What?”  The festival’s goal was to challenge the audience to consider their perceptions of persons with disabilities and to evaluate how much of those perceptions were formed by the ways in which disabilities are portrayed in film.

Amongst the featured films were “Shooting Beauty:  Everyone Deserves a Shot,” a documentary portraying the everyday lives of people with disabilities from their perspectives.

Further information and audience reviews of the film festival are available at: http://www.accessingarizona.com/wheelchair-holidays/phoenix-wheelchair/different-from-what-film-festival-arrives-at-mill-ave/

Ed Comitz Presents To NorthStar Resource Group at Sanctuary Resort and Spa

At NorthStar’s Annual Convention in Paradise Valley, Arizona, Attorney Ed Comitz presented the topic, The Top 10 Mistakes Physicians Make When Buying Disability Insurance, attended by a full house of investment advisors. A portion of the discussion was directed at current disability insurance claim practices, the difficulties physicians have when filing disability claims, and current issues relating to the application of disability insurance law to professionals in Arizona and elsewhere.

A disability insurance Q-and-A

Phoenix and Tucson-area disability attorney Ed Comitz recently responded to some common disability insurance questions  for the Pima County Medical Society’s January 2010 issue of Sombrero. He answers questions doctors and other healthcare professionals often ask,  such as, “What is the difference between ‘own occupation’ and ‘any occupation’ in disability insurance?” and “Why do so many doctors’ claims get denied, and how can a law firm help?” Read the full article here: A disability insurance Q and A