Principal Disability Insurance Review
In recent years, Principal has become one the most popular disability insurance carriers for physicians. Overall, we have found Principal to be a great carrier to work with. The application process is efficient, rates are very competitive, and underwriting is fair. Principal also has aggressive discount programs for physicians with excellent rates for females. Principal also offers excellent optional benefits that can be included in your policy at no extra cost. Principals current product is called Series 700.
- Quality of contract 4.5/5
- Application Experience 5/5
- Communication/Service 5/5
- Total score 4.75/5
2019 Financial Ratings:
- Moody’s Investors Service - A1 Good
- A.M. Best Company – A+ Superior
- Standard & Poor’s - A+ Strong
- Fitch – AA- Very Strong
- Comdex – 90/100
- Regular Occupation rider: This rider clearly states that if due to injury or sickness you are unable to perform the substantial and material duties of your occupation and are not working in your occupation, you would be considered totally disability and eligible for full benefits. Your benefit payment would not be reduced if you begin working in another occupation.
Our Analysis: When this rider is added, Principal’s policy is one of the strongest true own occupation definitions available in the industry.
Partial Disability: Many disabilities allow physicians to continue working, but they may work less or earn less, because of an injury or illness. Therefore, the partial disability benefit is an extremely important clause in the contract.
Principals partial disability is called residual disability and recovery benefit.
- Residual disability and recovery benefit rider: The trigger to qualify under this rider is a 20% loss of income due to injury or illness, and you can no longer work the same hours or perform all the same job duties you did prior. The rider pays a percentage of your benefit that is equal to the percentage loss of earnings. For the first 6 months of a claim, the benefits paid would be based on at least a 50% loss of income. If retired or unemployed, 50% of the maximum monthly benefit will be paid for residual disability.
Recovery benefits are included in this rider. The rider states that if you were receiving disability benefits and fully recover from your injury or illness and return to work full time, you can still receive benefits if you have at least a 20% loss of income. Recovery benefits can be paid for as long as the loss of income lasts, up the maximum benefit period.
- Benefit Update Rider: This rider allows you to increase coverage every third policy anniversary up to age 55. The rider also allows for increases to be made in the event you had a least a 20% increase in earnings if your employer provider provided group disability was lost or reduced. For most medical occupations, the benefit update rider will allow you to increase coverage up to a 35,000 monthly benefit without future medical underwriting. The advantage of this rider is that it can be included at no cost.
- Future Benefit Increase: This is another no cost benefit. Principal will automatically adjust your monthly benefit amount every year for the first 6 years of the policy. You are guaranteed a 4% compounded increase, up to 10% compounded. You may also request an additional increase annually, up to $500 maximum (based on your income).
Our analysis: It’s very attractive that Principal provides both these optional benefits at no cost and allows for such large future increases. By obtaining a small policy (before or during residency) you can lock in your insurability for benefits up to an income of 1,200,000. When you exercise either the Benefit update rider or future benefit increase rider, your coverage will contain the discounts that we previously used or any new discounts if larger. Exercising these riders will not result in additional policies so the terms of the increase will be the same as your original policy.
- Non Cancellable Guardian Renewable: With this clause, the cost and coverage can never change. It means the insurance carriers cannot change the policy provisions, rates or cancel your coverage once it is established and premium is being paid. Principal Series 700 contract is non-cancellable to age 65 or your 5th policy anniversary, which is later. It is conditionally renewable thereafter on an annual basis for life, subject to changes in premium. This is built into the contract and therefore is automatically included for Principals series 700 policies.
- Mental and/or Substance-related Disorders: This benefit includes claims that stem from, drugs, alcohol, stress, anxiety, depression, or burnout. Principal gives physicians the option to have a policy with no limitation (maximum benefit period would be the same as your selected benefit period) or a 24-month limitation. If the 24-month mental nervous limitation is selected, Principal will provide an additional 10% discount to your policy. A 24 month mental nervous limitation is applied for anesthesiologists and emergency room physicians.
- Presumptive Disability Benefit: This benefit provides coverage in the event you permanently loose the power of speech, hearing in both ears, sight in the eyes, or use of both hands, both feet, or one hand and one foot. Benefits become payable when the presumptive disability occurs and continue to be paid as long as the loss continue regardless of your ability to work or earn income. If the benefit period is to age 65 or longer, the benefit is extended to lifetime.
- Supplemental Health Benefit: This rider provides a one-time lump sum, equal to six times the monthly disability benefit, in addition to the other benefits provided by the policy, if the Insured becomes disabled under the policy and diagnosed with coronary artery bypass graft surgery, cancer, or stroke.
- Capital Sum Benefit: In addition to other benefits, this provides a one-time lump sum benefit (twelve times your monthly benefit) if you have a total loss of use without any possibility of recovery, of the sight in one eye or the use of a hand or foot.
- Rehabilitation Benefit: If you are disabled and want to pursue a rehab program to return to work, Principal may pay an extra benefit to help you with the cost.
- Transplant Surgery Benefit: Principal will pay benefits if your disability results from surgery involving a transplant of a part of your body to another person.
- Death Benefit: You receive a lump sum benefit (three times your monthly benefit) if you die after satisfying the elimination period while receiving disability benefits.
- Waiver of Premium: You do not pay for your coverage after you’re disabled for the elimination period. Principal will refund the premiums paid for coverage after the disability began and continue to waive all premiums that become due during your continuous disability.
- Elimination periods available: 30-day, 60-day, 90-day, 180-day, and 365-day elimination periods
- Benefit periods available: 2-year, 5-year, age 65, age 67, age 70.
Our Analysis: The age 70 benefit period is priced very well compared to other carriers.
- Cost of Living Adjustment (COLA): This benefit is designed to increase your monthly benefits on an annual basis during a claim. You may select a 3% or 6% COLA compounded on an annual basis.
- Catastrophic Rider (CAT): Pays a benefit in addiotnal to the base monthly benefit if the insured loses the ability to perform two or more activities of daily living without assistance; becomes cognitively impaired; or becomes presumptively disabled under the terms of the policy.
- Extended Total Disability Benefit: This rider continues to pay the Disability Benefit beyond the policy Maximum Benefit Period if You have a Continuous Disability that begins before and continues up to Your Age 55 Policy Anniversary.
- Multi Life Resident/Fellow: Principal offers a 20% discount for residents and fellows. These discounts are available to employees from most of the largest GME programs.
- Association Discounts: Principal offers a 10% discount to members of certain associations. While they are not as low as the resident/fellow discount its an excellent way for physicians out of training to get discounted rates.
- Multi-Life Gender Neutral Rates: Principal has discounts programs established that allow for gender neutral (unisex) pricing which can be very beneficial for females. While the discount is a 20% discount, for females it can result in about a 40% reduction from standard rates.