Guardian DI:
Protection for Individuals
and Small Businesses
An Introductory Overview
For producer use only. Not for use with the general public.
Product provisions and features may vary from state to state.
8542--05-08
Disability income insurance underwritten and issued by
Berkshire Life Insurance Company of America, Pittsfield, MA a wholly owned stock subsidiary of
The Guardian Life Insurance Company of America, New York, NY or provided by Guardian.
Disability Insurance Products
 Personal DI
 ProVider Plus (Policy Forms 1400 & 1500)
 The use of ProVider Plus in our
marketing programs
 Business DI
 Overhead Expense (Policy Form 4100; NC82 in Montana)
 Business Reducing Term (Policy Form AH55-A)
 Disability Buy-Out (Policy Form 3100; AH84 in Montana)
2
A Word About Guardian
& Berkshire
 Berkshire Life
 Wholly owned stock subsidiary
 DI and LTCI products
 A. M. Best rating: A+
3
Why Is DI Important?
 Your client…
 Income is your client’s most valuable and
vulnerable asset.
 You…
 Professional responsibility
 Market alignment & access
 Profit
4
Why ProVider Plus?
 Disability is unpredictable
 The best policy…
 provides the most comprehensive protection
 tailored to specific needs
5
Evaluating a Disability Policy
 Renewability
 Definition of total disability
 Strong policy provisions & safeguards
 Optional benefits
6
Renewability
 Non-cancellable and guaranteed
renewable until the expiration date
(age 65 or 67)
 We cannot…
 cancel the policy
 change policy provisions
 increase the policy premium after issue
(as long as premium payments are made
on a timely basis)
 After expiration date, conditionally
renewable for life
7
Total Disability: True “Own-Occ”
 “unable to perform the material and
substantial duties of your occupation…”
 The insured can be gainfully employed in
another occupation and still be considered
totally disabled
 True “own-occ” protection for the entire
benefit period – all occupation classes
8
Specialty Language
 Medical & dental specialists
 “If you have limited your occupation to the
performance of the material and substantial
duties of a single medical or dental
specialty, we will consider that specialty to
be your occupation.”
9
Occupation Class
 One of the primary determinants of risk
 Occ classes based on claims experience
 Determines pricing & benefits available
10
Occupation Classes
 Class 6-3:
white collar professionals,
executives, managers
 Classes 2-1*:
occupations with primarily
manual duties
 Classes 6M-1M:
medical & dental
occupations
* Available only in employer-sponsored plans; Class 2 also available to business owners who have owned the
business for at least 5 years. Class 1 is not available in Florida.
11
Move Up Option
 Many occupations can “move up” in class.
 Criteria include:
 income level & stability
 experience
 amount of travel
 characteristics of the business organization
12
Monthly Indemnity
 Amount payable for total disability
 Primary determinants of issue amount:
 earned income
 occupation class
 other disability coverage in force
(individual and group)
 who pays the premium (individual vs.
employer pay)
13
Maximum Issue Limits*
Occupation
Class
Maximum Issue
Limit
Maximum
Participation
with Group LTD
6–4
$15,000
$25,000
6M, 5M
$15,000
$25,000
4M, 3M
$15,000
$20,000
2,1, 2M, 1M
$7,500
Not available
* For issue ages 18 – 55. Limits vary for medical and dental professionals, depending on the use of the TeleMed
underwriting process. Limits also vary in Florida.
14
Elimination Period
 Elimination periods available: 30, 60, 90,
180, 360, 720* days
 To satisfy the EP, must be disabled from the
same or different causes.
 Days of disability don’t have to be
consecutive, but must occur during the
accumulation period.


Example: 90 day EP – 210 day AP
Example: 180 month EP – 360 day AP
* Not available in some states
15
Elimination Period
 Benefits begin to accrue after the
elimination period has been satisfied.
 Elimination period waived if you become
disabled again within 5 years after the
end of a prior disability…


which lasted more than 6 months
for which we paid benefits
16
Benefit Periods
 2 years, 5 years, 10 years, to age 65,
to age 67
 Flexibility to meet your clients’ needs
 Graded lifetime benefits* available by rider
(see details on the following slide)
17
Graded Lifetime Indemnity for
Total Disability Rider
 For disability prior to age 46, full monthly
indemnity payable after age 65 (or 67)
 For disability at age 46 or after, benefit after
age 65 (or 67) is a percentage of the
monthly indemnity

decreases 5% for each year beyond age 45 that
disability occurs
 Examples:
 For disability at age 46: 95% of monthly indemnity
 For disability at age 50: 75% of monthly indemnity
Note: Availability of this rider is limited in Florida.
18
Recurrent Disability
 No new elimination period if a disability
occurs within 12 months of a previous
disability.
 To be considered recurrent, the later
disability must be due to the same cause
or causes as the previous disability.
19
Presumptive Total Disability
 Total disability presumed, even if at work,
for total and complete loss of:


sight, hearing, speech
use of both hands, both feet, or one hand
and one foot
 Elimination period is waived
 Benefit paid as long as loss continues
during the benefit period
 Loss does not have to be irrecoverable
20
Capital Sum Benefit
 Lump sum benefit paid for:
 Total and irrecoverable loss of sight in one eye or

complete loss of a hand or foot by severance
 Capital Sum = 12 X monthly indemnity
 Payable in addition to any other
policy benefit
21
Rehabilitation Benefit
 Helps to meet the costs of a rehabilitation
program while totally disabled.
 We must agree to the program in writing
before enrollment.
 A formal program of retraining to help the
client return to work in his or her occupation.
22
Modification and Access Benefit
 Reimburses appropriate and reasonable
costs incurred by the client
 For a modification designed to assist in a
return to work in his or her occupation.
23
Transplant & Cosmetic Surgery
 Benefits payable for total disability due to
 transplant of a part of your body to another
person or
 complications of cosmetic surgery
 Must become totally disabled more than 6
months after the policy’s effective date.
24
Waiver of Premium
 Waives premium while your client is
disabled and receiving benefits
 Continues to waive premium for six months
following recovery.
 Refunds any premium paid that is
attributable to the period of disability – even
if paid before the disability began.
25
Exclusions & Limitations*
 No benefits payable…
 during incarceration
 for disability caused by, contributed to or
resulting from:
– military training, action, conflict or war while serving in
the military or working for contracted military services.
– commission of, or attempt to commit, a criminal
offense.
– being engaged in an illegal occupation.
– suspension, revocation or surrender of professional
or occupational license or certification.
– an intentionally self-inflicted injury.
– any loss excluded by name or specific description.
* Exclusions & limitations may vary by state.
26
Exclusions & Limitations*
 Normal pregnancy or childbirth are not
covered during the first 90 days of disability
or the elimination period, if longer.**
 Foreign Residency Limitation - The
insured must be living full time in the U.S. or
Canada in order to receive benefits (except
for incidental travel or vacations).
* Varies by state
** Policy Form 1400 only
27
Exclusions & Limitations
 Mental Disorder and/or Substance
Abuse limitation.*

monthly benefits are limited to an aggregate total
of 24 months
 Does not apply while continuously confined
as an inpatient in a hospital and under care
of physician.
* Applies to all policies issued in Florida. It also applies in all states to anesthetists, anesthesiologists, ER
physicians, pain management physicians, and CRNAs.
28
ProVider Plus:
Optional Benefits
29
Optional Benefits
 Classes 6 – 3, 6M – 3M







Residual Disability Benefit Rider
Cost of Living Adjustment Rider
Graded Lifetime Indemnity for Total Disability
Benefit Rider
Future Increase Option Rider
Automatic Benefit Enhancement Rider
Catastrophic Disability Benefit Rider
Retirement Protection Plus Disability Benefit Rider
 All Classes:


Social Insurance Substitute Rider
Unemployment Waiver of Premium Rider
 Classes 2, 1:

Partial Disability Rider
30
Residual Disability Benefit Rider
 Requires loss of income of at least 15% of
prior income.
 Specific loss of time or duties are not
required.
 Elimination period can be satisfied by total
or residual disability.
 First 12 months – dollar-for-dollar loss of
income benefit, up to the monthly
indemnity*
* Coordinates with benefits payable from any other disability insurance policies the client may already have.
31
Residual Disability Benefit Rider
 After the first 12 months, benefits are
proportionate to the loss of income.
 If income loss is 75% or more, we consider
the loss to be 100%.
 Residual benefits payable for entire period.
 Recovery: residual benefits will continue up
to the end of the benefit period, as long as
the loss of income is at least 15%.
32
Cost of Living Adjustment Riders
 Fixed 3%: The monthly benefit increases
each year during disability by 3%
 6% Maximum: The monthly benefit
increases each year during disability
according to changes in the CPI-U.

Increases will be no lower than 3% and no higher
than 6%
 For these options, increases begin after the
insured has been disabled for 12 months
Note: All COLA increases are calculated on a compound interest basis.
33
Cost of Living Adjustment Riders
 Four-Year Delayed: Increases begin on the
fourth anniversary of disability.
 The monthly benefit increases each year
during disability by 3%
 Economical option for obtaining long term
cost of living protection
Note: All COLA increases are calculated on a compound interest basis.
34
Cost of Living Adjustment Riders
 No cap on increases before the
expiration date
 After recovery, indexing increases remain
part of the policy’s base benefit


until the expiration date
no extra premium
35
Future Increase Option Rider
 Allows for the purchase of additional
coverage in spite of any change in health
or occupation
 Total increase option: up to 2 times the
base policy plus total in-force with Guardian
and Berkshire*
 Annual option dates to age 55
 Special option date:
 For loss of Group LTD coverage or
 On a date declared by the company
Note: State variations may apply.
36
Future Increase Option Rider
 Until age 45, insured can exercise up to the
total increase option.
 Afterwards, up to 1/3 of the available option
amount each year, or the remaining option
amount, if less than $1,000.
 May exercise an option if disabled on an
option date

increased benefit available for a subsequent
disability only
37
Automatic Benefit
Enhancement Rider
 Attached to policy at underwriter’s discretion
 4% compound annual increases for 5 years
 Increases provided despite any change in
health, income or occupation
 If the insured declines two consecutive
increases, no future offers
 Before age 60, insured may apply to extend
the rider for additional 5-year periods.
38
Catastrophic Disability
Benefit Rider
 Pays additional monthly benefit for
 Loss of 2 of 6 ADLs
 Cognitive impairment
 Irrecoverable disability
39
Catastrophic Disability
Benefit Rider
 Benefit amount:
 up to $8,000 per month
 total coverage not to exceed 100% of
applicant’s income
 Built-in annual 3% fixed
compounded adjustments

maximum benefit = two times the original benefit
40
Social Insurance Substitute Rider
 Coordinates with social insurance
 Dollar-for-dollar offset
 Issue amounts: up to $1500 per month
 Required for policies issued to classes
2 – 1 and 2M – 1M.
Note: In New York and New Jersey, if the insured receives any social insurance benefits, no benefits are payable
under the rider.
41
Unemployment Waiver of
Premium Rider
 Premiums waived if insured
becomes unemployed
 Must receive unemployment compensation
for at least 60 consecutive days.
 Premiums waived for 12 months, even if
insured returns to work.
 Renewable to age 60 or until the date option
is exercised.
42
Partial Disability*
 Benefit is payable if sickness or injury
causes a loss of


the ability to perform one or more of the material
and substantial duties of the insured’s occupation,
or
the ability to perform these duties for more than
one-half the time normally required.
 Elimination period must be satisfied by
total disability
 Benefit = 50% of the monthly indemnity
 Payable for up to 6 months
* Available to classes 2 – 1 and 2M – 1M.
43
Premium Options
 Level
 Premiums remain the same until age 65 or 67.
 Graded
 Low initial rate, with annual increases.
 Can be converted to a level premium (at attained
age rates) until age 50.
 Step-rate
 Premium increases once to a level premium
 At the later of age 35 or five years after purchase
44
Premium Payment Modes
 Annual, Semi-annual, quarterly, monthly
 Monthly Guard-O-Matic – no service fee
45
Risk Classes
 Preferred
 Select
 Standard
46
Employer-Sponsored Plans
 Gender-distinct pricing (Policy Form 1400)
used for policies issued in



Individual sales
Voluntary Income Protection programs
Association programs
 Unisex pricing (Policy Form 1500) used for
policies issued in


Qualified Sick Pay Plans
Executive Bonus Plans
47
Discounts
 Multi-policy discount
 5% on the first year premium
 Employer-sponsored discount: 10%
 Groups of 2+ lives
 Groups of 3+ lives if one of the participants is in
class 6M – 1M
 Association discount: 10%*
 For 10+ lives in approved associations
48
Business Products
 Overhead Expense
 Business Reducing Term
 Disability Buy-Out
49
Overhead Expense*
 Protects the business if the owner
is disabled
 Reimburses covered expenses incurred in
the daily operation of the business
 Excellent sequential sale to personal DI
or…
 Lead with Overhead Expense
* Policy Form 4100; NC82 in Montana
50
Overhead Expense
 Renewability:
 Non-cancellable & guaranteed renewable
to age 65
 Renewable to age 75 if working full time and
responsible for business expenses
 Definition of disability: own-occupation
51
Overhead Expense
 Waiting period
 30, 60 or 90 days
 Maximum indemnity periods
 12, 18 or 24 months
 Maximum issue limit*
 $30,000 per month
 Available to Classes 6, 5, 4, 4P, 3
* Higher limits may be available, subject to underwriter discretion.
52
Overhead Expense
 A reimbursement contract
 Eligible expenses covered up to the policy’s
maximum monthly benefit
 Carry-over of benefits
 “unused” benefits may be carried over to a
subsequent month.
 may be carried over until aggregate maximum
benefit is paid – up to twice the maximum
benefit period
53
Covered Expenses
 Rent
 Utilities (e.g. electricity, phone, water)
 Rent or lease expense (e.g. furniture
and equipment)
 Interest on debt
 Depreciation or scheduled installment
payments of principal of debt
 Taxes on business property
 Other normal, necessary and customary
fixed business expenses
54
Covered Expenses
 Salaries of employees who are not
members of the insured’s profession
 Professional replacement benefit
 80% of replacement’s salary is considered a
covered expense for up to 6 months
Note: Policy provisions vary In Montana.
55
Residual Overhead Expense
Benefit Rider
 Residual disability: insured suffers…
 at least 20% loss of gross monthly revenue and
 loss of time or duties
 Benefit = covered overhead expenses
minus current gross monthly revenue
56
Future Purchase Option
 Annual increase options to age 55
 Maximum annual option amount: $1500
 Total additional coverage of up to twice the
maximum monthly benefit
57
Tax Considerations
 Premiums for overhead expense coverage
are deductible
 Policy benefits are taxable
 however, benefits are used to reimburse covered
expenses, which are deductible
58
Premiums & Discounts
 Gender-distinct, except for MT
 Based on “age nearest birthday”
 Non-tobacco user discount: 20%
 Volume discount for monthly benefits
of $4,000+
 List bill discount: 10%
 Association discount: 10%
59
Business Reducing Term*
 Protects fixed-payment
business obligations…



loan for purchase of business or practice
business loan (e.g. expansion)
guaranteed employment contract
 Unique product!
* Policy Form AH55-A; Available in all states except FL, MN, MT, NC, SC, VA.
60
Reducing Term Insurance
Decreasing Term
Life Insurance
Reducing Term
Disability Insurance
$25,000
$1,000
Face Amount
Monthly Indemnity
Full Amount Payable Until
Issue
Term Ends $0 Issue
Term Ends $0
61
Business Reducing Term
 Coverage lasts for a specified term
 5 to 30 years
 policy term = length of the obligation
 coverage cannot extend beyond age 60
 Benefits payable until the end of the
policy term
 Elimination periods: 1, 3, 6, 12 months
62
Business Reducing Term
 Conditionally renewable to end of
policy term


renewal refused only for lack of insurable interest,
or reduction/ termination of need for the policy
your obligation: conduct an annual review
 Modified own occ definition of total disability:
unable to perform… your occupation & not
working at any occupation
63
Business Reducing Term
 Benefit paid directly to loss payee
 the holder of the obligation
 “indemnity” vs. “reimbursement”
 Issue limits…
 minimum: $1,000/mo. ($500 if other Guardian
or Berkshire coverage in force)
 maximum: $6,660-$22,500, depending on the
policy term
 Maximum issue age: 55
 Gender-distinct rates
64
Business Reducing Term
Issue Amounts
 Purchase loans or business obligations: up
to100% of the monthly payment
 Employment contracts: up to 100% of the
after-tax cost of contract payments
 We require proof of the obligation
65
Business Reducing Term
Tax Considerations
 Premiums are not deductible
 Benefits are not taxable to the policyowner
66
BRT: The Opportunity
 Simple sale: owners and professionals
understand that they are “on the hook”
 Young professionals: practice purchase loan
 loss payee: bank or older professional
 often, the note-holder requires insurance
 avoids having to assign personal DI policy
 Supplements the overhead expense sale
 can match exactly the term of the obligation
67
Disability Buy-Out*
 Provides benefits to assist in funding a
business’ buy-sell agreement
 Benefits paid to the policyowner:
co-owner or corporation
 Benefits reimburse amounts paid to
purchase the business interest of the
disabled owner
* Policy Form 3100; AH84 in Montana.
68
Renewability
 Renewable until…
 Maximum reimbursement amount has been paid
 Insured no longer has an ownership interest
 Policyowner, if individual, no longer has
ownership interest
 Insured ceases to be actively employed by
the business
 Policyowner, if individual, ceases to be actively
employed by the business
 Insured obtains actual and/or constructive
ownership of more than 90% of the business
 Policy anniversary on or most nearly after the
insured’s 64th birthday
69
Definition of Total Disability
 “Due to sickness or injury, the insured
is unable to perform the substantial and
material duties of his or her regular
occupation and not at work for the
business organization.”
70
Eligibility
 Occupation Classes
 6, 5, 4, 4P, 3
 No minimum ownership requirement –
90% maximum ownership
 All owners must apply, unless they are
uninsurable or not active in the business.
 Coverage is not available to two partners
more than 15 years apart in age
71
Disability Buy-Out
 Waiting Periods
 360, 540, 720 days
 Payment methods
 Lump sum
 Monthly payments (24, 36, or 60 months)
 Combination of initial lump sum & monthly
payments (“down payment” method)
 Payment method
must match provisions
of the buy-sell agreement
72
Issue Limits
Waiting Period Lump Sum
12 months
18 months
24 months
Monthly/Down Payment
$ 750,000 $ 1,250,000
$ 1,000,000 $ 1,500,000
$ 1,500,000 $ 2,000,000
Note: The maximum issue limit for medical & dental professionals is $1,500,000; issue limits vary for Montana.
73
Policy Indemnity
 Remains level until insured reaches age 60
 Thereafter, it decreases annually by 20%
 Policy terminates when insured
reaches age 64
 Benefit equals lesser of:
 amount paid
 policy indemnity
 fair market value
74
Buy-Sell Agreement
 Payments conditioned on evidence that the
buy-out is occurring
 Buy-sell agreement not required at time of
underwriting, but required:


at end of first policy year
at time of disability
75
Optional Benefits
 Presumptive Permanent Disability
 once monthly benefits begin, they continue to be
paid, even if the insured recovers
 Future Purchase Option
 right to increase the maximum monthly benefit
without evidence of medical insurability.
 annual options to age 55
 maximum option amount available each
year: $150,000
76
DBO: Financial Underwriting
 Requirements:
 firm’s balance sheet
 profit & loss statements
 proof of owners’ salaries
 Acceptable valuation formulas for
determining issue amounts vary, according
to the type of business.
 Amount issued for DBO is generally less
than what would be issued for life insurance.
77
Premiums
 Level or step-rate (at five year intervals)*
 Gender-distinct** (age nearest birthday)
 No-tobacco use discount: 20%
 Batch billed discount: 10%
 Association discount: 10%
* Level premiums only in Florida.
** Unisex rates only in Montana.
78
Tax Considerations
 Premiums for DBO are not tax deductible.
 Benefits are received tax-free.
 Disabled owner is subject to capital
gains tax if buy-out payments exceed
the cost basis.
79
Field Underwriting Guide
 Pub. 4089BL
 Order at Guardian
Online home page.
Click on “Order
Materials” under
Frequently Used Links.
80
Questions?
81
Guardian DI:
Protection for Individuals
and Small Businesses
An Introductory Overview