If you are a member of the country’s largest dental association (the ADA) you may be aware that they offer disability insurance at a discounted rate. This policy is offered through Great West Life (a Canadian life insurance company), and over the last 10 years rates have gone up and down (mostly up).
This policy traditionally offered unisex rates that increase every 5 years based on your age. Many people like this because early in your career you can get coverage that is very affordable. However rates are NOT guaranteed, and starting May 1, 2015 there will be a significant change. Premiums will no longer be the same for males and females. The new male rates will increase by about 16%, and female rates will increase by an average of 21%.
If you have had your ADA disability policy for a long time, and are no longer insurable, you might be stuck paying the increased premium. However if you are still healthy, there are some things you might want to consider before purchasing, or renewing your ADA disability policy.
Premiums are inexpensive with the ADA, but only initially. They are schedule to increase every 5 years based on your age. This increase can change from year to year based on the insurance company’s profit margins. Projections have changed pretty dramatically just over the last 5 years (2013-2018). For a male the rates have increased between 5-34% (based on your age bracket). Female rates over the same timeframe have increased from 22-36% based on your age. There’s no telling what rates will be 5, 10, or 15 years from now.
Definition of Disability
While the ADA plan does have a definition of disability that is a close equivalent to the “true own occupation” language that is found in an individual policy, it contains a “Relation to Earnings” provision which can reduce your monthly benefit payments if you are considered “over insured” at the time of a disability claim (by taking into account other income such as social security benefits, workers compensation, group and individual long term disability benefits, etc). An individual contract does not contain this limitation.
You never receive an actual policy because the contract is not between you and the insurance company. It is between the ADA and the insurance company. The ADA or Great West can make changes at any point. You must maintain your membership with the ADA to continue this plan. Many dentists we have worked with find the ADA membership to be useful early in their career, however they do not find it as beneficial in the later stages of their career. ADA membership fees are also not guaranteed.
Increase Option Rider
An individual policy has a future increase option that will allow you to purchase up to $17,000/month which can be activated in full at any annual increase option up to age 55 without medical questions. The ADA plan has an increase option which restricts your increase to $1,000/month in any given year, up to a maximum of only $5,000. If your health were to change this prolonged approach to allowing increases in benefit could result in a significantly lower benefit payout.
The restrictive nature of the increase option is a way for the insurance company (Great West) to limit their exposure to someone who has become unhealthy over time as increases are spread out over a longer period of time.
The ADA plan only pays recovery benefits for a maximum of 3 months –whereas you are eligible for a recovery benefit with an individual policy up to age 65. Even after recovering from a sickness or injury it is quite possible to suffer a loss of income for many months, even years, so the benefits with the ADA are significantly restrictive in comparison.
Most group and association plans offer similar policies. Benefits, policy language, and premiums can change at any time. If you want guarantees you will have to look into an individual disability policy from an accredited insurance company.
At Dentists Disability Insurance we represent ALL of the major disability insurance providers, and would be happy to help you explore your options.