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What’s So Special About Special Risk Disability?

What’s So Special About Special Risk Disability?. Thomas R Petersen Petersen International Underwriters 239292 Valencia Boulevard, Suite 215 Valencia, California 91355 (800) 345-8816 * piu@piu.org. What is Special Risk Insurance?. Insuring the Space Shuttle?.

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What’s So Special About Special Risk Disability?

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  1. What’s So Special About Special Risk Disability? Thomas R Petersen Petersen International Underwriters 239292 Valencia Boulevard, Suite 215 Valencia, California 91355 (800) 345-8816 * piu@piu.org

  2. What is Special Risk Insurance? • Insuring the Space Shuttle?

  3. What is Special Risk Insurance? • Insuring Oil Rigs?

  4. What is Special Risk Insurance? • Definition – Insurance that is outside the mainstream of coverages.

  5. What is Special Risk Insurance? • Property and Casualty Insurance? • Liability Coverage? • Life Insurance?

  6. What is Special Risk Insurance? • Definition – Insurance that is outside the mainstream of coverages. An addendum to this definition

  7. What is Special Risk Insurance? • Definition – Insurance that is outside the mainstream of coverages. Outside the mainstream of coverage which the producer is familiar!

  8. Three Main Categories • Excess Coverages • Occupation or Avocation Issues • Special Situations • Location • Needs • Health

  9. Excess Personal Disability Special Risk Disability Plans

  10. Is Excess Disability Insurance Really Needed?

  11. Spending Patterns in the USA • U.S. News and World Report • U.S. Bureau of Labor Statistics 65% to 75% of income is consumed just to live!

  12. Show Me The Max! % Income Issued by Most Carriers 100 75 70 60 50 40 30 20 0 The Need Line 75,000 150,000 300,000 500,000 1,000,000

  13. Personal Disability • Physician Income = $600,000 • Monthly income = $50,000 • Benefit Needed = $32,500/Month • Individual, or • Group Excess and Multi-Life • Guaranteed to issue • Guaranteed issue

  14. Excess Personal Disability Excess/Primary Business Disability Disability Plans

  15. Self-employed Attorney has • 1 income • 2 budgets • Personal Budget • Business Budget • Personal DI is for Personal Budget • BOE is for Business Budget Business Overhead Expense

  16. Example: This attorney needs $50,000/month in BOE • Typical Issue Limits = $30,000/month • Show Me the Max! • P&C - Business Interruption Coverage Business Overhead Expense

  17. Other BOE Items of Interest • Primary Markets Often…… • Disallow 5+ persons of the same profession • Provide benefits up to a cap, even if more is needed!

  18. Businesses need to address how assets are handled: • Voluntary withdrawal • Dissolution • Death • Disablement • Purpose of this need • Logical • Necessary Buy-Sell

  19. Buy-Sell • Step 1 - Agree to terms • Step 2 - Plan for the funding • Life insurance can address: • Death • Fund withdrawal and dissolution

  20. Withdrawal and dissolution has some degrees of control. • Death or disability has NO control • There is no time to maneuver or negotiate • Financial planning MUST be pre-planned! • Death is certain! • Motivation by surviving owners to acquire full ownership to prevent FORCED relationship with heir's or others is logical and desirable. Buy-Sell

  21. Disability presents more difficult problems • Disabled owner is dead "productively“ • Illegal to bury him or her! • Still has a voice in business, but will change: • Not interested in investing in company • Wants full salary, benefits and split of profits - NOW! • Produces nothing! Buy-Sell

  22. Forces disabled owner to sell, and • Non-disabled owners to buy • Pre-agreed upon price or formula • Has a market value via insurance Buy-Sell

  23. When is a Buy-Sell a Special Risk? • Primary Markets Often……. • Limit issue limits and/or elimination periods • Disallow one person Buy-Sell • Disallow family businesses • Disallow large age differentials • Reduce benefits at age 60 and olderGot a Buy-Sell? Get a Key Person!

  24. Movie production company signs top star • No Star = No Movie • Similar to Keyperson Life • Star gets money by contract, Studio can recapture some losses Key Person

  25. When is a Key Person a Special Risk? • Primary Markets Often….. • Don’t write key-person disability • Those that do: • Offer only modest amounts • Restrict age limits • Limited acceptable occupational

  26. Uses include: • Personal Disability • Buy-Sell • Business Overhead Expense • Key Person Excess Disability

  27. Excess Personal Disability Excess/Primary Business Disability Loss of Future Earnings Special Risk Disability Plans

  28. History Loss of Future Earnings

  29. Excess Personal Disability Excess/Primary Business Disability Loss of Future Earnings Bank Loan Special Risk Disability Plans

  30. 1 to 10 year notes • Amount or length of time issues Bank Loan Indemnification

  31. Excess Personal Disability Excess/Primary Business Disability Loss of Future Earnings Bank Loan Contract Indemnification Special Risk Disability Plans

  32. Employment contract guarantee against non-performance due to a disability • Reduces entity/company liability Contract Indemnification

  33. Excess Personal Disability Excess/Primary Business Disability Loss of Future Earnings Bank Loan Contract Indemnification Severance Agreement Special Risk Disability Plans

  34. Severance Agreement • Early/Forced Retirement • Contracts often include: • FULL BENEFITS!

  35. Excess Personal Disability Excess/Primary Business Disability Loss of Future Earnings Bank Loan Contract Indemnification Severance Agreement War/Terrorism Special Risk Disability Plans

  36. Terrorism and War Coverage • Standard Exclusions in traditional policies • International and Domestic exposures • Particular industries • Media • Fire Fighters • Consultants • Sanitation • Medical

  37. Excess Personal Disability Excess/Primary Business Disability Loss of Future Earnings Bank Loan Contract Indemnification Severance Agreement War/Terrorism 401(k) Completion Special Risk Disability Plans

  38. 401(k) Completion • Give Up Retirement?

  39. Excess Personal Disability Excess/Primary Business Disability Loss of Future Earnings Bank Loan Contract Indemnification Severance Agreement War/Terrorism 401(k) Completion Buy-In Special Risk Disability Plans

  40. Buy-In Disability Plans • Example

  41. Excess Personal Disability Excess/Primary Business Disability Loss of Future Earnings Bank Loan Contract Indemnification Severance Agreement War/Terrorism 401(k) Completion Buy-In Occupational Issues Special Risk Disability Plans

  42. Entertainer Pilot Athlete Musician Composer Martial Arts Instructor Artist Commercial Diver Venture Capitalist Jockey Horse Trainer Tuna Boat Captain I Have a client…..

  43. Excess Personal Disability Excess/Primary Business Disability Loss of Future Earnings Bank Loan Contract Indemnification Severance Agreement War/Terrorism 401(k) Completion Buy-In Occupational Issues Avocational Issues Special Risk Disability Plans

  44. I’m an Executive but I love to… • Weekend warriors • Scuba • Search and Rescue

  45. Excess Personal Disability Excess/Primary Business Disability Loss of Future Earnings Bank Loan Contract Indemnification Severance Agreement War/Terrorism 401(k) Completion Buy-In Occupational Issues Avocational Issues Special Situations Special Risk Disability Plans

  46. Special Situations • Short-term needs • Multi-national needs • Health Issues • Current • Recent • High Net worth • High Unearned income • Older ages

  47. How to Identify a Special Risk

  48. How to Identify a Special Risk When Your Regular Carrier Can’t or Won’t!

  49. Financial Bottom Line • 65% to 75% of income is needed! • Business can easily fail without the individual at the helm nor without enough cash to carry through! • Families are impacted more than the disabled person! There are some serious holes in most financial or business plans!

  50. What’s So Special About Special Risk Disability? Please contact your local Plus Group office for more information.  Go to www.plusgroupus.com and click on the agency locator map to find an office near you or call 800/831-1018."

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