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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

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
What is Special Risk Insurance?
  • Insuring the Space Shuttle?
what is special risk insurance2
What is Special Risk Insurance?
  • Definition – Insurance that is outside the mainstream of coverages.
what is special risk insurance3
What is Special Risk Insurance?
  • Property and Casualty Insurance?
  • Liability Coverage?
  • Life Insurance?
what is special risk insurance4
What is Special Risk Insurance?
  • Definition – Insurance that is outside the mainstream of coverages.

An addendum to this definition

what is special risk insurance5
What is Special Risk Insurance?
  • Definition – Insurance that is outside the mainstream of coverages.

Outside the mainstream of coverage which the producer is familiar!

three main categories
Three Main Categories
  • Excess Coverages
  • Occupation or Avocation Issues
  • Special Situations
    • Location
    • Needs
    • Health
slide11
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!

slide12

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

slide13
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
disability plans
Excess Personal Disability

Excess/Primary Business Disability

Disability Plans
slide15

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

slide16

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

other boe items of interest
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!
slide18

Businesses need to address how assets are handled:

    • Voluntary withdrawal
    • Dissolution
    • Death
    • Disablement
  • Purpose of this need
    • Logical
    • Necessary

Buy-Sell

slide19
Buy-Sell
  • Step 1 - Agree to terms
  • Step 2 - Plan for the funding
    • Life insurance can address:
      • Death
      • Fund withdrawal and dissolution
slide20

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

slide21

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

slide22

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

when is a buy sell a special risk
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!
slide24

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

when is a key person a special risk
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
slide26

Uses include:

    • Personal Disability
    • Buy-Sell
    • Business Overhead Expense
    • Key Person

Excess Disability

special risk disability plans1
Excess Personal Disability

Excess/Primary Business Disability

Loss of Future Earnings

Special Risk Disability Plans
slide28

History

Loss of Future Earnings

special risk disability plans2
Excess Personal Disability

Excess/Primary Business Disability

Loss of Future Earnings

Bank Loan

Special Risk Disability Plans
slide30

1 to 10 year notes

  • Amount or length of time issues

Bank Loan Indemnification

special risk disability plans3
Excess Personal Disability

Excess/Primary Business Disability

Loss of Future Earnings

Bank Loan

Contract Indemnification

Special Risk Disability Plans
slide32

Employment contract guarantee against non-performance due to a disability

  • Reduces entity/company liability

Contract Indemnification

special risk disability plans4
Excess Personal Disability

Excess/Primary Business Disability

Loss of Future Earnings

Bank Loan

Contract Indemnification

Severance Agreement

Special Risk Disability Plans
severance agreement
Severance Agreement
  • Early/Forced Retirement
  • Contracts often include:
    • FULL BENEFITS!
special risk disability plans5
Excess Personal Disability

Excess/Primary Business Disability

Loss of Future Earnings

Bank Loan

Contract Indemnification

Severance Agreement

War/Terrorism

Special Risk Disability Plans
terrorism and war coverage
Terrorism and War Coverage
  • Standard Exclusions in traditional policies
  • International and Domestic exposures
  • Particular industries
    • Media
    • Fire Fighters
    • Consultants
    • Sanitation
    • Medical
special risk disability plans6
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
401 k completion
401(k) Completion
  • Give Up Retirement?
special risk disability plans7
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
special risk disability plans8
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
i have a client
Entertainer

Pilot

Athlete

Musician

Composer

Martial Arts Instructor

Artist

Commercial Diver

Venture Capitalist

Jockey

Horse Trainer

Tuna Boat Captain

I Have a client…..
special risk disability plans9
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
i m an executive but i love to
I’m an Executive but I love to…
  • Weekend warriors
  • Scuba
  • Search and Rescue
special risk disability plans10
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
special situations
Special Situations
  • Short-term needs
  • Multi-national needs
  • Health Issues
    • Current
    • Recent
  • High Net worth
  • High Unearned income
  • Older ages
how to identify a special risk1

How to Identify a Special Risk

When Your Regular Carrier Can’t or Won’t!

financial bottom line
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!

what s so special about special risk disability1

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."