Insurance Broker Discusses Types of Premium Structures
As a proficient Insurance Broker, I get questions all the time from clients about the different types of premium structures. There are several types of premium structures available with individual disability policies. The one that we recommend is one that is guaranteed level for the entire time that you have that disability coverage, usually to age 65 or 67. These premiums will not increase and they will be easy to compare to other company’s offerings. There is also one that is a step rate and that step rate might be in increments of 5 years or 10 years so it’s going to be one premium for a little while and then it’s going to go up. If it’s an association plan, those rates could be changed but they’re not guaranteed.
There is something called an annually increasing premium. This premium will go up every single year for as long as you have the plan. Sometimes a company will show dividends to reduce the effect, but a dividend is not guaranteed and it’s a return of excess premium, which you cannot count on it. In trying to look and compare between an annually increasing premiums to a level premium, we suggest that you get level premiums. Get guaranteed level premiums from both companies so that you can see what you’re actually dealing with. The last type of plan would be a combination where some part of the coverage, maybe $2,000 a month, is a guaranteed level premium and then the additional coverage, maybe $3,000 a month is on an annually increasing table. One can always buy an annually increasing and then level it at some point in the future. This is suggested to do because once you guarantee those rates, they’re based on your age and they won’t change as you get older.
If you have questions about types of premium structures, contact our professional Insurance Brokers for guidance. Let our experience work for you.
This educational blog was brought to you by Insurance Broker Michael J. Bruno, seasoned Chartered Financial Consultant, Chartered Life Underwriter and Registered Health Underwriter. Specializing in financial planning and disability insurance for physicians and dentists for over 30 years.