Must-haves for disability income protection

(1)

Must-haves for

disability income

protection

CHOOSING AN INCOME PROTECTION PRODUCT FOR DISABILITY?

01 Will my claim get paid and how much will I receive?

02 Can I get cover that matches 100% of my needs?

03 Can I change my cover at a later stage without

further underwriting?

Ask yourself:

For more information, contact 0860 10 52 08 or visit www.fmi.co.za

(2)

Will my claim

get paid and

how much will I

receive?

Can I get cover

that matches

100% of my

needs?

Can I change my

cover or benefits

at a later stage

without further

underwriting?

01

02

03

- Specialist experience in occupational disability assessment.

- The most comprehensive claim criteria in the market.

- Partial claims assessed on either percentage disabled or loss of income basis – you choose.

- We don't reduce

pay-outs by other income earned in the first year of claim and don't require proof of loss of income which means the highest possible pay-out.

- You have a greater chance of having your claim paid with FMI than with any other insurer!

- Cover 100% of your income on an own occupation definition from day 1 till the day you would have retired. - No claims boosters

required, just your full income covered from day 1.

- Cover on multiple waiting periods and benefit terms.

- Ability to split cover across different waiting periods which no other insurer will allow you to do.

- Cover that matches your needs!

- Increase cover by more than with any other insurer and with far fewer restrictions.

- Decrease cover and then re-instate or increase it again without medical underwriting.

- Cover that can be changed to meet changing needs!

Assessing an income protection product for disability?

FMI has the answers!

With the diversity of available income protection products, it can be easy to lose sight of the real reason for income protection – to protect your ability to earn an income when you are injured or ill and unable to work.

Whatever your choice of product, you need to be sure that when it comes time to claim, you will be paid, that you are able to get cover that matches 100% of your needs, and that you have the flexibility to change your cover if you need to.

(3)

01

Will my claim get paid and

_{how much will I receive?}

01a

WILL MY CLAIM GET PAID?

You have a greater chance of having your claim paid with us than with any other insurer.

With extensive experience assessing income protection claims on an occupational disability basis, FMI understands the real issues behind most claims and we do everything we can to get claims paid as quickly and completely as possible. For partial claims, we allow a choice of a percentage disabled or loss of income based payment to allow you the biggest possible pay-out.

We have also developed additional claim criteria to fast track claim payments for some standard conditions, with little assessment and few questions asked. After the initial claim periods, if you’re still unable to return to work we will utilise our extensive claims experience to further assess your claim on an occupational disability basis and continue payment if required.

Our certainty lies in our experience and expertise – we are specialists in assessing income protection risk and we assess claims in a way that no other insurer is able to do.

Occupational disability

An insurer can have multiple claims definitions but without experience in assessing claims on occupational disability, these definitions mean nothing. Before you compare insurers on their number of claims criteria, you should first evaluate their ability to assess claims under occupational disability because that is the criterion that you are most likely to claim on.

At FMI, we have more experience than anyone else in assessing income protection claims on an occupational disability basis.

ONLY

FMI

This is

how most

claims are

assessed.

(4)

APPENDIX TABLE 1 – COMPETITOR SUMMARY OF PARTIAL OCCUPATIONAL DISABILITY CRITERIA

Read More

CASE

Study

Bryan the Plumber

Fall resulting in dislocated shoulder. No manual work for 3 months.

TIP Cover: R40 000 per month

Partial claims – get the highest possible pay-out

OR

YOU CHOOSE!

% Disabled Loss of Income

Most insurers assess claims on either a percentage disabled or loss of income basis, or they don’t give you the choice. Some insurers use both assessment methods but don’t clarify whether the assessment which has the highest pay-out is the one that will be used.

Assessed on percentage disabled? With FMI, if you return to work and find your loss of income is actually

greater than you thought it would be, you can still switch to claim on a loss of income basis up to 30 days after the claim has closed, and get paid the difference. The choice is yours!

ONLY

FMI

Average earnings: R40 000 per month

50% manual I 50% admin

50% disabled, so no income earned PAID = R 60 000

Can’t do manual work so no income earned PAID = R120 000

In this case, FMI’s loss of income option means a bigger pay-out for Bryan (R120 000 as opposed to R60 000).

There are examples where a percentage disabled approach results in a higher claim pay-out. Loss of income can be an onerous requirement at claim stage or your loss might only occur after you have returned to work. By allowing you to choose the basis on which your claim is assessed, FMI ensures that you are not adversely affected when you are still partially able to work.

Paid on a Loss of Income Basis

Paid on a % Disabled Basis

(5)

Understanding FMI’s claim criteria

FMI’s multiple claim criteria are unmatched in the market because they are developed based on our extensive claims experience and income protection expertise. This reduces the subjectivity of the assessment process, speeding up payment and ensuring you receive the highest possible pay-out.

Fast track

If after initial claim period you are still unable to work you can still claim under occupational disability.

Guaranteed

minimum period If you have one of the fractures in the Fractures table, you will be paid out your full benefit amount for the duration set out in the Fractures table.

Guaranteed sickness payment

If you have a doctor’s note that books you off work for at least 7 days, you will be paid out your full benefit amount for the duration that you are booked off work from day 8 up to a maximum of 14 days. If hospitalised for at least 24 hours continuously, your pay-out will be backdated to day 1.

Childbirth benefit

After giving birth, female policyholders may claim for a once-off lump sum equal to 12 times their total monthly premium, if their policy has been in force for at least 9 months.

Occupational

disability

Full occupational disability

Allows you to claim if you have an injury or an illness that prevents you from working.

Partial disability

% disabled

You can choose to be paid out based on the percentage of your job that you cannot do.

Loss of income

You can choose to be paid out based on the amount of income that you have lost over the claim period. This option is available for up to 30 days after the end of the claim.

Driver’s extension Claim R250 a day towards a driver if through disability you are unable to _{drive but are otherwise able to perform your occupation.}

Functional impairment

If you have a permanent condition listed in the Functional impairment table, you will be paid based on the severity of your impairment and the corresponding percentage pay-out for that severity level.

Claim

Functional

impairment

Occupational disability

Note: Driver’s extension applies on

occupational disability claims.

Fast T

rack

Guaranteed

sickness

Guaranteed

minimum period

Childbirth

If you still cannot work, then claim will be assessed on occupational disability.

You choose highest pay-out.

Par

tial

disability

% Disabled Loss of Income

APPENDIX TABLE 2 – COMPETITOR SUMMARY OF PRODUCT CLAIM CRITERIA

Read More

(6)

Aggregation

Aggregation rules allow insurance providers to reduce claim amounts against income earned from work or other disability benefits. This is a massive risk as the claim amount might end up being less than the cover paid for and less than you expected.

For example, if you're self-employed, you might receive an income while you are disabled for work performed before you were disabled. But, you might struggle to get back to your pre-disability earnings immediately on your return to work. Aggregation of these variable earnings could cause you to end up with less than you were covered for in the long run.

FMI will never aggregate a temporary claim pay-out against income earned from working. And after the first 12 months of any temporary claim, FMI will then only aggregate against payments made by another insurer.

ONLY

FMI

Aggregation and proof of loss of income are standard industry processes and can put you at a significant disadvantage as they may reduce the amount you are paid.

Aggregation

reduces

claim

amounts.

01b

HOW MUCH WILL I RECEIvE?

Receiving the correct claim pay-out is essential because the cover amount you select is the amount you believe you will need at claims stage.

Proof of

loss of

income can

reduce

claim

amounts.

Proof of Loss of Income

Proof of loss of income entails proving your income and the amount lost during the disability period.

If you have a variable income or are self-employed not only is this an administratively onerous and difficult task at claim stage, your pay-out amount could be seriously affected.

We don't ask for proof of loss of income which means you get paid what you need when you need it.

ONLY

FMI

(7)

APPENDIX TABLE 4 – COMPETITOR SUMMARY OF PROOF OF LOSS OF INCOME RULES

Read More

CASE

Study

Earnings post-disability:

- 1st month: R15 000 primary commission

(policies sold just before accident)

- Entire disability: R10 000 per month secondary

commission (policies sold 12 months before accident)

Average earnings pre-disability:

R40 000 per month

- R30 000 primary commission (new policies) - R10 000 secondary commission

(policies sold 12 months prior)

R40 000 per month

TOTAL PAID over 12 months: R480 000

Payments exceed pre-disability earnings but when Siya returns to work it will take a year for his earnings to return to the same level as before.

AGGREGATION from day 1

1st month: R15 000 Rest of months: R30 000

TOTAL PAID over 12 months: R345 000

Siya will only earn R30 000 per month for the first year back at work, because he will not earn any secondary commission.

Claiming with Competitor

Claiming with FMI

Siya the Adviser

Injuries as the result of a car accident. Unable to work for 12 months.

TIP Cover: R40 000 per month

With no aggregation, Siya receives enough for both the period while he can’t work and the period when he returns to work but his income has not recovered yet. The FMI approach recognises that policies that aggregate against income earned while disabled can leave a gap in cover on return to work.

APPENDIX TABLE 3 - COMPETITOR SUMMARY OF AGGREGATION RULES

Read More

(8)

CASE

Study

Justin the Plumber

Hijack victim. Disabled at 45. Retirement age: 65.

EIP Cover: R30 000 per month with annual increases

Total expected future earnings: R14.4 million

(based on current earnings allowing for annual inflationary linked increases between age 45 and 65)

Covering 100% of income PAID R14.4 million

Covering 75% of income PAID R11 million

Claiming with Competitor

Claiming with FMI

A total difference of R3.4 million!

Average earnings: R30 000 per month

(with annual increases)

If you need your full income every month to live then insuring anything less than 100% from the day earnings stop until the day you would have retired is just not enough.

Income protection is actually a simple product – it allows you to insure your income against the risk that you are unable to work. If your policy is only protecting a portion of your income, then it is only doing part of what it should.

FMI covers 100% of income* for the first 24 months on a temporary disability basis and, beyond 24 months until

retirement age, 100% of income on an extended disability basis. This ensures you are 100% covered from day 1 until the day you would have retired.

*FMI defines after-tax monthly income as the sum of monthly Guaranteed Salary, Non-Guaranteed Salary, and the Life Insured's Share of Profits.

02

Can I get cover that matches

_{100% of my needs?}

100% of

income

from

day 1 until

retirement.

Most competitors offer 100% cover of income on temporary income protection benefits for the first 24 months of disability. However, after 24 months payments are usually limited to 75% of income. Could you survive with

only 75% of your income?

Insured by Guardrisk Life Ltd FSP 76. FMI is an authorised Financial Services Provider. FSP 2717.

ONLY

FMI

• Covers 100% of your earnings

(9)

And, remember, proving functional impairment is far more onerous than proving occupational disability. So claims boosters are not guaranteed.

Research shows that 83% of claims that run

longer than 24 months would not qualify for a claim booster.

Some competitors offer claim boosters to cover this gap, increasing the claim amount after the fi rst 24 months BUT ONLY if you are permanently disabled at the

highest severity level. Boosters are not guaranteed to apply to all claims that run

beyond 24 months.

APPENDIX TABLE 5 – COMPETITOR SUMMARY OF MAXIMUM AMOUNTS ALLOWABLE ON DIFFERENT PRODUCTS

Read More

FMI have no need for claim boosters because you can select cover equal to 100% of your income.

ONLY

FMI

EXAMPLES of claims that could run longer than 24 months and not qualify:

The Skin

Damage to your skin can have serious effects on your ability to work. In order to qualify for the booster you must burn the palms of both hands or suffer third degree burns that cover more than 30% of your total body surface area.

Organic brain

disorders

An organic brain disorder can prevent you from working for years before you would qualify as functionally impaired, and even then you may not be eligible for the claim booster e.g. Alzheimer’s, epilepsy, and meningitis.

Mental and

behavioural

disorders

Psychological conditions by their nature do not often fi t into a standard Functional

Impairment table. Furthermore, psychological conditions can prevent you from working for years before you would qualify for the claim booster e.g. Bipolar disorder, schizophrenia, depressive disorders, and obsessive compulsive disorders.

visual

disorders

Any visual disorder which leaves your vision substantially impaired can result in you being unable to work making occupational based criteria easy to meet. In order to qualify for the claim booster for visual disorders, you need to be completely blind. Anything less than complete loss of sight would not warrant payment under the claim booster.

Neurological

impairment

of respiration

Any respiration impairment which was neurologically caused will only qualify for the claim booster if you have no capacity for spontaneous breathing and rely completely on ventilation. This includes the requirement that you need to be permanently confi ned to a bed.

Cover should be ﬂ exible enough to meet individual needs

It is essential to cover your entire income BUT also important to have fl exibility in how your cover is made up so that the cover you choose fi ts your needs. Unlike many other insurers, FMI allows you to choose waiting periods and benefi t terms that match your needs so you get paid out when you need it most.

FMI has four WAITING PERIODS for temporary disability cover:

• 7 days (benefi ts paid retrospectively back to day 1, for self-employed individuals, professionals, commission earners, and contract workers)

• 14 days (not offered by most competitors) • 30 days

• 90 days

Temporary disability cover (with a short waiting period) is a must as we know most temporary disability claims last less than 90 days. With FMI you can decide which waiting period best suits your needs.

With FMI you can split cover across waiting periods (NOT the case with most insurers).

ONLY

FMI

Claim boosters aren't always the answer

82% of

FMI's

temporary

claims last

less than

90 days.

14 days or less 15 to 30 days 31 to 60 days 61 to 90 days 15% 14% 27% 44%

Split of claim duration up to 90 days

(10)

APPENDIX TABLE 6 – COMPETITOR SUMMARY OF WAITING PERIODS AND BENEFIT TERMS

Read More

FMI has four BENEFIT TERMS for temporary disability cover:

• 3 months • 6 months • 12 months • 24 months

Andre the Business Owner

Needs cover from day one.

TIP Cover: R30 000 per month. Waiting Period: 7 days

CASE

Study

Average earnings: R30 000 per month

Premium: R304.81

Cover split over waiting periods:

R10 000 – Waiting Period 7 days R10 000 – Waiting Period 14 days R10 000 – Waiting Period 30 days Premium: R227.54

Most insurers only offer a 24 month benefit term for temporary disability. A large number of employees have PHI benefits with a waiting period of 3 or 6 months which makes temporary income protection cover with a benefit term of 3 or 6 months a perfect fit for the shortfall. Insurers who only offer 24 month benefit term options cannot provide benefits that fill this gap appropriately.

Most

insurers

only offer

a 24 month

benefit

term.

FMI offers a 14 day waiting period. This is not offered by most insurers but can be a valuable option for working individuals:

- Non-self-employed / non-professional individuals can’t get cover on a 7 day waiting period but, with FMI, they can choose a 14 day waiting period. Most insurers offer 30 days as shortest waiting period (depending on sick leave to cover the gap) but most people don’t have a full sick leave balance of 30 days so there is still a gap that needs to be covered.

- For individuals who are not self-employed, but earn a combination of a basic salary and commission, FMI allows the commission portion of earnings on a 7 day waiting period and basic salary on a 14 day waiting period. Most insurers would force all cover on a 30 day waiting period.

ONLY

FMI

Difference in monthly premium: R77.27

(11)

You should be able to have cover beyond traditional retirement ages

Think income is only important while you’re working? What about after your retirement? Or what if you decide to work past the traditional retirement age on your policy? How will you cover that income?

You need a product that recognises the risks you face as you reach and exceed your traditional retirement age, as well as when you end up working longer than anticipated.

With FMI's Retirement Extender Option, you could receive up to 75% of your pre-retirement income payable for life, plus temporary income protection cover if you work past age 70.

Ask yourself:

1. Can I claim for temporary disabilities after age 70?

2. If I am in claim at age 70, can my claim continue on a functional impairment basis? 3. How much cover will I have on a functional impairment basis after age 70?

FMI's Retirement Extender means that at application stage, policyholders that have the Temporary Income Protector benefit can add the Temporary Income Protector 75 (TIP 75) benefit while policyholders with the Extended Income Protector benefit can add the Long-term Care Protector benefit.

At application stage for TIP, if you select Retirement Extender as your cease age, you will have access to TIP 75. At application stage for EIP, if you select Retirement Extender as your cease age, you will have access to Long-term.

TIP 75

Long-term Care Protector

Provided you are working past age 70, this cover pays you a monthly income if you cannot work in your own occupation due to a temporary accident or illness up until the age of 75.

If you are 70 or have retired, this cover pays you a monthly income for life if you are functionally impaired.

It's also important to think about the possibility that when taking out cover you assumed an incorrect policy retirement age.

What if you end up working longer than you thought when you took out your cover? You're going to need to extend your policy to make sure you continue to have cover for as long as you work.

With FMI's Continuation Option you have the option of extending your policy retirement age by 5 years on slightly different terms. You can exercise this option more than once and you can extend it right up to age 70.

APPENDIX TABLE 7 – COMPETITOR SUMMARY OF COVER BEYOND AGE 70

Read More

APPENDIX TABLE 8 – COMPETITOR SUMMARY OF COVER BEYOND AGE 70

Read More Research shows more individuals are working past the traditional retirement age of 70.

(12)

Life changes and so should your cover. However, increasing your cover under strict terms might put you at risk, especially if you have to undergo underwriting every time you do so.

03

Can I change my cover or

benefits at a later stage

without further underwriting?

A future insurability guarantee allows changes to cover levels without further underwriting. Some insurers offer future insurability guarantees that allow for once-off or annual increases, but these are often subject to tight eligibility rules and may not apply if the client has claimed before.

FMI boasts the strongest future insurability guarantee on the market. And, it doesn't fall away if our clients claim or were not accepted at standard rates.

ONLY

FMI

Once we’ve accepted an individual for cover, they can SUSPEND, REDUCE, AND INCREASE their cover as their needs change, all without additional medical underwriting. This ensures that cover remains in line with your needs as your circumstances change over time.

Overview of Benefit Increase Options

Annual Benefit Increase

All insurers have an option which allows you to automatically increase your benefit amount by a fixed percentage each year without medical underwriting to meet gradual inflationary increases to income.

FMI’s Annual Benefit Increase allows annual increase of 0%, 5%, 7.5%, or 10% (selected at policy commencement).

Other Benefit Increase Options

Some insurers allow an increase in cover over and above the annual fixed increase without medical underwriting on policy anniversary. However, there are significant differences between these options buried in the fine print.

Also, the older you are, the more likely you are to need the option to avoid your new cover being underwritten, so it’s important to note the maximum age to which you can exercise the option.

FMI Annual Review Option means that if you are under the age of 35, you can increase

your cover by up to 20% and up to the lesser of CPI x 2 and 20% if aged 35 to 55.

At FMI, we allow you to increase your cover beyond the annual benefit increase even if you’ve claimed before or have a health loading. This means you can continue to match cover and income without exposure to the risk of additional underwriting.

ONLY

FMI

Most competitors offer detailed and restrictive options for increasing cover. Often, clients with a health loading or a prior claim are excluded which excludes those most likely to need the option.

Insured by Guardrisk Life Ltd FSP 76. FMI is an authorised Financial Services Provider. FSP 2717. APPENDIX TABLE 7 – COMPETITOR SUMMARY OF INCREASES ON POLICY ANNIVERSARY, USING ANNUAL REVIEW INCREASE OPTIONS

Read More

(13)

Taryn the Financial Adviser

Asthma health loading. Wants to increase cover by 5% per year to make up difference between

annual earnings increase and selected annual benefit increase.

TIP Cover: R25 000 per month

• Annual benefit increase

• Plus, a 20% increase at each policy anniversary until age 35 and thereafter by the lesser of CPI x 2 and 20%

• Ability to keep cover levels in line with income despite loading

Other Product Providers

FMI

Average earnings: R25 000 per month

Annual Earning Increases: average 15% Annual Benefit Increase selected: 10%

CASE

Study

Other Options from FMI

Freeze Benefit

Freeze policy for either 3 or 6 months after the first 12 months of the policy. No premiums or cover for that time but, upon reinstatement, all benefits and premiums remain the same and no underwriting is required.

Continuation Benefit

When reaching cease age, extend selected disability benefits for a 5 year period on specified terms.

Change in Circumstances Benefit

Increase cover by up to 25% without underwriting on beneficiary's death, divorce, marriage, childbirth, adoption, or purchasing a property.

Reinstatement Benefit

Reduce cover on policy anniversary and then re-instate cover at the next policy anniversary without underwriting.

Future Income Protector

Increase cover by up to 300% without underwriting during certain periods, depending on your age at application.

• Annual benefit increase only

• Excluded from other Benefit Increase options • Requires underwriting for any increase • Increase may be rejected

(14)

CASE

Study

CASE

Study

Nick the Accountant

Business earnings decrease to R25 000. Wants to decrease cover to match earnings

but, if business improves, wants to be able to increase cover again.

TIP Cover: R50 000 per month

James the Lawyer

Low replacement ratio. James get married and wants to increase his cover.

TIP Cover: R30 000 per month

• Can decrease cover to any level or even freeze it for a time

• When business improves, can increase cover without underwriting

• Change in Circumstances benefit allows a 25% increase without having to be underwritten

• Can increase his cover again using this option when he has a child or if/when his spouse dies

• May require underwriting for any increase • Increase may be rejected

• Requires underwriting for any increase • Increase may be rejected if his health has

deteriorated since he originally took out cover • Loadings may apply

Other Product Providers

FMI

Average earnings: R50 000 per month

APPENDIX TABLE 8 – COMPETITOR SUMMARY OF THE RULES AROUND EACH PRODUCT OFFERING Read

More

APPENDIX TABLE 9 – COMPETITOR SUMMARY OF DIFFERENT OPTIONS TO INCREASE COVER WITHOUT UNDERWRITING

Read More