an introductory overview

Disability income insurance underwritten and issued byBerkshire Life Insurance Company of America, Pittsfield, MA a wholly owned stock subsidiary of

The Guardian Life Insurance Company of America, New York, NY or provided by Guardian.

For producer use only. Not for use with the general public. Product provisions and features may vary from state to state.

8542--05-08

Guardian DI:Protection for Individuals

and Small Businesses

An Introductory Overview

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Disability Insurance Products

Personal DIProVider Plus (Policy Forms 1400 & 1500)

The use of ProVider Plus in our marketing programs

Business DI Overhead Expense (Policy Form 4100; NC82 in Montana) Business Reducing Term (Policy Form AH55-A) Disability Buy-Out (Policy Form 3100; AH84 in Montana)

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A Word About Guardian& Berkshire

Berkshire Life Wholly owned stock subsidiaryDI and LTCI productsA. M. Best rating: A+

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Why Is DI Important?

Your client… Income is your client’s most valuable and

vulnerable asset.

You…Professional responsibility Market alignment & access Profit

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Why ProVider Plus?

Disability is unpredictable

The best policy… provides the most comprehensive protection tailored to specific needs

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Evaluating a Disability Policy

Renewability

Definition of total disability

Strong policy provisions & safeguards

Optional benefits

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Renewability

Non-cancellable and guaranteed renewable until the expiration date (age 65 or 67)

We cannot…cancel the policy change policy provisions increase the policy premium after issue

(as long as premium payments are made on a timely basis)

After expiration date, conditionally renewable for life

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Total Disability: True “Own-Occ”

“unable to perform the material and substantial duties of your occupation…”

The insured can be gainfully employed in another occupation and still be considered totally disabled

True “own-occ” protection for the entire benefit period – all occupation classes

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Specialty Language

Medical & dental specialists

“If you have limited your occupation to the performance of the material and substantial duties of a single medical or dental specialty, we will consider that specialty to be your occupation.”

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Occupation Class

One of the primary determinants of risk

Occ classes based on claims experience

Determines pricing & benefits available

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Occupation Classes

Class 6-3: white collar professionals, executives, managers

Classes 2-1*: occupations with primarily manual duties

Classes 6M-1M: medical & dental occupations

* Available only in employer-sponsored plans; Class 2 also available to business owners who have owned the business for at least 5 years. Class 1 is not available in Florida.

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Move Up Option

Many occupations can “move up” in class.

Criteria include: income level & stabilityexperience amount of travelcharacteristics of the business organization

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Monthly Indemnity

Amount payable for total disability

Primary determinants of issue amount: earned incomeoccupation classother disability coverage in force

(individual and group)who pays the premium (individual vs.

employer pay)

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Maximum Issue Limits*

Occupation Class

Maximum Issue Limit

Maximum Participation with Group LTD

6 – 4 $15,000 $25,000

6M, 5M $15,000 $25,000

4M, 3M $15,000 $20,000

2,1, 2M, 1M $7,500 Not available

* For issue ages 18 – 55. Limits vary for medical and dental professionals, depending on the use of the TeleMed underwriting process. Limits also vary in Florida.

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Elimination Period

Elimination periods available: 30, 60, 90, 180, 360, 720* days

To satisfy the EP, must be disabled from the same or different causes.

Days of disability don’t have to be consecutive, but must occur during the accumulation period.Example: 90 day EP – 210 day APExample: 180 month EP – 360 day AP

* Not available in some states

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Elimination Period

Benefits begin to accrue after theelimination period has been satisfied.

Elimination period waived if you becomedisabled again within 5 years after theend of a prior disability… which lasted more than 6 months for which we paid benefits

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Benefit Periods

2 years, 5 years, 10 years, to age 65, to age 67

Flexibility to meet your clients’ needs

Graded lifetime benefits* available by rider (see details on the following slide)

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Graded Lifetime Indemnity for Total Disability Rider

For disability prior to age 46, full monthly indemnity payable after age 65 (or 67)

For disability at age 46 or after, benefit after age 65 (or 67) is a percentage of the monthly indemnity decreases 5% for each year beyond age 45 that

disability occurs

Examples:For disability at age 46: 95% of monthly indemnityFor disability at age 50: 75% of monthly indemnity

Note: Availability of this rider is limited in Florida.

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Recurrent Disability

No new elimination period if a disability occurs within 12 months of a previous disability.

To be considered recurrent, the later disability must be due to the same cause or causes as the previous disability.

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Presumptive Total Disability

Total disability presumed, even if at work, for total and complete loss of:sight, hearing, speechuse of both hands, both feet, or one hand

and one foot

Elimination period is waived

Benefit paid as long as loss continues during the benefit period

Loss does not have to be irrecoverable

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Capital Sum Benefit

Lump sum benefit paid for: Total and irrecoverable loss of sight in one eye or

complete loss of a hand or foot by severance

Capital Sum = 12 X monthly indemnity

Payable in addition to any other policy benefit

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Rehabilitation Benefit

Helps to meet the costs of a rehabilitation program while totally disabled.

We must agree to the program in writing before enrollment.

A formal program of retraining to help the client return to work in his or her occupation.

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Modification and Access Benefit

Reimburses appropriate and reasonable costs incurred by the client

For a modification designed to assist in a return to work in his or her occupation.

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Transplant & Cosmetic Surgery

Benefits payable for total disability due to transplant of a part of your body to another

person orcomplications of cosmetic surgery

Must become totally disabled more than 6 months after the policy’s effective date.

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Waiver of Premium

Waives premium while your client is disabled and receiving benefits

Continues to waive premium for six months following recovery.

Refunds any premium paid that is attributable to the period of disability – even if paid before the disability began.

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Exclusions & Limitations*

No benefits payable…during incarceration for disability caused by, contributed to or resulting

from:– military training, action, conflict or war while serving in

the military or working for contracted military services.– commission of, or attempt to commit, a criminal offense.– being engaged in an illegal occupation.– suspension, revocation or surrender of professional or

occupational license or certification.– an intentionally self-inflicted injury.– any loss excluded by name or specific description.

* Exclusions & limitations may vary by state.

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Exclusions & Limitations*

Normal pregnancy or childbirth are not covered during the first 90 days of disability or the elimination period, if longer.**

Foreign Residency Limitation - The insured must be living full time in the U.S. or Canada in order to receive benefits (except for incidental travel or vacations).

* Varies by state

** Policy Form 1400 only

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Exclusions & Limitations

Mental Disorder and/or Substance Abuse limitation.*monthly benefits are limited to an aggregate total

of 24 months

Does not apply while continuously confined as an inpatient in a hospital and under care of physician.

* Applies to all policies issued in Florida. It also applies in all states to anesthetists, anesthesiologists, ER physicians, pain management physicians, and CRNAs.

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ProVider Plus:Optional Benefits

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Optional Benefits

Classes 6 – 3, 6M – 3M Residual Disability Benefit Rider Cost of Living Adjustment Rider Graded Lifetime Indemnity for Total Disability

Benefit Rider Future Increase Option Rider Automatic Benefit Enhancement Rider Catastrophic Disability Benefit Rider Retirement Protection Plus Disability Benefit Rider

All Classes: Social Insurance Substitute Rider Unemployment Waiver of Premium Rider

Classes 2, 1: Partial Disability Rider

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Residual Disability Benefit Rider

Requires loss of income of at least 15% of prior income.

Specific loss of time or duties are not required.

Elimination period can be satisfied by total or residual disability.

First 12 months – dollar-for-dollar loss of income benefit, up to the monthly indemnity*

* Coordinates with benefits payable from any other disability insurance policies the client may already have.

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Residual Disability Benefit Rider

After the first 12 months, benefits are proportionate to the loss of income.

If income loss is 75% or more, we consider the loss to be 100%.

Residual benefits payable for entire period.

Recovery: residual benefits will continue up to the end of the benefit period, as long as the loss of income is at least 15%.

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Cost of Living Adjustment Riders

Fixed 3%: The monthly benefit increases each year during disability by 3%

6% Maximum: The monthly benefit increases each year during disability according to changes in the CPI-U. Increases will be no lower than 3% and no higher

than 6%

For these options, increases begin after the insured has been disabled for 12 months

Note: All COLA increases are calculated on a compound interest basis.

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Four-Year Delayed: Increases begin on the fourth anniversary of disability.

The monthly benefit increases each year during disability by 3%

Economical option for obtaining long term cost of living protection

Note: All COLA increases are calculated on a compound interest basis.

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No cap on increases before the expiration date

After recovery, indexing increases remain part of the policy’s base benefituntil the expiration dateno extra premium

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Future Increase Option Rider

Allows for the purchase of additional coverage in spite of any change in healthor occupation

Total increase option: up to 2 times the base policy plus total in-force with Guardian and Berkshire*

Annual option dates to age 55

Special option date: For loss of Group LTD coverage orOn a date declared by the company

Note: State variations may apply.

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Future Increase Option Rider

Until age 45, insured can exercise up to the total increase option.

Afterwards, up to 1/3 of the available option amount each year, or the remaining option amount, if less than $1,000.

May exercise an option if disabled on an option date increased benefit available for a subsequent

disability only

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Automatic Benefit Enhancement Rider

Attached to policy at underwriter’s discretion

4% compound annual increases for 5 years

Increases provided despite any change in health, income or occupation

If the insured declines two consecutive increases, no future offers

Before age 60, insured may apply to extend the rider for additional 5-year periods.

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Catastrophic Disability Benefit Rider

Pays additional monthly benefit for Loss of 2 of 6 ADLsCognitive impairment Irrecoverable disability

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Catastrophic Disability Benefit Rider

Benefit amount: up to $8,000 per month total coverage not to exceed 100% of

applicant’s income

Built-in annual 3% fixedcompounded adjustmentsmaximum benefit = two times the original benefit

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Social Insurance Substitute Rider

Coordinates with social insurance

Dollar-for-dollar offset

Issue amounts: up to $1500 per month

Required for policies issued to classes 2 – 1 and 2M – 1M.

Note: In New York and New Jersey, if the insured receives any social insurance benefits, no benefits are payable under the rider.

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Unemployment Waiver of Premium Rider

Premiums waived if insured becomes unemployed

Must receive unemployment compensation for at least 60 consecutive days.

Premiums waived for 12 months, even if insured returns to work.

Renewable to age 60 or until the date option is exercised.

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Partial Disability*

Benefit is payable if sickness or injury causes a loss of the ability to perform one or more of the material

and substantial duties of the insured’s occupation, or the ability to perform these duties for more than

one-half the time normally required.

Elimination period must be satisfied by total disability

Benefit = 50% of the monthly indemnity

Payable for up to 6 months

* Available to classes 2 – 1 and 2M – 1M.

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Premium Options

Level Premiums remain the same until age 65 or 67.

Graded Low initial rate, with annual increases. Can be converted to a level premium (at attained

age rates) until age 50.

Step-rate Premium increases once to a level premium At the later of age 35 or five years after purchase

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Premium Payment Modes

Annual, Semi-annual, quarterly, monthly

Monthly Guard-O-Matic – no service fee

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Risk Classes

Preferred

Select

Standard

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Employer-Sponsored Plans

Gender-distinct pricing (Policy Form 1400) used for policies issued in Individual salesVoluntary Income Protection programsAssociation programs

Unisex pricing (Policy Form 1500) used for policies issued in Qualified Sick Pay Plans Executive Bonus Plans

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Discounts

Multi-policy discount5% on the first year premium

Employer-sponsored discount: 10%Groups of 2+ lives Groups of 3+ lives if one of the participants is in

class 6M – 1M

Association discount: 10%*For 10+ lives in approved associations

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Business Products

Overhead Expense

Business Reducing Term

Disability Buy-Out

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Overhead Expense*

Protects the business if the owner is disabled

Reimburses covered expenses incurred in the daily operation of the business

Excellent sequential sale to personal DI or…

Lead with Overhead Expense

* Policy Form 4100; NC82 in Montana

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Overhead Expense

Renewability:Non-cancellable & guaranteed renewable

to age 65Renewable to age 75 if working full time

and responsible for business expenses

Definition of disability: own-occupation

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Overhead Expense

Waiting period30, 60 or 90 days

Maximum indemnity periods12, 18 or 24 months

Maximum issue limit*$30,000 per month

Available to Classes 6, 5, 4, 4P, 3

* Higher limits may be available, subject to underwriter discretion.

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Overhead Expense

A reimbursement contract

Eligible expenses covered up to the policy’s maximum monthly benefit

Carry-over of benefits “unused” benefits may be carried over to a

subsequent month. may be carried over until aggregate maximum

benefit is paid – up to twice the maximum benefit period

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Covered Expenses

Rent

Utilities (e.g. electricity, phone, water)

Rent or lease expense (e.g. furniture and equipment)

Interest on debt

Depreciation or scheduled installment payments of principal of debt

Taxes on business property

Other normal, necessary and customary fixed business expenses

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Covered Expenses

Salaries of employees who are not members of the insured’s profession

Professional replacement benefit80% of replacement’s salary is considered a

covered expense for up to 6 months

Note: Policy provisions vary In Montana.

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Residual Overhead Expense Benefit Rider

Residual disability: insured suffers…at least 20% loss of gross monthly revenue and loss of time or duties

Benefit = covered overhead expenses minus current gross monthly revenue

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Future Purchase Option

Annual increase options to age 55

Maximum annual option amount: $1500

Total additional coverage of up to twice the maximum monthly benefit

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Tax Considerations

Premiums for overhead expense coverage are deductible

Policy benefits are taxablehowever, benefits are used to reimburse covered

expenses, which are deductible

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Premiums & Discounts

Gender-distinct, except for MT

Based on “age nearest birthday”

Non-tobacco user discount: 20%

Volume discount for monthly benefits of $4,000+

List bill discount: 10%

Association discount: 10%

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Business Reducing Term*

Protects fixed-payment business obligations… loan for purchase of business or practice business loan (e.g. expansion)guaranteed employment contract

Unique product!

* Policy Form AH55-A; Available in all states except FL, MN, MT, NC, SC, VA.

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Reducing Term Insurance

Decreasing Term Reducing Term Life Insurance Disability Insurance

$25,000 $1,000

Issue Term Ends $0 Issue Term Ends $0

Full Amount Payable Until

Monthly IndemnityFace Amount

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Coverage lasts for a specified term5 to 30 yearspolicy term = length of the obligationcoverage cannot extend beyond age 60

Benefits payable until the end of the policy term

Elimination periods: 1, 3, 6, 12 months

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Conditionally renewable to end of policy term renewal refused only for lack of insurable interest,

or reduction/ termination of need for the policyyour obligation: conduct an annual review

Modified own occ definition of total disability: unable to perform… your occupation & not working at any occupation

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Benefit paid directly to loss payee the holder of the obligation “indemnity” vs. “reimbursement”

Issue limits…minimum: $1,000/mo. ($500 if other Guardian

or Berkshire coverage in force)maximum: $6,660-$22,500, depending on the

policy term

Maximum issue age: 55

Gender-distinct rates

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Business Reducing Term Issue Amounts

Purchase loans or business obligations: up to100% of the monthly payment

Employment contracts: up to 100% of the after-tax cost of contract payments

We require proof of the obligation

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Business Reducing Term Tax Considerations

Premiums are not deductible

Benefits are not taxable to the policyowner

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BRT: The Opportunity

Simple sale: owners and professionals understand that they are “on the hook”

Young professionals: practice purchase loan loss payee: bank or older professionaloften, the note-holder requires insuranceavoids having to assign personal DI policy

Supplements the overhead expense sale can match exactly the term of the obligation

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Disability Buy-Out*

Provides benefits to assist in funding a business’ buy-sell agreement

Benefits paid to the policyowner:co-owner or corporation

Benefits reimburse amounts paid to purchase the business interest of the disabled owner

* Policy Form 3100; AH84 in Montana.

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Renewability

Renewable until…Maximum reimbursement amount has been paid Insured no longer has an ownership interestPolicyowner, if individual, no longer has ownership

interest Insured ceases to be actively employed by

the businessPolicyowner, if individual, ceases to be actively

employed by the business Insured obtains actual and/or constructive ownership

of more than 90% of the businessPolicy anniversary on or most nearly after the

insured’s 64th birthday

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Definition of Total Disability

“Due to sickness or injury, the insured is unable to perform the substantial and material duties of his or her regular occupation and not at work for the business organization.”

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Eligibility

Occupation Classes6, 5, 4, 4P, 3

No minimum ownership requirement – 90% maximum ownership

All owners must apply, unless they are uninsurable or not active in the business.

Coverage is not available to two partners more than 15 years apart in age

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Disability Buy-Out

Waiting Periods360, 540, 720 days

Payment methodsLump sum Monthly payments (24, 36, or 60 months) Combination of initial lump sum & monthly

payments (“down payment” method)

Payment method must match provisions of the buy-sell agreement

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Issue Limits

Waiting Period Lump Sum Monthly/Down Payment

12 months $ 750,000 $ 1,250,00018 months $ 1,000,000 $ 1,500,00024 months $ 1,500,000 $ 2,000,000

Note: The maximum issue limit for medical & dental professionals is $1,500,000; issue limits vary for Montana.

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Policy Indemnity

Remains level until insured reaches age 60

Thereafter, it decreases annually by 20%

Policy terminates when insured reaches age 64

Benefit equals lesser of:amount paidpolicy indemnity fair market value

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Buy-Sell Agreement

Payments conditioned on evidence that the buy-out is occurring

Buy-sell agreement not required at time of underwriting, but required:at end of first policy yearat time of disability

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Optional Benefits

Presumptive Permanent Disabilityonce monthly benefits begin, they continue to be

paid, even if the insured recovers

Future Purchase Option right to increase the maximum monthly benefit

without evidence of medical insurability.annual options to age 55maximum option amount available each

year: $150,000

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DBO: Financial Underwriting

Requirements: firm’s balance sheetprofit & loss statements proof of owners’ salaries

Acceptable valuation formulas for determining issue amounts vary, according to the type of business.

Amount issued for DBO is generally less than what would be issued for life insurance.

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Premiums

Level or step-rate (at five year intervals)*

Gender-distinct** (age nearest birthday)

No-tobacco use discount: 20%

Batch billed discount: 10%

Association discount: 10%

* Level premiums only in Florida.

** Unisex rates only in Montana.

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Tax Considerations

Premiums for DBO are not tax deductible.

Benefits are received tax-free.

Disabled owner is subject to capital gains tax if buy-out payments exceed the cost basis.

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Field Underwriting Guide

Pub. 4089BL

Order at Guardian Online home page. Click on “Order Materials” under Frequently Used Links.

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Questions?

Guardian DI:Protection for Individuals

and Small Businesses

An Introductory Overview

an introductory overview

Documents