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Disability Insurance Carrier Review: Principal

I review these products to inform the public about these carriers.  Most disability insurance products are very good, but what is right for one person isn’t right for another. That is why you should talk to an expert, objective agent, who can help you navigate the sea of carriers and their individual product features.  I am available for consultations, which you can schedule HERE, or you can always contact me directly at 888-636-2310.

Who is Principal?

Principal is one of the oldest insurance companies in the world.

Founded in 1879, they have grown into a Fortune 500 company.Principal

Ranked number 3 in individual disability insurance sales (based on 2015 LIMRA data), Principal is a major player for those looking to secure long-term disability insurance.  Operation in over 19 countries and with almost 600 billion under management, Principal continues to be a leader in the insurance and asset management markets.

The Principal brand is represented in 19 countries and is traded on the New York Stock Exchange.

Principal offers several disability income solutions, including:

Individual Disability Insurance

Multi-life Disability Insurance

Key-Person Disability Insurance

Disability Buy-Sell

Business Loan Protection

Disability Retirement Security

Group Long-term Disability

Group Short-Term Disability

Principal has a diverse and impressive lineup of products. As a major player in the disability insurance space, they are consistently in the game from both a pricing and a benefits standpoint.

Principal’s Financials

Principal is rated A+ by A.M. Best, their second highest rating. They manage 591.6 billion in assets and have 1.3 billion in after-tax operating earnings.

Principal’s Board of Directors highlights their diversity.   From an AT&T executive to an executive from Brink’s, the executives who run Principal have a unique skillset that helps them run a client-centric business.

Products Offered

Principal has several available plans, many of which vary by the state in which they’re written.  Two of their more popular plans are their individual disability plan (which can be quoted multi-life) and their disability buy/sell.

Principal Individual Disability Plans

PrincipalThese plans are traditional individual disability policies and compete with the other major players in the white collar space (Guardian, Northwestern, Ohio National, The Standard, and other white collar based carriers).

Notably, Principal is truly an a la carte design.  They feature three types of own-occupation definitions of disability: Own-occ not engaged (you can’t do your job and you’re not working anywhere else), own-occ transitional (you can’t do your job and you’re doing a job where you are making less than before), and true own-occ (you can’t do your job but you’re working in another job, irrespective of your income).

Principal also has several riders that can be added to the base policy. These include those found on most policies, such as future purchase options, residual benefits, and cost of living adjustments. One rider (mental/nervous limitation) will even decrease the cost of your policy.

From an individual disability insurance policy perspective, Principal can be attractive for a few reasons.

First, they will do simplified underwriting for single lives up to 4k per month and up to 6k per month for multi-life (depending on state and age).  This program eliminates underwriting requirements, such as routine medical requirements (blood, urine, EKG, etc.), financial verification (for incomes under 150k), and the medical portion of the application (completed over the phone).

We always look at price in relation to the benefits provided and a Principal policy can be very competitive. One area where they shine is in multi-life (common employer) scenarios.

If three individuals with a common employer purchase individual Principal disability policies, then a 20% discount will apply to each.  The pricing is based on unisex rates.  If you’re female, this is a big deal since women pay approximately 40%-50% more for disability insurance than men.

Let’s look at an example:

A 40-year-old non-smoker male professor (with a PhD) making 200k annually could purchase a monthly benefit of $9,515 with a 90-day elimination period to age 65 policy for $4,084.79 annually.  This includes future benefit increases, true own occupation coverage, and residual (partial) benefits. 

That exact same design for a female professor would cost almost $6,600.  While this is still in the expected range for disability insurance premiums (2-4% of gross income), it is substantially higher (over 60%) than her male counterpart.

Should our female professor find two other employees at her college, who also need disability insurance, they could apply for a multi-life discount.  This discount (20% plus unisex rates) would drive her premiums down to $3,871.46, a savings of over 40%.

Principal’s disability buy–out is another popular plan with high lump sum options.  These plans can be very important in partnerships or corporations, where the ownership is highly concentrated and there is a buy/sell arrangement in place.

Most often, these arrangements are funded by life insurance. However, if one of the owners were to become disabled for an extended time, buying that individual out of the business can be very cumbersome.

The plan Principal offers can be structured to pay out either monthly (24, 36 or 60 months) or in a lump sum.  Limits are based largely on occupation class and elimination period (365, 540, or 730 days) but can get as high as 2 million for a lump sum or 3 million for a monthly payout (over 60 months).

What’s great is the multi-life discount may be available on this plan, further reducing premium costs.

Principal Pros

About Raymer Malone, CFP®
About Raymer Malone, CFP®

Raymer Malone, CFP® is principal and owner of www.highincomeprotection.com, an online insurance agency that specializes in disability insurance.  Ray has been in financial services since 1998 and has been life and health licensed since 2004. He started his company to help consumers get access to disability insurance products online and to provide them with the proper direction in selecting a policy. Ray resides in Lake Tahoe, NV with his wife and two children.

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