1. Disability income insurance underwritten and issued by Berkshire 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

2. 2 Disability Insurance Products  Personal DI ProVider 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)

3. 3 A Word About Guardian & Berkshire  Berkshire Life Wholly owned stock subsidiary DI and LTCI products A. M. Best rating: A+

4. 4 Why Is DI Important?  Your client… Income is your client’s most valuable and vulnerable asset.  You… Professional responsibility Market alignment & access Profit

5. 5 Why ProVider Plus?  Disability is unpredictable  The best policy… provides the most comprehensive protection tailored to specific needs

6. 6 Evaluating a Disability Policy  Renewability  Definition of total disability  Strong policy provisions & safeguards  Optional benefits

7. 7 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

8. 8 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

9. 9 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.”

10. 10 Occupation Class  One of the primary determinants of risk  Occ classes based on claims experience  Determines pricing & benefits available

11. 11 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.

12. 12 Move Up Option  Many occupations can “move up” in class.  Criteria include: income level & stability experience amount of travel characteristics of the business organization

13. 13 Monthly Indemnity  Amount payable for total disability  Primary determinants of issue amount: earned income occupation class other disability coverage in force (individual and group) who pays the premium (individual vs. employer pay)

14. 14 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 $7,500Not 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.

15. 15 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 AP Example: 180 month EP – 360 day AP * Not available in some states

16. 16 Elimination Period  Benefits begin to accrue after the elimination period has been satisfied.  Elimination period waived if you become disabled again within 5 years after the end of a prior disability… which lasted more than 6 months for which we paid benefits

17. 17 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)

18. 18 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 indemnity For disability at age 50: 75% of monthly indemnity Note: Availability of this rider is limited in Florida.

19. 19 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.

20. 20 Presumptive Total Disability  Total disability presumed, even if at work, for total and complete loss of: sight, hearing, speech use 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

21. 21 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

22. 22 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.

23. 23 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.

24. 24 Transplant & Cosmetic Surgery  Benefits payable for total disability due to transplant of a part of your body to another person or complications of cosmetic surgery  Must become totally disabled more than 6 months after the policy’s effective date.

25. 25 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.

26. 26 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.

27. 27 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

28. 28 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.

29. 29 ProVider Plus: Optional Benefits

30. 30 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

31. 31 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.

32. 32 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%.

33. 33 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.

34. 34 Cost of Living Adjustment Riders  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.

35. 35 Cost of Living Adjustment Riders  No cap on increases before the expiration date  After recovery, indexing increases remain part of the policy’s base benefit until the expiration date no extra premium

36. 36 Future Increase Option Rider  Allows for the purchase of additional coverage in spite of any change in health or 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 or On a date declared by the company Note: State variations may apply.

37. 37 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

38. 38 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.

39. 39 Catastrophic Disability Benefit Rider  Pays additional monthly benefit for Loss of 2 of 6 ADLs Cognitive impairment Irrecoverable disability

40. 40 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% fixed compounded adjustments maximum benefit = two times the original benefit

41. 41 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.

42. 42 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.

43. 43 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.

44. 44 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

45. 45 Premium Payment Modes  Annual, Semi-annual, quarterly, monthly  Monthly Guard-O-Matic – no service fee

46. 46 Risk Classes  Preferred  Select  Standard

47. 47 Employer-Sponsored Plans  Gender-distinct pricing (Policy Form 1400) used for policies issued in Individual sales Voluntary Income Protection programs Association programs  Unisex pricing (Policy Form 1500) used for policies issued in Qualified Sick Pay Plans Executive Bonus Plans

48. 48 Discounts  Multi-policy discount 5% 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

49. 49 Business Products  Overhead Expense  Business Reducing Term  Disability Buy-Out

50. 50 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

51. 51 Overhead Expense  Renewability: Non-cancellable & guaranteed renewable to age 65 Renewable to age 75 if working full time and responsible for business expenses  Definition of disability: own-occupation

52. 52 Overhead Expense  Waiting period 30, 60 or 90 days  Maximum indemnity periods 12, 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.

53. 53 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

54. 54 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

55. 55 Covered Expenses  Salaries of employees who are not members of the insured’s profession  Professional replacement benefit 80% of replacement’s salary is considered a covered expense for up to 6 months Note: Policy provisions vary In Montana.

56. 56 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

57. 57 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

58. 58 Tax Considerations  Premiums for overhead expense coverage are deductible  Policy benefits are taxable however, benefits are used to reimburse covered expenses, which are deductible

59. 59 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%

60. 60 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.

61. 61 Reducing Term Insurance Decreasing TermReducing Term Life InsuranceDisability Insurance $25,000 $1,000 Issue Term Ends $0Issue Term Ends $0 Full Amount Payable Until Monthly IndemnityFace Amount

62. 62 Business Reducing Term  Coverage lasts for a specified term 5 to 30 years policy term = length of the obligation coverage cannot extend beyond age 60  Benefits payable until the end of the policy term  Elimination periods: 1, 3, 6, 12 months

63. 63 Business Reducing Term  Conditionally renewable to end of policy term renewal refused only for lack of insurable interest, or reduction/ termination of need for the policy your obligation: conduct an annual review  Modified own occ definition of total disability: unable to perform… your occupation & not working at any occupation

64. 64 Business Reducing Term  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

65. 65 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

66. 66 Business Reducing Term Tax Considerations  Premiums are not deductible  Benefits are not taxable to the policyowner

67. 67 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 professional often, the note-holder requires insurance avoids having to assign personal DI policy  Supplements the overhead expense sale can match exactly the term of the obligation

68. 68 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.

69. 69 Renewability  Renewable until… Maximum reimbursement amount has been paid Insured no longer has an ownership interest Policyowner, if individual, no longer has ownership interest Insured ceases to be actively employed by the business Policyowner, if individual, ceases to be actively employed by the business Insured obtains actual and/or constructive ownership of more than 90% of the business Policy anniversary on or most nearly after the insured’s 64th birthday

70. 70 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.”

71. 71 Eligibility  Occupation Classes 6, 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

72. 72 Disability Buy-Out  Waiting Periods 360, 540, 720 days  Payment methods Lump 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

73. 73 Issue Limits Waiting PeriodLump Sum Monthly/Down Payment 12 months$750,000$1,250,000 18 months $1,000,000$1,500,000 24 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.

74. 74 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 paid policy indemnity fair market value

75. 75 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 year at time of disability

76. 76 Optional Benefits  Presumptive Permanent Disability once 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 55 maximum option amount available each year: $150,000

77. 77 DBO: Financial Underwriting  Requirements: firm’s balance sheet profit & 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.

78. 78 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.

79. 79 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.

80. 80 Field Underwriting Guide  Pub. 4089BL  Order at Guardian Online home page. Click on “Order Materials” under Frequently Used Links.

81. 81 Questions?

82. Guardian DI: Protection for Individuals and Small Businesses An Introductory Overview