Petersen International-Lloyds of London Disability Insurance

What that structure buys you is flexibility no admitted carrier can match. Monthly benefits reaching a quarter million dollars and beyond. Participation limits of sixty-five to seventy-five percent of income regardless of how high that income runs, and up to one hundred percent for business purposes. Coverage for health histories, occupations, avocations, income structures, and ages that traditional carriers decline outright. In our practice, Petersen is where a case goes when the answer everywhere else was no, and it is also where a high earner goes when every admitted carrier has been maxed out and there is still uninsured income left on the table.

What that structure costs you is different, and no brochure we have seen from this market explains it plainly. This is non-admitted, surplus lines coverage. It is not protected by your state’s insurance guaranty association, and the policies are term contracts rather than the non-cancellable-to-age-sixty-five structure the admitted carriers sell. Both of those are manageable. Neither should be discovered after you have bought.

Surplus Lines: What Non-Admitted Actually Means

When you purchase surplus lines coverage, you sign a state-required affidavit stating that the insurer is not admitted in your state, is not subject to that state’s financial regulation, and does not participate in the state guaranty fund. That language is alarming out of context and worth putting in context properly.

Admitted carriers participate in state guaranty associations, which step in if a licensed insurer becomes insolvent. Those associations cover claims only up to statutory caps that vary by state and are frequently far below what a high-limit disability claim would be worth. A seven-figure disability claim at an admitted carrier is not fully guaranteed either; it is guaranteed to the state’s cap and no further.

Lloyd’s operates differently. Risks sit with individual syndicates, and behind those syndicates sits the Lloyd’s Central Fund, which is available to meet policyholder obligations where a member cannot. Lloyd’s holds strong financial strength ratings across the major agencies, and AM Best has assessed its balance sheet strength as very strong with a Superior financial strength rating and a stable outlook. The Central Fund is further supported by insurance the Corporation of Lloyd’s purchases on it.

Here is the honest comparison, and it cuts both ways. The Central Fund is not capped the way a state guaranty association is, which is a genuine advantage on a large claim. But it is a discretionary market-level backstop rather than a statutory entitlement created by your state legislature, and recourse in a dispute involves a different legal and regulatory pathway than it would with an admitted carrier. Marketing material from this market tends to present the Central Fund as strictly superior to a state guaranty fund. We would say it is different, stronger in some respects, structurally less certain in others, and entirely acceptable for the purposes this coverage serves. What is not acceptable is buying it without knowing.

We place surplus lines disability coverage regularly and will walk you through exactly what you are buying before you sign anything.
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The Plan Lineup at a Glance

Why High Earners End Up Underinsured

The mechanism that drives most of this business is not obvious until someone draws it for you, and it works against you precisely as you become more successful.

Disability carriers publish issue limits, which cap what one company will write on a single life, and participation limits, which cap total coverage across every source. Those limits are not a straight percentage of income. They are tiered, and the replacement percentage steps down as income climbs. A professional earning a moderate income may be able to insure a large share of it. A professional earning several times that amount will find the available benefit does not scale proportionally, so the percentage of income actually covered falls as the income rises.

Group long-term disability compounds it. Group plans typically promise a percentage of base salary, but they apply a monthly benefit cap, they usually exclude bonus, commission, incentive pay, and partnership distributions, and when the employer pays the premium the benefit is generally taxable to the employee. Stack those three reductions and a plan advertising sixty percent replacement can deliver something closer to a third of what a senior executive actually spends. The higher the compensation and the more of it that sits outside base salary, the worse the gap becomes.

The result is that the people with the most income at risk are frequently the least adequately insured, and they usually do not know it because their benefits statement quotes a reassuring percentage. Working through what an employer plan actually obligates the employer to provide is a necessary first step before any of this is worth pricing.

The Tiered Approach to Income Protection

The solution these plans are built around is layering. Rather than trying to solve the whole problem with one policy, coverage is assembled in tiers, each sitting on top of the last, until the total approaches a defensible replacement percentage.

A typical structure places employer group long-term disability at the base, an individual policy from an admitted carrier in the middle, and a high limit surplus lines layer on top to reach the target. Where there is no group coverage, the individual policy sits at the base with the high limit layer above it. Where the person cannot obtain traditional coverage at all, whether because of health, occupation, income structure, or age, the high limit plan can provide the entire benefit on its own.

This is why these plans should not be evaluated as competitors to the contracts we place from the admitted carriers, and why we would rarely recommend one instead of an admitted policy for someone who qualifies for both. Layering means the strongest available admitted contract goes on first and this coverage fills what remains. Our review of the major disability carriers we place business with covers what belongs in the lower tiers.

Definition of Total Disability

This is where the coverage is genuinely strong, and it surprises people who assume specialty market coverage means compromised contract language.

The definition of total disability in these plans is a true own occupation definition, sitting in the base contract rather than being sold as a rider. Total disability means that solely due to sickness or injury you are unable to perform the substantial and material duties of your occupation, even if you are working in another occupation. That is the full-strength version of the provision, and it is worth noting that two of the largest admitted carriers in this market place true own occupation behind a separately priced rider.

Your occupation is defined as the occupation or occupations in which you were gainfully employed for the majority of the time during the twelve months before disability began. If you have limited your practice to a single specialty, that specialty is deemed to be your occupation, provided the industry widely recognizes it as a specialty. A surgeon who can no longer operate is measured against surgery, not against medicine generally, and may collect full benefits while teaching or consulting.

The practical significance for a specialist is difficult to overstate, and our full explanation of how own occupation coverage functions at claim time covers why this provision outweighs almost everything else on a proposal.

The Structural Difference You Must Understand: Term Coverage

Here is the point where this coverage departs most sharply from an admitted individual disability policy, and where we have seen the most confusion in practice.

An admitted non-cancellable policy is guaranteed to age sixty-five or sixty-seven. The carrier cannot cancel it, cannot reprice it, and cannot change its provisions for that entire period. These surplus lines plans work differently. They are written for a defined term of insurance, and the policy is non-cancellable during that term, with terms and premium fixed for its duration. At the expiry date, a new term of insurance may be offered, subject to underwriting.

Read that last clause carefully. Renewal is not guaranteed and it is not automatic. It is an offer that may be extended after underwriting, which means your health and circumstances at that point are relevant again. The underwriting materials for these plans also state directly that underwriters reserve the right to modify terms and conditions at the time of underwriting.

That is not a reason to avoid this coverage. It is a reason to understand what layer of your plan it occupies. A person who can qualify for an admitted non-cancellable contract should generally place that contract first and use this coverage above it, because the guaranteed layer should be the foundation and the renewable layer should be the supplement. A person who cannot qualify anywhere else is choosing between term coverage and no coverage, which is not a difficult choice. Our comparison of the renewability structures used in this market explains why the guarantee period matters as much as it does.

How Benefits Are Paid

Monthly benefits begin after the elimination period and continue for as long as total disability continues, up to the benefit period. Where multiple separate claims occur, each claim carries a full benefit period eligibility rather than drawing down a single lifetime pool, which is a meaningful provision for anyone with a recurring or episodic condition.

The lump sum benefit is the provision that has no real analogue in the admitted market. If the insured is permanently and totally disabled, a lump sum is payable, structured as what the industry calls a career-ending benefit intended to recoup the loss of future earnings. Benefits can reach up to ten times annual income. For someone whose career represents decades of compounding earning power rather than a monthly paycheck, that structure addresses a loss that monthly indemnity simply cannot.

Elimination periods and benefit periods are both offered in a range, and benefit periods on some plans run from as short as one month out to age sixty-five. That short end is unusual and exists for specific structural purposes rather than as a consumer option. How you set the waiting period should still follow the ordinary discipline described in our guide to calculating the right elimination period, which is to measure what your reserves genuinely cover rather than reflexively buying the shortest wait.

Optional Riders

The residual rider addresses partial disability, paying a monthly benefit when income is reduced by at least fifteen percent because of accident or illness. If income is reduced by at least eighty percent, the full monthly benefit becomes payable. That fifteen percent trigger sits at the more generous end of this market, and the eighty percent full-payment threshold is a clean, mechanical test rather than a discretionary judgment. Partial disability is the most common claim scenario in almost every occupation, so this rider deserves serious consideration rather than being treated as an upsell. Our explanation of how residual benefits are calculated covers the underlying math.

The cost of living adjustment rider adjusts the monthly benefit on each anniversary based on the Consumer Price Index, with increases running up to ten percent per year. That ceiling is substantially higher than the three to six percent caps typical of admitted contracts, which matters in a sustained inflationary period and matters most on a long claim. As with any inflation rider, weigh it against simply purchasing a larger base benefit, since if you are not already at your maximum available benefit the additional base coverage may serve you better. Our broader guide to what each disability rider contributes works through that comparison.

Built-In Policy Provisions

Several provisions are included rather than sold, and they are the same across the plan family.

Presumptive disability applies if sickness or injury causes total loss of the use of both hands, both feet, one hand and one foot, sight in both eyes, hearing in both ears, or the ability to speak. The elimination period is waived and the monthly benefit is paid for the entire benefit period or as long as the loss exists.

The transplant benefit treats total disability resulting from donating an organ as an illness, provided the policy has been in force at least six months. Organ donation is one of the few genuinely voluntary events that can produce a legitimate disability claim, and most contracts either exclude it or are silent.

The recurrent disability provision gives you a choice rather than imposing one. If you return to work full time after a total disability and become totally disabled again within six months, you may elect to continue the previous claim with no new elimination period, or elect a fresh elimination period and benefit period. Once six months have elapsed since your return to work, any new claim automatically carries a new elimination and benefit period. That election is genuinely valuable, because whether continuing the old claim or starting a new one serves you better depends entirely on how much of the prior benefit period remains.

Waiver of premium applies after the initial premium payment, waiving future premium if you are totally or residually disabled for more than ninety days, for as long as that disability continues. A grace period of thirty-one days applies to any premium installment.

Every one of these provisions is subject to what the underwriters actually offer on your specific case. Let us find out what that looks like.
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Loss Payee, Ownership, and Premium Structure

Two contract concepts appear here that rarely surface on a personal admitted policy, and both exist because these plans are used heavily for business purposes.

The loss payee is the party to whom all disability benefits are paid. On a personal policy that is normally the insured, but on a loan indemnification or business plan it may be the lender or the company. The owner is the person or entity with the right to request modifications to the policy, which may differ from both the insured and the loss payee. Getting these designations right at application is not administrative housekeeping; it determines who controls the contract and who receives the money.

Premium may be paid monthly, quarterly, semi-annually, annually, or as a single premium. The single premium option is worth knowing about, because it allows a business to fund a defined obligation completely at the outset rather than carrying a recurring payment, which matters for contract guarantee and loan indemnification arrangements where the underlying obligation has a fixed life.

Impaired Risk: When the Answer Elsewhere Was No

This is the capability that brings most cases to this market. Underwriting is individually negotiated with medical professionals reviewing the file, and the working assumption is that a decline from a traditional carrier is a starting point rather than a conclusion.

Health histories commonly placed here include cardiovascular conditions, diabetes, kidney conditions, liver conditions and hepatitis, height and weight considerations, mental and psychiatric history, and drug or alcohol history. Autoimmune and connective tissue conditions, chronic pain conditions, and neurological conditions all fall within the same negotiated approach rather than a fixed grid.

The honest framing is that flexibility does not mean automatic acceptance, and it does not mean identical terms. An offer may come with a rated premium, an exclusion for the specific condition, a shorter benefit period, or a combination. What it means is that a file gets individually examined rather than being sorted by an algorithm, and that a well-documented, well-managed condition presents very differently from a sparse record. The quality of the medical documentation submitted matters more here than anywhere else in the disability market, and preparing that file properly before submission is a meaningful part of what we do on these cases.

Unusual Income and High Net Worth

Traditional disability applications are occasionally declined not because of health but because of the shape of the applicant’s finances. Substantial net worth, large amounts of unearned income, or income reported primarily as capital gains can each trigger a decline, on the underwriting theory that someone with sufficient passive resources has a reduced incentive to return to work.

That logic is defensible in the abstract and frequently wrong in the specific. A practice owner whose balance sheet reflects illiquid business equity, or an investor whose reported capital gains fluctuate wildly year to year, is not meaningfully insulated from an income loss. These situations are routine in the specialty market and are handled as underwriting problems to be solved rather than reasons to decline. The concepts involved parallel what we describe in our explanation of how financial underwriting evaluates an applicant, applied with considerably more latitude.

Special Situations the Traditional Market Will Not Touch

A set of circumstances puts an otherwise excellent applicant outside standard appetite entirely, and each of these is placeable here.

Working overseas is the most common. Most admitted contracts restrict where benefits will be paid if the insured resides outside the United States or Canada, and some will not issue at all to an applicant working abroad. Specialty coverage is built for internationally mobile professionals, which is why it frequently appears in planning for Americans living and working outside the country. War zone coverage extends that further, for personnel working in active conflict regions where standard coverage is unavailable at any price, a category with obvious overlap with the planning we do around field-based work in remote and unstable regions.

Other situations include family businesses where ownership and compensation structures complicate income verification, applicants whose weekly hours fall outside standard minimums, home-based workers, and people currently in severance or temporarily unemployed. That last one solves a specific corporate problem worth naming: when a severance package obligates an employer to continue long-term disability coverage, the terminated employee cannot be kept on the group plan and cannot buy an individual policy because they are not employed. Specialty coverage is often the only instrument that satisfies the severance obligation.

Avocations and Hazardous Activities

An applicant who is a perfect risk in every other respect can be declined outright for what they do on weekends. Amateur racing, demolition derby, scuba diving, rock climbing, mountaineering, sky diving, base jumping, and helicopter skiing all sit outside standard appetite at most admitted carriers.

Two structures are available and the distinction is worth understanding. Primary coverage insures the person including the avocation, so the policy responds regardless of whether the disability arose during that activity. A carve-out does the opposite, providing coverage only while participating in the avocation, which is used to layer over an existing policy that excludes it. If your admitted carrier has attached an exclusion rider for your activity, a carve-out fills exactly that hole rather than duplicating coverage you already hold, and it is usually the cheaper of the two approaches.

Coverage at Older Working Ages

Many admitted carriers stop issuing individual disability coverage in the early sixties, and some business plans such as overhead expense and buy-sell carry even earlier cutoffs. That timing is increasingly disconnected from how people actually work.

A professional at sixty is frequently at peak earnings and peak responsibility, and often has more financial obligation rather than less, whether because retirement savings were disrupted, because children arrived later, or because the plan was always to keep working. The need for income protection does not politely decline at the moment carriers stop selling it. Specialty coverage remains available at ages the traditional market has exited, and for a business owner still carrying a partnership obligation or a loan guarantee into their late sixties, that availability can be the difference between a funded plan and an unfunded one.

The Entertainment Industry Problem

Entertainment income breaks the assumptions disability underwriting is built on, which is why the traditional market has historically avoided it.

Three specific features cause the trouble. Employment is intermittent by design, with substantial gaps between projects that look like unemployment on an application but are simply how the industry works. Royalty and residual income continues flowing during a disability, which means a conventional loss-of-income test may show no loss at all even though the person’s ability to generate new work has ended entirely. And earnings are frequently concentrated in a small number of very large payments, producing income volatility that standard financial underwriting reads as instability.

The royalty issue is the sharpest of the three and worth dwelling on. A composer who can no longer compose still receives payments on existing catalog. Under a residual test measuring current income against prior income, that catalog revenue can mask a complete loss of earning capacity. This is precisely where a true own occupation definition earns its cost, because qualification rests on the inability to perform the substantial and material duties of the occupation rather than on demonstrating a specific percentage of income loss.

Plans built for this market are designed around those realities rather than penalizing them, and can accommodate the very large monthly benefits that seven-figure earners require. The same structural analysis applies to athletes, authors, and anyone whose income mixes active earnings with passive residuals from past work.

Business Disability Programs

A personal disability policy replaces personal income. It does nothing for the obligations a business continues to generate while its owner is out, and those obligations are frequently what actually ends the enterprise. Six distinct business structures are available in this market, each solving a different exposure.

Two of these deserve additional comment. On loan indemnification, the declining benefit structure that mirrors the amortizing loan is genuinely efficient, because you are not paying to insure principal you have already repaid. That reduces premium relative to a level benefit and matches the actual exposure. On overhead expense, premiums are generally tax deductible as a business expense and benefits are received as reimbursement of deductible expenses, which affects the after-tax economics substantially. Tax treatment depends on your specific circumstances and entity structure and should be confirmed with your tax advisor rather than taken from any insurance page, including this one.

The Dentist Startup Situation

One scenario recurs often enough to name specifically. A dentist finishing training carries substantial education debt, then borrows again for office space, equipment, and operating reserves. The lender requires disability insurance assigned as collateral before funding. Meanwhile many admitted carriers will not issue a personal policy until the dentist has been in business for a period, commonly a year.

That sequencing leaves a new practice owner personally uninsured during the single most financially exposed period of their career, with substantial debt and no established income. The high limit plans do not carry the same time-in-business requirement, which is why they appear frequently in practice acquisition and startup financing. The right structure separates the two problems, using loan indemnification coverage to satisfy the lender and a separate personal policy to protect the household, rather than assigning personal benefits to the bank and leaving the family with nothing.

Filing a Claim on Surplus Lines Coverage

Claim handling here is not identical to the admitted market, and it is worth setting expectations. Documentation requirements are substantial, particularly on high-limit claims and on residual claims where income loss must be demonstrated with financial records. The regulatory framework governing claim disputes differs from that applying to an admitted carrier in your state, which is one of the practical consequences of non-admitted status.

None of that means claims are harder to collect on a valid file. It means the file needs to be built properly. Understanding what any disability claim requires from the insured applies with additional force here, and the discipline of keeping clean, contemporaneous financial and medical records from the outset is the single best thing a policyholder can do for a future claim.

Who This Coverage Fits

It fits high earners who have exhausted the traditional market and still have substantial uninsured income, which is the core use case. It fits applicants declined, heavily rated, or excluded elsewhere for health reasons, where the realistic alternative is no coverage. It fits people whose occupation, avocation, work location, or hours put them outside standard appetite. It fits professionals whose income is unearned, capital gains based, or accompanied by substantial net worth. It fits working professionals past the age at which admitted carriers stop issuing. It fits business owners with key person, buy-sell, overhead, loan, or contract exposures that a personal policy was never designed to address. And it fits employers who have made a contractual severance or salary continuation promise they cannot otherwise fund.

It fits poorly in several situations we would rather name directly. Anyone who qualifies for a strong admitted non-cancellable contract should place that first, because a guarantee to age sixty-five is worth more than a renewable term as the foundation of a plan. Buyers for whom state guaranty association protection is a firm requirement should stay in the admitted market, since this coverage does not provide it. Anyone unwilling to accept that renewal at term expiry is subject to underwriting should understand that clearly before buying rather than after. And a modest earner with straightforward health and a common occupation will generally find better value and stronger guarantees from an admitted carrier, since the specialty market exists to solve problems that this buyer does not have.

What to Confirm Before You Apply

Confirm the term of insurance and exactly what happens at expiry. Confirm the elimination period and benefit period offered on your specific case rather than the ranges published for the plan family. Confirm whether the residual rider is attached and what triggers it. Confirm whether the cost of living rider is included and at what cap. Confirm who is designated as loss payee and owner, particularly on any business structure. Confirm the precise wording of any exclusion attached to your offer. Confirm what surplus lines taxes and fees apply in your state, since these are additional to premium and vary. And confirm the definition of total disability as it appears in the issued contract, not in a summary.

Placing surplus lines coverage correctly requires knowing both markets, because the entire value of this coverage depends on what has already been placed underneath it. That is the substance of what an independent disability insurance broker should be doing on a case like this. We build the admitted layers first, identify precisely what remains uninsured, and bring the specialty market in for the balance.

The same layered thinking applies across a household balance sheet rather than to disability alone, which is why we coordinate this work with our independent life insurance brokerage practice and evaluate coverage by occupation and classification before recommending anything. High earners in demanding fields frequently discover that the gap they thought was small is the largest uninsured exposure they own. Specialty occupations in the service and field trades, from hospitality and lodging management outward, run into the same classification walls from the opposite direction.

If a carrier has already told you no, or told you yes for far less coverage than you need, that is the conversation we want to have.
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