Guardian Disability Insurance Brokerage

What are the Most Important Things to Look for in a Disability Insurance Policy?
All DI Policies Are Not Equal
by Larry Laskin

Disability insurance is probably the most important insurance you will ever own. You may have researched the various policies and are confused by the definitions in the policies. Which provisions are the most important? What exactly do they mean? How do they affect my ability to collect benefits? These are all very important questions. I will try to answer them for you here.

Definition of disability- This is perhaps the most important definition in a disability insurance policy. After all, it will determine if and when you will be eligible for benefits. Some definitions will pay you for up to two years if you cannot work in your occupation due to a disability. It will only continue to pay you if you are not able to work in any occupation thereafter that you are reasonably fit based on training, education or experience. The next definition is modified own-occupation, but not working. Under this scenario, if you cannot perform the substantial and material duties of your occupation solely due to injury or sickness, you can collect benefits as long as you are not working in another occupation. The best definition you can obtain is a true own-occupation definition of disability. This means that if you cannot perform the substantial and material duties of your occupation solely due to injury or sickness, you can collect benefits even if you are working in another occupation. Some carriers even offer specialty-specific language to physicians and dentists.

Non-Cancellable vs. Guaranteed-Renewable- With a guaranteed renewable contract, the disability insurance company guarantees to renew your policy as long as you pay your premiums on-time, but reserves the right to raise rates in the future. With a non-cancellable contract, not only can they not cancel you except for non-payment, but they cannot raise your rates. A policy that is both non-cancellable and guaranteed renewable assures you that premium rates and policy provisions will not be changed as long as premiums are paid on a timely basis.

Does the policy have limitations for mental disorder claims? Many companies limit the benefit period for mental disorder types of claims, for example caused by stress or anxiety to 24-months. Some companies have no benefit period limitations on these types of claims. You may feel that this is not important since you have never had these types of issues personally, but you never know what may happen in the future.

Waiver of Premiums- Most disability insurance policies contain language that would waive your premiums should you ever become disabled and begin to collect benefits. In most circumstances, you would continue to pay your premiums while disabled, then once you satisfy the elimination period and begin to collect benefits; the company would begin to waive the premiums for you and would reimburse you for the premiums that you paid during the elimination period.

Waiver of elimination period- This benefit could mean first-day coverage for subsequent periods of disability after a full recovery. What this rider does is that if you are disabled, then recover and become disabled again within a certain period of time, you would not have to satisfy the elimination period again. For example, in Berkshire’s ProviderPlus* contract, if you become totally disabled within 5 years after the end of a previous disability that lasted more than 6 months and for which they paid benefits, they will waive the elimination period for the second claim.

Presumptive Disability- Almost all carriers have this provision in their contracts. This means that if you lose sight in both eyes, hearing in both ears, the use of both hands or both feet, or one hand and one foot in their entirety due to an injury or sickness, you will be considered totally disabled and can collect your monthly benefits even if you are still working. Please be careful though that the contract states that it does not have to be irrecoverable.

Make sure you read and understand the policy wording before purchasing as the definitions can vary greatly between contracts. It could mean the difference between collecting your benefit. or not.