Get the Advice of Somebody Who Specializes in Disability Insurance

Last year, our office submitted over 1,200 applications for personal disability insurance. There are many mistakes people make once they decide to buy a policy, so we would like to share the top three.

Mistake #1 - "Shopping" For A Policy

We have all shopped for a car. You go from one dealer to the next, looking for the best deal. A car at one dealership might cost $35,000, while the exact same car at another dealership might cost $32,000. It does not work this way with disability insurance, but people think it does.

The Price of Disability Insurance

The price is set by the insurance company and cannot be changed by individual agents. A disability policy structured with the same monthly benefit, elimination period, benefit period, and optional riders will cost exactly the same from whoever it is purchased. The only way to get different prices is by accessing different disability insurance discounts.

Our job is to give you knowledgeable advice and help you through the underwriting process to obtain the most favorable decision. We may know of discounts that other agents do not, but the policy price is the same everywhere. Choose your agent based on their reputation, knowledge, and experience.

The Cost of Disability Insurance

There is also an issue of cost. If “price” is what you pay for the policy, “cost” is what the policy is worth long-term; in other words, it’s value. Cost is a much more important factor than price. 

If you purchased a low-priced policy that didn’t pay, the cost was very high. The most expensive policy is the one that doesn’t pay you when you need it to.

The mistake people make is looking only at the policy price and neglecting the contract provisions, believing they are all the same. Every disability policy has different definitions. While one might consider you to be disabled if you can’t do your own occupation, another might consider you to be disabled if you can’t do any occupation.

Mistake #2 – Trying to Become an Expert 

Advising people to protect their income isn’t rocket science, but it does require some knowledge and experience. Some of the information needed to make an educated decision can be found in the quotes. You can also look at the specimen policy to see subtle but important differences between the policies.

The second biggest mistake I see is someone trying to compare policies themselves. They think they will get three or four quotes, read them in 10 minutes, and know which policy is best for them. This can be a very costly mistake if they guess wrong. 

I say guess because that is really what they are doing. They are guessing that policy A will pay them more than policy B. If you would not go to your physician and say, “Doc, I’ve determined that I need open-heart surgery. When can we schedule this?”, why would you try to determine which insurance contract is the best?

Get the advice of someone who specializes in disability insurance. Since many agents write little to no disability insurance, you need to ask how familiar your agent is with disability income policies. Do your homework on the agent, the company, the company’s financial strength, and the contract-- and then take their advice. 

Mistake #3 – Not Accepting a Policy 

Once you’ve consulted with a disability specialist, decided which policy is appropriate for you, and applied for coverage, there are still mistakes to be avoided. The biggest mistake I see after someone applies for a policy is not accepting the insurer's offer. 

There isn’t a policy out there that will cover pre-existing conditions, a medical issue you had before you applied. Companies do not insure existing disabilities; they exclude them from coverage. If you’ve had a back problem and have regularly seen a chiropractor, you should expect some form of back exclusion.

The mistake people make is that they will not accept the policy with this exclusion. Even though they didn’t initially want coverage because of their back, and they don’t ever think that they will be disabled because of their back condition, they don’t want a policy that isn’t 100% perfect. What they should do is accept the policy and work with their agent over time to ensure they still have the best possible offer. 

All insurance carriers work in the same fashion, so don’t turn down one offer with the idea of going to another carrier. Best case, you’ll likely be disappointed with the second offer as well; worst case, you’ll have a more significant change in health and be left without any coverage. 

To get the appropriate disability coverage, you have to do three things:
 

Shop for a policy with an eye toward its contractual provisions, not its price. Value follows dollars, and better policies typically command higher premiums because they offer greater value.
 

Use a financial professional in the field of disability insurance, not an agent who just also happens to sell an occasional DI policy-- and definitely don’t try to go it alone!
 

After consulting with your disability insurer, take the offer that the underwriter provides, and see what you can do to improve it over time. 
 

If you follow these three rules, you’ll almost always have the most appropriate income protection you can find.