Individual disability insurance can be a difficult financial product to fully understand as no two policies are the same at any company. If you are shopping for a policy for yourself, you may have seen the term “Non-Cancellable & Guaranteed Renewable” already. Hopefully, I can help you understand what that means because if you buy a policy it will be one of the following;
Non-Cancellable & Guaranteed Renewable
Every single policy from every company offering disability income insurance can be classified into one of three types of “Renewability”. The most comprehensive, and typically the most expensive, is to have a policy that is Non-Cancellable and Guaranteed Renewable. Guaranteed Renewable only policies offer fewer guarantees, and conditionally renewable policies offer the fewest guarantees.
So What Are The Benefits To A Non-Cancellable Policy?
With a Non-Cancellable and Guaranteed Renewable policy, nothing about your policy is going to change as long as you pay the premiums before the benefit period ends at age 65 or 67. The policy benefits are not going to change until the Non-Cancellable period ends at 65/67. The premium is not going to change, and more importantly, the policy will be in-force should you become too sick or hurt to work 20 years from now.
If you buy a new disability insurance policy at the age of 32, you will pay 32-year-old rates for as long as you keep the policy. The insurance company can not change the rates on you, and more importantly, can not drop you for any other reason than failing to pay the premiums. It is not until after age 65 or 67 when the policy becomes "Conditionally Renewable" that any riders fall off or premiums can change.
If you want to buy a disability insurance policy to protect your income, and have a great policy that will be there in case you need it, it is probably a good idea to have a Non-Cancellable and Guaranteed Renewable policy. With this kind of policy, you don’t have to worry about any possible loopholes or worst-case scenario changes in the future.