Helping You Buy Disability Insurance
The decision to buy disability insurance is an important first step in protecting your income.
Once you begin researching policies, speaking with peers about their coverage, and meeting (online or in person) with a professional, your head may be spinning.
Unlike other types of insurance, when you want to buy disability insurance, there are several factors to consider outside of benefits vs. premiums.
Disability Insurance Is Complex
There is no such thing as “the best disability insurance policy” or “the best disability insurance company.” Anyone who tells you that is an agent who only works for one carrier or an individual who had a positive experience and is unable to compare that experience to all available disability insurance policies.
What is right for one person might not fit another, and that’s where the challenge is when you’re looking to buy disability insurance.
Besides different types, such as long-term or short-term, disability insurance varies based on your occupation, health, and income.
Occupation
This is where your agent will normally start when helping you buy disability insurance.
Different companies will have different occupation classes based on what you do for a living. One company may have a better class than another for the same profession.
This means, selecting the company that most favors your occupation will have a significant impact on what you pay and the benefits you receive.
There is no one company with the best occupation classes for all professions. Where one company might have an advantage with a particular occupation, they could also be weak in another area.
Working with an agency that understands this competitive landscape will help you immensely when you buy disability insurance.
Health
This is another area that has a major impact on what your disability insurance policy covers and how much it costs.
If you’re healthy and have had nothing wrong with you, then all companies will be similar regarding your health rating. Other circumstances may affect your policy rating, like smoking or dangerous hobbies, but for this explanation, we’ll discuss how your health affects your disability insurance policy.
When you apply to buy disability insurance, you’ll go through a process known as underwriting. There are two parts to disability insurance underwriting, your health, and your financials.
Disability insurance underwriting will normally involve a paramedical exam, a review of your doctor records, and several other background checks, such as verifying your prescriptions.
Your health is evaluated by several factors. Most notably, it is determined by your physical condition and your lifestyle.
Disability insurance has different underwriting than life insurance.
Mostly, perfect health, combined with a typical lifestyle, will result in “standard” disability insurance rates. Unlike life insurance, disability insurance policies don’t have rating classes that are preferred or preferred best. Standard rates are your best offer.
Also, where life insurance is black and white regarding certain health conditions, disability insurance policies have a wider range of offerings.
First, when you look to buy disability insurance, you will have a health evaluation process unlike most other types of insurance.
Back problems, anxiety, and arthritis are much more debilitating than they are a threat to your survival. These conditions may not have a major effect on life insurance underwriting but can have a massive effect on disability insurance underwriting.
Disability insurance policies have two primary ways to offset the costs of these risks: ratings and exclusions.
Ratings
Ratings are assessments to your premiums. Similar to life insurance, disability insurance policy ratings will increase your policy costs. They are typically assessed on complex medical conditions, such as diabetes or undesirable height and weight conditions.
A rating will increase your premium, normally in increments of 25%. So, someone with a medical condition that causes a 50% rating will pay one and a half times the premium that someone without that condition might pay.
Ratings might be temporary, depending on the situation.
Exclusions
When considering whether to buy disability insurance, many people look to draw similarities between the insurance they already have and what they would like to purchase.
While a lot of the health underwriting is similar to life insurance and disability insurance, exclusions are where this process diverges.
An exclusion is an amendment to your disability insurance policy that allows the carrier to not pay claims based on certain health conditions. Common exclusions include those for mental/nervous disorders, arthritis, and back or joint injuries. An exclusion can be compared to a pre-existing condition. It is likely to cause a disability that has either occurred in the past or currently exists.
When you try to buy disability insurance and you end up with an exclusion, it is a negative outcome.
However, unlike a product like life insurance, an exclusion shouldn’t stop you from purchasing your disability insurance policy.
Besides an accident, several conditions can cause your untimely demise. Similarly, there are several situations in which you may become disabled. The major difference is that a life insurance policy will apply a much higher cost to your policy, where a disability insurance policy will maintain a standard rating and utilize and exclusion.
For example:
Take William Q.
William fell off a ladder while painting a house earlier in life. He has a few rods in his back but is otherwise unaffected by his unfortunate fall years later. William has now become a successful executive at a small technology company.
He is otherwise healthy and applies to buy disability insurance from an independent agent. All companies that look at his health records decide he should have a back exclusion attached to his disability insurance policy. Aside from this condition, the rest of his policy is approved as applied.
While this isn’t unexpected, it is something William didn’t desire. Should he accept this policy as offered?
Yes.
Although William won’t have coverage should he be unable to work due to his back issue, his disability policy will still cover much more than that.
Should William contract cancer, rheumatoid arthritis, or any other disease, his disability insurance policy will pay.
Also, even though his policy has a back exclusion, should he get into a car accident and break his back, there is a high likelihood his policy would pay due to trauma.
Income
When you buy disability insurance, your income will dictate how much coverage you’re allowed to purchase.
Your occupation and certain health conditions can restrict your ability to purchase the largest benefit amount and benefit length available, but your income will ultimately dictate how much disability insurance coverage you’re allowed to buy.
Most disability insurance policies will allow up to 60% of your income in coverage. That might not sound like much; however, remember individual disability insurance purchased with after-tax dollars pays benefits that are tax-free.
There are a few opportunities to increase your coverage.
Being Self Employed
If you’re self-employed, you might qualify for an income enhancement.
This policy upgrade allows you to increase your income, allowing for a higher benefit amount. A self-employment enhancement can allow for a 20% increase in income when applying.
This is especially important for those businesses with substantial write-offs. All disability insurance carriers underwrite their policies based on tax returns. This can be unfortunate for all those write-offs that small business owners like to take.
A business owner upgrade can allow a business owner with substantial write-offs to qualify for more coverage than they would otherwise be allowed.
People who are self-employed, who wish to buy disability insurance, may also be allowed a more important upgrade: business owner occupation class upgrade. As a business owner, you may be entitled to an occupational upgrade. An occupational upgrade may be available to someone who has a 10% or more interest in a small business. Unlike an upgrade that allows for a higher benefit amount, this benefit permits a better occupation class, which lowers your overall premiums.
Your income dictates your benefits…but certain situations can be upgraded.
Being Part of an Association
Membership has its privileges, as they say. If you’re part of an organization, there might be a discount on your individual disability insurance policy. To secure this discount, just ask. The alternative is to work with an independent agent familiar with these discount programs.
Being Part of a Group
Aside from coverage offered by a company, you may be eligible for a company-wide discount. People, who work for the same company and are willing to go through the underwriting process, may qualify for a discount on their premiums. This discount can vary from 5%-20%, depending on the carrier.
Depending on your gender, a group discount can have a huge advantage. Many of these programs offer a substantial discount if other people within your organization also apply to buy disability insurance.
A little-known fact is that women pay a lot more than men for disability insurance. Some of the multi-life disability policies available today use unisex pricing.
Should a small group of women decide to buy disability insurance, their coverage could be discounted by over 40%.
An experienced, independent agent will look for and find these opportunities.
How We Help
Our process is built to help you secure the best disability insurance for your personal situation.
Following this ideology, we follow a process known as K.E.E.P.
K.E.E.P. is an acronym for knowledge, evaluation, e-application, and placement.
Knowledge
This is a two-way street. First, your agent must understand your goals and what you’re trying to accomplish with your policy. Some may need personal paycheck protection, while others are looking for a disability buyout policy. One professional may require a 90-day elimination period, while a high-income earner may go 365 days with no benefits (substantially reducing their policy cost in the process).
The second part is the knowledge acquired by the consumer. For most people, even those with an existing policy, disability insurance is a fairly complex product. There are several moving parts that affect your premiums or your ability to make claims. When the policy owner truly understands all options available to him or her, only then can they make the decision about which policy is best for them.
Evaluation
Note that the carrier is often determined by the preceding factors. Once a client has clearly defined his or her goals, discussed any job or health information with the agent, and has understood the components of a disability insurance policy, only then is a carrier selected.
Again, this part of the process is a learning opportunity for you and us. Although we have spent time understanding your objectives, pricing or features may change. We adapt during this process to customize your policy to fit your needs.
We provide a step by step procedure to help you buy disability insurance that fits your needs.
After we pass the knowledge step, we evaluate your needs and create a spreadsheet built specifically for you and highlights only the best policies available to you, based on your health, income, and profession.
From there, we will complete a conference call that includes a screen share. You’ll learn a lot about the policies available to you and how their different characteristics affect your coverage and premiums.
We also offer to reconfigure the design to fit your specific needs. You get what you want.
eApp
So, you’ve decided on the policy that fits your needs and your budget; what’s next?
The insurance industry is slow to adapt to how we do business today. However, many carriers offer an e-application process.
Once you have bought disability insurance, the process will normally look like this:
- Complete an application over the phone and electronically sign via email.
- Schedule and finish a paramedical exam, including blood, urine, height/weight, and other requirements.
- Provide the carrier with the last few years of financial documentation.
- Finish the underwriting process…this has little involvement from the insured, but takes the longest. The company with which you apply will request your doctor records, run a prescription drug check, a motor vehicle records check, and an MIB check.
Depending on the policy for which you apply, this process can take from 2 weeks to 2 months. Since this is a major purchase for most people, the timeline should not dissuade you.
If you do it right, you should only have to purchase disability insurance one time in your life. We can help you do that.
Placement
You have an offer.
Now what?
You have a decision to make. If you have an offer you applied for, then you simply pay for the policy and put it in force. That means you now have disability insurance.
Most policies we write are approved as applied. That means you know going in what your premiums and benefits will be. If you have gone this far, more than likely, you’ll now own disability insurance.
But if you decided to buy disability insurance and now you’re offered coverage that either doesn’t cover a condition that you deemed important or it is more expensive than you had planned for, then you have a few decisions to make.
For one, we are independent and offer policies from all the major players in the disability insurance space.
That means, if you’re offered a policy with restrictions or is more expensive than planned, we have options.
From alternative plans to unique designs, we will find something that helps you to protect your future earnings.
We provided expert, unbiased advice to those looking to secure disability insurance for themselves and their families.
This mantra won’t change just because you didn’t get offered the coverage you expected.
In Summary
Disability insurance is important and challenging at the same time.
Its importance is clear. Not being able to support your lifestyle or even pay your bills, should you suffer a disability or have an accident, can be financially catastrophic.
If you buy disability insurance, you can be financially protected.
The challenge is twofold.
First, disability insurance is not cheap. Most people will pay 2-4% of their annual income to protect their largest asset, their ability to produce money.
Second, qualifying medically and financially for the best disability insurance policy for your needs is difficult. It’s a long process and one that should be handled by an expert.
We hope to be your expert in navigating this process. Complete the quote form on the left or call 888-636-2310. Please contact us today to see how we can help.