This site is dedicated to help consumers and their advocates find the best disability insurance based on their goals. That being said, we recognize there are unique situations that call for a highly specialized policy that many agents may be unaware even exists. We call these policies special risk insurance, and this section of our website highlights several of these types of policies.
Types of Special Risk Insurance
There are a limitless number of special risk insurance policies on the market today.
In an effort to keep things simple and organized, I’ve broken the various types of policies into three main categories: specialty disability insurance, specialty life insurance, and specialty health insurance.
Each of these categories has several products they cover and while no website could possibly go over every insurance policy that every insurance company offers; we will cover a few of the more useful special risk insurance coverages.
Special Risk Disability Insurance
The vast majority of our disability insurance clients use our agency to purchase one insurance product: individual long-term disability insurance.
While that might be our bread and butter, a few clients come to us with needs outside the scope of a traditional personal disability insurance policy. In most cases, these policies are either business use disability insurance policies or short term disability insurance plans.
Business Use Disability Insurance
When most people think about business insurance policies, they immediately focus on group benefits offered through their employer. While our agency certainly does group plans, the business use policies discussed here are primarily utilized by ownership to protect their interests.
Disability Insurance for Severance Agreements
Believe it or not, some businesses can be woefully underprepared to fulfill their end of a severance agreement.
In some severance agreements, part of the package is the requirement to continue existing benefits, such as long-term disability insurance.
The challenge begins when human resources realizes the terminated employee is no longer eligible for the company’s group LTD plan.
This issue is further compounded by the fact that the individual disability insurance market doesn’t issue policies on people that are unemployed.
What you have now is a major problem: a contractual obligation to provide long-term disability insurance benefits without an actual policy to help mitigate that cost.
In the special risk insurance market, carriers such as Lloyd’s of London have created policies called severance agreement disability insurance. These policies are designed to protect the business and ensure a long-term disability plan for the terminated employee remains in place until the severance obligation is fulfilled.
These policies keep the employee, his or her family, and the company safe from a potentially huge financial loss.
Disability Insurance for Business Loans
Another issue for a business that can arise is the inability of a key owner (or the sole proprietor) to continue to work due to sickness or injury.
In many small businesses, the loss of such an individual is financially catastrophic considering how much value and revenue he or she brings to the table.
And while the owner’s personal finances can be protected through individual disability insurance and some business expenses can be offset through business overhead expense disability insurance, if the company has debt it can be a big problem.
To solve that problem, the owner of the company can purchase disability insurance for business loans, sometimes called loan indemnification disability insurance.
This type of special risk insurance is designed to make payments to a bank or lender should the insured be unable to work due to sickness or injury.
If your business has debt that it would be unable to repay in the event of the owner becoming disabled, a disability insurance policy for business loans can be the thing that keeps it from going bankrupt.
Disability Insurance for Buy Sell Arrangements
If you have a business partner (or partners), you likely have some type of succession plan in place should one of you die or no longer be able to participate in the growth and management of your business.
This plan is probably a legal document, drawn up by your attorney that goes over conditions, valuations, and obligations. What these documents don’t normally require is funding.
Funding is capital that provides the business and/or business owners with the ability to fulfill their obligations under the buy/sell agreement. Most businesses will use life insurance (typically term) to provide this necessary funding.
Smart businesses will also look to disability insurance as a way to fund any contractual requirements under the buy/sell document.
Simply put disability insurance for buy/sell agreements, also known as disability buy-out coverage is used to fund a buy sell agreement when one partner becomes too sick or injured to continue working in the business, necessitating a buy-out.
Having one of these policies in place facilitates an uncomfortable process and allows for the business to dedicate its working capital to where it is needed most after the loss of one of its owners: the continuation of the business.
There are a number of other business use disability insurance policies. If your business has a unique or special insurance risk that you would like covered, please contact us today for a confidential, complimentary consultation.
Short Term Disability Insurance
In the individual market, there isn’t a huge demand for short-term disability insurance. Short-term disability typically allows claims for sickness and injury, like long-term disability insurance.
But, unlike long-term disability insurance, short-term normally has elimination periods of 7 to 90 days and a benefit length of no more than 5 years (and it can be as little as 6 months).
We get a number of requests for short-term disability insurance. Unfortunately, those requests normally go unfulfilled, since people are normally looking for one of two things:
A policy that covers a pre-existing condition
A policy that covers a healthy pregnancy
Disability insurance, whether short or long term, will not cover pre-existing conditions nor will it cover a healthy pregnancy.
Unlike other types of special risk insurance, if a disability insurance policy were to cover one or both of these health conditions, then those policies would almost be guaranteed to pay claims.
Insurance companies try to avoid offering policies where claims are nearly a sure thing.
When we help someone buy a short-term disability insurance policy, it is normally a cost consideration. Because these policies have weaker benefits than their long-term counterparts, they are typically less expensive.
Having a disability insurance policy, even short-term disability insurance, is still preferable to not having a policy at all.
Special Risk Life Insurance
Life insurance is life insurance, right?
Well, that depends.
There are a few situations where purchasing a life insurance policy on yourself or someone else can be difficult. We’ll go over a few of the special risk insurance for life coverages below.
Business Use Life Insurance
Most of the specialty policies for life insurance are for business use. There are a lot of reasons business owners use life insurance as one of their key protection tools. Funding a buy/sell agreement, providing for a succession plan, and even employee retention are all legitimate reasons for a business or business owner to purchase life insurance.
The most important factor in issuing one of these policies is that there is an insurable interest. Whether the business or the business owner owns the policy, there must be a financial loss to the beneficiary (normally the business itself or the business owner) to have a policy issued.
Confidential Failure to Survive
Another question that we get on occasion is “Can I buy life insurance on someone else without them knowing?”
If you polled one hundred life insurance agents, it would be surprising to hear more than a few of them answer yes.
But, confidential life insurance does exist. It does, however, have a few caveats.
In order to purchase a life insurance policy on someone else without their knowledge, the owner/purchaser must have a contractual financial interest in the insured.
These interests can vary from people who rely on others for their income, such as talent agents and business managers to an ex-spouse where child support and alimony have been granted.
If a contractual financial obligation can be demonstrated, then a confidential life insurance (confidential failure to survive) policy can be issued, without the need for the insured to take a medical exam or sign the application.
Key Person Failure to Survive
In addition to business loan life insurance, buy sell protection, and a handful of other business products, key person failure to survive can also be critically important.
If your business relies on one or a few crucial employees for its success, then protecting your business in the event of their unfortunate death is important.
A key person failure to survive policy differs from a traditional key person life policy in three ways:
- It is not designed as a retention tool.
- It is typically a 12-month term.
- It does not require a medical exam or medical records.
These policies can be issued very quickly (in as little as 48 hours) and can cover insureds where health issues are a concern or where issue limits are a problem.
Not all businesses need this type of policy. If you have a business where the key person will likely be involved for several years, there are likely better solutions on the market.
Those that do, however, find key person failure to survive a valuable solution to a temporary problem.
Personal Use Life Insurance
The majority of the special risk insurance products offered through our agency are for business use. Even the two policies we’re about to cover can be used for business protection.
Unlike many of the preceding insurance policies, neither of the following require a business use to purchase them.
Accidental Death Insurance
There are a handful of companies that offer what we would call stand-alone accidental death insurance (bold and italics). While their uses vary, the benefits are the same:
Accidental death insurance will pay if the insured dies through accident or injury, but not from sickness.
There are a few different types of accidental death insurance.
Accidental death (depending on the policy, it may be called accidental death and dismemberment) is a special risk insurance that can be purchased as a stand-alone policy or as a rider attached to another policy (mostly life insurance).
As a stand-alone policy, accidental death comes in two forms: traditional and high limit.
Traditional accidental death insurance has no medical underwriting. You can normally get a policy in as few as two days. For people with uninsurable health conditions, this may be the only type of life insurance benefit for which they are eligible.
Benefit amounts vary but normally cap out around 400k. Most policies offer the ability to cover your entire family, and some offer a return of premium option (if you don’t use your policy benefits, you can get some or all the premiums you paid are returned to you).
The downside of a traditional accidental death policy is that it only pays if you die through an accident or injury; it will not pay if you die from an illness.
The other main issue with a traditional accidental death policy is the exclusions.
Risky hobbies, such as rock climbing or motor vehicle racing, are not normally covered. Traveling outside the U.S. or Canada or any involvement in armed conflict may also be excluded.
High limit accidental death insurance is a turbocharged version of traditional accidental death.
These policies can cover an individual or group and has issue limits of 100 million. These plans can also be tailored to eliminate many of the exclusions present in the traditional market.
War zones, operating as a pilot, motor racing etc. can all be included in a high limit accidental death insurance policy.
As mentioned, neither traditional accidental death nor its high limit counterpart requires medical exams, and policies are normally issued very quickly.
Kidnap and Ransom Insurance
Ok. This isn’t really life insurance, but it certainly makes a threat on your life much less financially burdensome.
Most people will never need to consider kidnap and ransom insurance, but for those who travel to countries where this might be a real risk and have a substantial net worth, then this insurance can be very valuable.
The typical purchaser of a kidnapping insurance policy is someone with a lot of assets who travels, primarily for business. The owner of the policy can apply for benefits up to their personal or corporate net worth. On a claim, the policy functions in a reimbursement capacity, allowing the family or business to recoup their losses they paid to the kidnapper.
Again, few people will ever need to purchase one of these policies, let alone make a claim on one. However, for those with a lot of money, who travel to countries where kidnapping is prevalent, owning a kidnap and ransom insurance policy can be a financial life saver.
Special Risk Health Insurance
At www.highincomeprotection.com, we specialize in protecting people’s incomes. We provide expert, unbiased advice about high limit disability and life insurance.
That being said, we do offer a few special risk insurance products that are outside the scope of our primary lineup. We do this because we found there is a demand for these products in our marketplace, and the clients we serve view them as a necessity.
International Medical Coverage
A lot of our clients travel.
Some for months at a time.
If you love to travel internationally for extended periods of time, then you know a potential health issue while overseas may result in financial disaster.
We offer two types of medical coverage under our special risk insurance umbrella. Neither of these plans is ACA (Affordable Care Act) compliant and should not be used as your only health insurance.
The first policy is built for people who travel abroad. Traditional health insurance doesn’t always offer full coverage outside the U.S., so this type of policy provides piece of mind to international travelers.
Coverage can be as high as 5 million dollars and even has options that cover war, terrorism, and hazardous activities.
The other policy is meant for foreign nationals traveling to the U.S. on business or vacation. Many of these individuals come from countries with universal healthcare and may be shocked at the cost of medical treatment in the United States, should they need it.
These policies have coverage limits up to one year with benefits of up to 1 million dollars. They can also be paired with an accidental death and dismemberment policy to provide a comprehensive protection plan.
Out Of Pocket Protection
This type of policy has begun to generate interest as the health insurance market changes.
Those unlucky enough to have an individual health insurance plan likely have a large deductible that must be met before coverage kicks in. Since much of this site’s customer base is self-employed, it is likely that if you’re reading this, you are lucky enough to own one of these expensive health insurance policies.
An out of pocket protection plan is a type of special risk insurance that covers things your health insurance (and large deductible) may miss.
For instance, some of these plans offer cash (indemnity) on your first hospital admission. Depending on the level of coverage purchased, this benefit could cover 6k of that expense. There are benefits for doctor visits, daily hospital stays, outpatient treatment, and a host of other medical situations that one might find themselves in.
High income professionals might not need this type of product, but if you want to avoid a large surprise bill after a trip to the hospital (well, you’ll still get the bill, you’ll just have extra cash to pay it), then one of these policies might make sense.
Summary
We specialize in providing expert, unbiased insurance advice to our customers. For most, that advice is in the form of helping them purchase disability insurance.
But, we also understand that, occasionally, a need outside of long-term (or short-term) disability insurance may arise. That is where special risk insurance can come into play.
As a client, we’re here to help you purchase policies that protect your income from the uncertainties in life. If your risk falls into one of the categories above, please let us know by completing the quote form or contact us. Even if you have something unique not reviewed in this article, we’ll work to find you coverage.
Helping you find the best policy for your needs is our goal.