Purchasing disability insurance should rank as high as purchasing life insurance to make sure your family’s finances are protected from the unexpected. No exam disability insurance makes the process that much easier.
If you’re an individual looking for long-term disability insurance, forgoing a physical exam can be attractive. Sometimes, the disability insurance carrier may not even require financial underwriting.
Quicker processing and simpler underwriting will ensure this valuable coverage is in force if and when you need it. If you need disability insurance and want to know how to get it as painlessly as possible, read on.
5 Types of No Exam Disability Insurance
“No Exam” sounds straightforward; however, there are several types of disability insurance that require no medical exam. The five main categories are: traditional non-med, simplified issue, guaranteed standard issue, group, and supplemental.
For most people, their no exam disability insurance is still fully underwritten, it just doesn’t require an exam.
This is true for other products such as life insurance with no medical exam.
These types of “no-exam” insurance products still have an underwriting process which may require doctor records or other requirements but a medical exam isn’t mandatory.
A smaller percentage of the population may choose “simplified” disability insurance. These plans are easier to qualify for medically; however, they are often more expensive than traditional disability insurance.
Guaranteed standard issue or “GSI” policies are offered in an employer setting. They are supplemental or in addition to existing group coverage and are often utilized to increase the limited insurance a group policy provides.
Group disability insurance offered through an employer or association rarely requires any medical exam. While not everyone has access to a group plan, if you do, it should be explored as a viable no-exam option.
The last kind of no exam disability insurance is for supplemental coverage. These policies are purchased with a fully underwritten, traditional long-term disability plan.
The type of policy you want, your current and past health, and your desire to have a policy issued quickly will dictate the right no exam disability insurance policy for you.
①Traditional No Exam Disability Insurance
For those who need a smaller long-term disability policy and don’t want to go through the hassle of a medical exam, this is a great option.
Almost all disability insurance companies have some kind of program that allows an applicant to skip an exam.
The parameters of these programs normally come down to the age of the applicant, the benefit amount applied for, and other factors of the policy design, such as the benefit length.
For ExampleA typical no exam disability insurance policy program will have age ranges and benefit amounts that require no exam. The agent guide may specify that applicants between the ages of 18 and 40 can apply for up to $6,000 in monthly benefit without an exam. Ages 41-50 may only be allowed $3,000 of monthly benefit and anyone 51+ must get an exam.
For most of our clients, we focus on the benefit amounts, rather than the underwriting requirements the carrier needs to issue a policy.
If a policy design calls for an exam, then we normally recommend the client take the exam to get the best policy for their situation. If no exam is required, then that’s a bonus.
For those clients that are willing to take a lesser benefit amount and skip the exam entirely, that’s an option.
What’s important is that you understand what you need and how the coverage you’re purchasing protects you.
②Simplified Issue Disability Insurance
Another type of no exam disability insurance is simplified issue.
As the name implies, underwriting is more lenient on these policies and rarely requires any physical exam.
There are a few trade-offs for these policies.
For one, occupation classes may be condensed or even eliminated.
Consolidated occupation classes hurt white-collar professionals (who normally have the lowest number of disability claims), since they are forced into the same occupational classification as professions with a much higher incidence of claims.
This means they’ll pay more for the same coverage they could get elsewhere on a non-simplified basis.
Some simplified policies eliminate occupation classes altogether.
While this may sound attractive, this type of policy normally only covers you when you’re away from work. That’s why they don’t take your occupation into account.
For any injury or sickness that is work-related, you’ll be relegated to collecting workman’s comp and any other state or federal disability insurance available to you. Your simplified disability plan won’t pay in that case.
None of this means simplified disability insurance is bad. If used to protect a mortgage or as a supplemental policy to an existing group plan, they can be very attractive.
Simplified policies can also be great for those with health conditions. Because a higher incidence of morbidity is already priced in, those with existing health problems may find a simplified issue policy a much better option than going with a fully-underwritten policy.
This is why it is important to shop for your coverage and weigh all your options. Make sure you’re getting the policy that is best for YOU, not what you hear from someone else.
③Guaranteed Standard Issue Disability Insurance
Guaranteed standard issue, or GSI, is often purchased by the executives or high-income earners of a company that offers the plan through their workplace.
Employers can offer GSI as a stand-alone or build it on top of an existing group policy. GSI has advantages to traditional disability insurance because it is discounted and requires no medical underwriting.
Guaranteed standard issue policies are individually owned and can be portable. They are attractive to those with health issues (since there is no medical underwriting, and pre-existing conditions are often covered after a wait period) and those whose group benefits don’t cover their salary and bonus.
Unfortunately, you can’t just apply for GSI. You must have your employer’s buy-in.
If you’re the employer, know that GSI is often best when you have a mix of male and female applicants, an average age under 50, and salaries north of 75k. Although you may purchase a guaranteed standard issue policy with less than 10 employees, anything above 10 will give you a better shot at securing coverage.
We help business owners buy the right disability insurance policies for their needs. Contact us today if you’d like to explore your options.
④Group Disability Insurance
The ultimate no exam disability insurance is group coverage.
Offered through your employer or an association, basic group requires little beyond a few forms and a salary reduction agreement.
Not all companies offer group disability insurance, and those that do often don’t fully cover highly compensated employees. Sometimes, even moderate salaries are not properly insured with a group plan.
The other major challenge with group is that it isn’t always portable.
That means, if you leave your buttoned-up corporate job to work in your jeans for a hip startup, then you likely will lose your disability insurance.
All that being said, group disability insurance is a great solution for a lot of workers.
It is gender neutral, so pricing can be great for women (who pay 40-60% more than men for disability insurance), and it can cover things like pre-existing conditions and even pregnancy.
If you have group disability insurance available through your employer, you should explore if it is right for you.
A number of people will opt to purchase the group coverage and then add on an individual, supplemental policy. That policy could be GSI or even an individual long-term disability insurance policy.
It all depends on your needs.
⑤Do You Need More Coverage?
Most workers don’t need high limit disability insurance. In fact, a large percentage of the population could probably get away with buying the relatively low limits that a traditional no exam disability insurance carrier might offer.
That being said, there is a relatively small percentage of the population that can not only benefit from a fully underwritten, maximum benefit long-term disability insurance policy but also needs additional coverage on top of that plan.
If you have purchased a non-cancellable, fully underwritten, disability insurance plan, within the past 90 days and had a standard rating or better, there
is now an option to add a supplemental disability insurance plan to your current policy, without the need of another medical exam.
This plan is known as a “Top Hat” supplemental disability insurance plan.
Are You A H.E.N.R.Y.?
What is the financial and health profile of someone who should consider a top had supplemental disability insurance plan?
Well to start, you’ll have to be able to qualify for standard rates on a non-cancellable, fully underwritten disability insurance policy. Your health plays a big role in the pricing and the benefits of your disability insurance policy. If you’re fairly healthy and have an occupation that isn’t overly strenuous or dangerous, then you should be able to get a traditional individual long-term disability insurance policy.
As mentioned before, only a small percentage of the population needs a supplemental high limit disability insurance policy. No exam disability insurance is available up to 6k per month without financial documentation.
Fully underwritten policies (which include a medical exam) can cover up to 20k per month and can last until retirement (65, 67, or 70).
That leaves a group of people that we call H.E.N.R.Y. or High Earners Not Rich Yet. These individuals make a substantial income but are normally relatively young (under 50) so haven’t had an opportunity to amass the wealth that could sustain them should they become disabled.
Most H.E.N.R.Y. individuals like the flexibility of no exam disability insurance but need more coverage than it would typically offer. That means that most of this demographic needs fully-underwritten disability coverage.
For a small subset of this group, they need even more coverage than what a traditional long term disability policy will cover. Those people must consider supplemental disability insurance coverage.
What Is Supplemental No Exam Disability Insurance?
This coverage is available to high-income earners who don’t have all of their needs met by a fully underwritten disability insurance policy. Typically, they need high limit disability insurance not available through the traditional market channels. We specialize in high limit disability insurance for high-income earners and can help you secure one of these policies.
In order to apply for one of these policies, you should be making over 250k annually and have recently (within the last 90 days) been issued a fully underwritten non-cancellable disability insurance policy from a major carrier such as Guardian or Principal.
Individuals who fit this description can pursue a supplemental no exam disability insurance policy.
There are a few guidelines that must also be met:
1. You may only, in combination with your permanent, noncancellable plan, have up to 65% of your current income insured.
2. The maximum issue limit is up to $10,000 per month. However, if you want more coverage you can take another exam and apply in the traditional manner.
3. The elimination periods are from 90 days to 180 days.
4. The benefit period is 24 month or 60 months, for each disability.
5. Policy term length is 3 years or 5 years.
For high-income earners, this is great news. As you know. you are limited in terms of how much monthly benefit you can receive. If you are earning over $250K a year, you may end up short on coverage.
What Is The Process?
Most financial experts agree that you will need about 65% of your current income in order to financially survive a disability. If that number sounds low, keep in mind that we’re talking about after tax income. Disability insurance, when paid for personally (not by your employer or company), pays benefits that are tax-free.
Unfortunately, most disability insurance companies will not offer 65% of your current income. Traditional issue limits can be as low as 40%. For someone making upwards of 300k, the shortfall in coverage can be anywhere from 6-10k (or more).
This gap in coverage can be financially catastrophic should the insured suffer a disability that prevents them from earning a living. Income protection insurance (disability insurance) is meant to do just that, protect your income. If less than two-thirds of your after-tax income is protected, you must find a way to fill that gap.
If you fit the definition of a H.E.N.R.Y. and traditional disability insurance policy is not enough to fully cover your current income, then you can secure a no exam disability insurance policy to address this problem.
The procedure is relatively straightforward:
- Apply, get approved, and accept a fully underwritten, non-cancellable disability insurance policy from a major disability carrier (either through High Income Protection or another agency)
- Within 90 days, apply with a supplemental disability insurance carrier. There is no exam required. We will just need to send them a copy of the original application (that you completed for your traditional policy) and a copy of the declaration page from the newly issued policy.
- Within 1-2 business days, you will have an offer for additional coverage.
- Complete a simple application with the new company and an authorization to put the coverage in force.
- You’re now covered for up to an additional 10k per month!
This is a very simple process and one that can help you address the 65% problem.
Summary
Just because you have disability insurance, don’t think that your income is fully protected. If you’ve recently purchased a non-cancellable, fully underwritten, long term disability insurance policy that doesn’t cover at least 65% of your income, we can help.
We provide expert, unbiased advice on purchasing disability insurance. If you would like our assistance in purchasing a traditional disability insurance policy or if you’re already partially covered and are interested in a high limit, supplemental no exam disability insurance policy, please complete the quote form on the left.
You can also call us today for a confidential discussion. Our toll-free number is 888-636-2310.
