The critical features in any disability
income protection policy – group or
individual – are the contractual provisions that define the circumstances under which a claim will be paid. The
definitions of disability may vary significantly
depending on the company. Since most
consumers are not disability insurance
experts, substantial education is usually
required to select a disability plan that
matches one’s circumstances. This can
make it difficult to make apples-to-apples
comparisons between insurers.
A Critical Detail Inside the
Besides learning the basics of disability insurance, prospective policy owners
should examine the contract language
regarding a specific type of disability: one
occurring as a result of a mental or nervous (M/N) disorder. Why? Several compelling reasons:
n;Statistically, a disability resulting
from a M/N disorder is your biggest risk. A 2013 report by the
Anxiety and Depression Association of America found “that major
depressive disorder is the leading
cause of disability in the US.” The
U.S. Department of Labor ( dol.gov)
concurs, stating major depressive
disorder is “the leading cause of
disability in the U.S. for ages 15-44.”
n;Because M/N disorders are harder
to verify than other disabling
events, many insurance carriers
restrict how long benefits will be
paid, a common limit being 24
months. So, even if you own a
policy with lifetime benefits,
payments from a disability claim
as a result of depression will only
be made for 2 years. Often, this
limiting provision will also include
substance abuse and addiction-
n;The policy may state that if a
disability is determined to be
“caused by, resulting from, or
contributed to” a M/N disorder,
the insurance company may apply
the limitation in a more expansive
context. This is a critical distinction.
For example, if an insurer concludes depression was an integral factor in a worker experiencing debilitating back pain, it might seek to
limit benefits for the back-related
disability to 24 months.
n;Combine the historical prevalence
of M/N factors in disability with the
likelihood of diminished benefits,
and it is easy to see the possibility
of litigation to resolve a claim – by
both the insured and the insurer.
From the claimant’s perspective,
even successful litigation delays
benefits and adds stress.
Managing Your Ongoing Medical
History is Prudent
Insurance companies rely on medical
documentation to guide their decisions,
both to insure and pay claims, especially
when M/N conditions are involved. If a
disability is not primarily the result of an
M/N condition, it is important to clearly
The Provision Limiting Benefits
for M/N Conditions to 24 Months
is Not Universal
While most group disability plans impose the 24-month limiting condition,
select insurance companies offer
individual policies with no benefit restrictions
for disabilities resulting from M/N disorders. If such a policy promises lifetime
benefits for incidents of disability, there
are no caveats. However, approval of a
“no limits” policy is contingent on the
applicant’s individual health history. In
exchange for expanded coverage, applicants should expect a higher level of
screening during the application process.
Incentive for Healthy Applicants
If you want disability insurance without limitations,
to Secure Coverage Promptly
Waiting runs the risk of developing
health conditions or experiencing epi-
sodes that could result in declined cov-
erage or specific exclusions. The sooner
you have the insurance (including op-
tions to obtain more in the future under
the same insurability status), the better.
For young, newly-minted professionals,
the cost of obtaining top-level disability
may seem daunting. To address this, sev-
eral insurance companies offer a menu
of premium schedules, or the option to
change premium schedules over time.
For a number of reasons, it is common
for professionals and highly-compensat-
ed employees to have a mix of disability
insurance, perhaps a combination of in-
dividual and group policies, or individu-
al policies with different companies.
there is strong incentive for healthy applicants
to secure coverage promptly.
JOHN M. DRISCOLL, PRESIDENT
JOHN DRISCOLL & COMPANY, INC.
5080 N. 40th Street, Suite 400, Phoenix, AZ 85018
(602) 957-7155, John_Driscoll@JDriscollCo.com
Should You Be Nervous About
Your Disability Insurance?
Registered Representative of Park Avenue Securities LLC (PAS). Securities products offered through PAS, member FINRA, SIPC. General Agent of The Guardian Life Insurance Company of America® (Guardian), New York, NY.
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