3 outcomes from a disability applicationSubmitted by Disability Gurus on January 6th, 2017
Once you have decided on your preferred insurance plan the next major step is submitting an application. Generally speaking, applications will document your personal information (name, date of birth, social security number, driver’s license number, income, profession, etc.) along with health history details (illnesses, injuries, medications, surgeries, etc.). In addition, carriers may request a medical exam and/or a telephone interview. All these factors help the insurance underwriter assess your risk of morbidity, so they can make an offer of coverage.
Once an application is submitted to the insurance carrier, most of the work happens behind the scenes. Advisors should provide updates on major items, but your time involvement should be minimal. Common updates that we provide to clients are the request for Attending Physician Statements (APS), requiring additional information to clarify a personal or health question and need for a medical exam or re-test due to abnormal labs. Additional requirements tend to delay the underwriting process from a few days to several weeks. One of our favorite updates is letting a client know of an approval, however that is not always the situation.
As a result, there are primarily three outcomes of an application…
- Approved as applied with no restrictions. We wish every application has this outcome, but unfortunately it’s not a perfect world.
- Approved as applied with restrictions/exclusions. Risky behavior and health can cause restrictions or exclusions within a policy. Risky behavior can include activities such as sky diving, scuba diving, rock climbing or piloting. Additional application forms are typically needed to clarify these activities to determine if the risk is severe enough to limit policy coverage. Exclusions tend to be health related. If an applicant has a pre-existing condition there is a good chance that health concern will be excluded from future claims. Health concerns can range, but typical issues are stress-related, musculoskeletal and BMI. Often, clients act irrationally when faced with accepting an exclusion. The typical response is to not take the policy. However, our job as the advisor is to show how the policy will cover 99% of possible disability claims and exclude only 1%. Plus, not all exclusions are permanent. Oftentimes, we can negotiate to have an exclusion reviewed within 1 to 2 years of policy inception. With favorable information, insurance carriers will often remove an exclusion once this time has elapsed.
- Declined. Our least favorite outcome! The insurance underwriter found significant reason to decline an application based on health and/or activities. We’ve had clients declined for numerous reasons, but a few include depression, vertigo, ulcerative colitis and BMI. This may be the end of the road for securing individual coverage, we often pivot and look at coverage through work or associations. Individual coverage offers the most robust contracts, but when faced with a decline, we entertain other coverage sources since any coverage is better than no coverage.
It is important that coverage is reviewed every year. This ensures the policy is properly protecting your income, but also to potentially improve coverage (such as removing a policy exclusion/restriction). Every year you should receive a policy anniversary letter from the insurance carrier. Policy anniversary or job change is the best time to review your coverage.
Contact us today to discuss securing new coverage or reviewing your existing coverage.
Written by: Jeffrey Marsico, CLU & David Marsico