Application Process (it’s easy as 1 - 2 - 3)Submitted by Disability Gurus on February 23rd, 2021
After our help with reviewing your options, you made the wise decision to apply for disability protection with a reputable insurance carrier. Now, you may be asking, what happens next?
The general application process is similar for everyone, but there could be additional requirements depending on the applicant and situation.
We must submit an application to apply for coverage with an insurance carrier. Many carriers now offer electronic applications, but some still require paper application submission. Electronic applications or eApplications, allow us to submit forms quicker and to also help minimize application errors. On an application we will provide information about who you are, what you do and the terms of coverage. Personal information can include, but not limited to, full legal name, citizenship, address, phone number, date of birth, Social Security number, Driver’s License number, employment information, occupation, and income. We will also select the desired coverage, such as benefit amount, waiting/elimination period, benefit period, and any riders desired on the policy. Once the application is completed and signed, it is sent to the insurance carrier to open your file.
Once the insurance carrier has your application, the next step involves underwriting your file. Generally, there are two parts to underwriting, financial and medical. For financial underwriting, the insurance carrier will typically ask for income documentation and existing disability coverages. Income documentation can involve a copy of a business and/or personal tax return, signed employment contract, W-2, or year-to-date paystub. Existing disability coverages would be any group, association, or individual disability policies already in force. These can be policies you secured individually or just receive as an employee benefit at your job. The insurance underwriter wants to make sure you are eligible for additional disability coverage based on your income and existing disability benefits. An insurance carrier will generally not over-insure your income. Commonly, a replacement ratio of 50 – 70% is targeted for disability coverage as a percentage of gross income. Keep in mind, individual disability benefits would be received income tax-free, if disabled.
The medical underwriting will almost always involve a phone interview to disclose heath history information. It’s important to disclose a complete health history along with dates, doctor names, doctor contact information, treatments, medications, and outcomes. Occasionally, an underwriter may request the Attending Physician Statement (APS) to better understand a person’s health history. Usually for higher benefit amounts or older ages of the applicant, the insurance carrier may request a paramedical exam. This exam is paid for by the insurance carrier and is usually completed at home. The exam can involve a blood and urine specimen, height and weight measurement, and blood pressure readings. There may be more sophisticated requirements, such as an EKG should the underwriting guidelines require it.
It is important to note that for medical students, residents, and fellows, most insurance carriers will waive the financial (income and existing disability benefits) and medical exam requirements. The most common requirements for applicants still in training are an application and phone health history interview.
Once the underwriter has all your information available, he/she will make an offer. To understand the outcomes in much greater detail, please read our blog post titled “3 outcomes from a disability application”. However, to summarize, the 3 outcomes would be approved as applied, approved with modifications, or declined. Our goal will always be to receive approved as applied, but of course, modifications and declines do happen.
If the underwriter approval and offer is acceptable to you, then we can have the policy issued. Most insurance carriers now offer electronic policies, or ePolicies. This greatly shortens the time to secure and pay for your policy since eSignatures can be done with the click of a button. At the end of the process you can download a PDF copy of your policy and keep in a secure location. We will also keep a copy for our records. Ask us about giving you complimentary access to your own financial website with vault storage for important documents!
Once a year expect email and/or paper mailings from the insurance carrier regarding policy anniversary summaries, premium notices, or important policy rider features, such as the future increase option agreements. We will offer yearly reviews of your coverage to ensure the policy is meeting your current needs, wants, and goals. Of course, the Gurus are always available to speak with you.
Written by: Jeffrey Marsico, CFP®, CLU®