Cancer can cause severe pain and fatigue. So can cancer treatments, like chemotherapy. The impact of the disease and treatment can make it difficult to work.
Being unable to earn an income while also paying some of the expenses related to treatment can cause a financial double-whammy.
One of the best ways to prepare for the possible loss of income due to cancer is to have disability insurance.
This is a type of coverage in which you pay a premium to an insurance company in exchange for a paid benefit in the event an injury or illness limits your ability to work for an extended period.
You can buy your own individual policy and/or participate in a group plan through your employer or membership in an organization. There are short-term disability policies designed to cover you for periods of a year or less, and long-term disability policies that can cover you for several years or even your lifetime.
In general, a disability insurance policy will provide benefits if you can’t work because of cancer. Most injuries or illnesses that aren’t self-inflicted or caused by something that is specifically included in your policy will be covered if they limit your ability to work.
However, there are circumstances where you may receive no benefits or reduced disability benefits if you’re diagnosed with cancer.
This can happen based on two factors:
- How serious your condition is
- How your policy defines disability
Just being sick or injured doesn’t automatically qualify you for policy benefits. The affliction must be serious enough to limit or prevent you from working.
In addition, there are several ways that disability insurance policies define disability. If your condition does not meet that criteria, you will collect either a reduced benefit or no benefit at all.
The most comprehensive definition available is own-occupation. This type of coverage states that the policy will pay benefits if an injury prevents you from working in your given profession, even if you’re well enough to earn an income doing other types of work.
On the opposite end of the spectrum is an any-occupation policy. With this type of coverage, you must be unable to work in any profession and in any capacity to qualify for benefits.
There is also a provision called residual disability. This means you can perform some, but not all, of the material and substantial duties of your occupation. It can also mean that you are unable to work in your occupation for a set percentage of the time.
Residual disability benefits are triggered when the insured suffers an established percentage of income because of their disability.
Keep these definitions in mind as you shop for disability insurance. If chemotherapy, for example, enables you to work only half-days, then a residual disability benefit would help you make up the lost income.
Unfortunately, most carriers will deny your individual disability insurance application if you’ve recently had cancer or are being treated for it. Insurance companies underwrite applicants based on their likelihood of filing a disability claim. Already having cancer makes an applicant an extremely high risk to insure.
If you don’t already have group disability coverage, such as through your employer, you may be able to get insurance that way. Group plans are guaranteed issue, which means there is no underwriting. If you’re eligible to sign up, you’re automatically covered.
One problem with this option is that you typically can’t apply at any time; you can typically only sign up for employer benefits during the annual enrollment period.
Another option is to apply for Social Security Disability Insurance (SSDI) if cancer is preventing you from working.
SSDI has a stricter definition of disability than most private disability insurance policies. Most applications are initially denied.
To qualify, you must be significantly limited in your ability to do basic work such as lifting, standing, walking, sitting, and remembering. In addition, the condition must be severe enough that it’s expected to last at least 12 months and/or result in death. Otherwise, Social Security will not consider you disabled.
If you manage you get through the application process and receive a favorable benefits ruling, don’t expect a large check each month. According to the Social Security Administration, the average monthly disability paid by SSDI was $1,234 at the beginning of 2019.
Part of the underwriting process for standard individual disability insurance policies is filling out a questionnaire about your medical history and your family medical history. You will also be asked about previous and current tobacco use.
These factors help the insurance company analyze the likelihood of you being diagnosed with an illness that could prevent you from working, including cancer. If the insurer considers you to be at high risk for getting cancer, you can still get coverage. But you will likely pay a much higher premium for coverage than those who are not high-risk.
In order to collect benefits from a disability insurance policy, you will have to prove to the insurance company that:
- You have suffered a disabling accident or illness, such as cancer
- That the cancer and/or treatment will adversely impact your ability to work
Insurers will require a written statement from your treating physician. This document will detail the nature of your cancer, describe the treatment plan, and verify that you either cannot work at all or will be limited in what tasks you perform or how much time you can work.
The insurance company will also need medical records, including medical history, physician notes, MRIs, x-rays, and lab reports. There is also usually a claim form you will have to complete.
Your policy will likely spell out how much time you have between your diagnosis and when you need to apply for benefits.
Once you’re in remission or have had your cancer removed, you should be able to obtain an individual disability insurance policy.
However, it’s unlikely that an insurance company will cover any future relapses. If you’ve had cancer before you apply, your policy will likely have an exclusion attached to it. An exclusion restricts coverage for claims resulting from or related to a preexisting medical condition.
Depending on the type of cancer you had, this exclusion may limit you from filing claims for any type of cancer. On the other hand, if you suffered a more localized type of cancer, such as thyroid cancer, then a future policy may only exclude that type of cancer from coverage but include other types.
Even with exclusions, your previous history of cancer will lead to higher premiums because it may lead to separate health and disability issues in the future.
Because of how common cancer is, it’s in your best interest to consider disability insurance before you have a potential diagnosis. This is especially true if you have any risk factors that make a diagnosis more likely for you than for the general population.
Joel Palmer is a freelance writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.
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