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How to get disability insurance in 2021

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8 mins
From quote to coverage, putting a disability insurance plan in place can take several weeks. Here's what you can expect along the way.

If you rely on your source of income to live life, then it makes perfect sense to protect that income from injury and illness with disability insurance. But buying disability insurance has always been a long, confusing process. That is, until now.

In this article, we are going to set the record straight on how to get disability insurance in 2021, including:

Ready to get started?

Applying for disability insurance

Here are the five key steps you can expect to take when shopping for individual disability insurance from conventional carriers.

Step 1: Research your disability insurance options

When shopping for an individual disability insurance plan, the first step is usually finding a licensed insurance agent.

A reputable, knowledgeable agent can make the process a lot easier. They can take care of all the research and legwork, then offer recommendations with your best interests in mind. Some respected agencies, such as Simply Insurance, operate entirely online.

A greedy agent, however, may pressure you to purchase more coverage than you truly need to maximize their own financial gain. For this reason, it’s important to perform your due diligence when selecting an insurance agent and company.

Disability insurance policies have many moving parts and optional features. Therefore, it’s important to research several options. Obtain multiple quotes from different carriers.

As you research individual disability insurance options, it's crucial that you thoroughly vet the carrier issuing the policy. History and financial strength are important attributes of an insurance company.

Individual disability insurance policies are available through insurance companies. You can get one through an insurance agent that represents a carrier or through the carrier directly. An agent can help you understand the differences in policy features and find the best option for your individual situation.

When you buy disability insurance today, you’re planning for tomorrow. You’re counting on an insurance company to protect you. After all, someday you may depend on this company to provide a stream of monthly income for several years. So, what if the insurer goes out of business or can’t meet its contractual obligations? The effect on you and your family could be catastrophic.

That said, you can minimize this risk by choosing companies with superior financial ratings. Insurance company ratings are grades given by third-party rating agencies.

Rating agencies assess an insurer’s ability to meet its current and future obligations to policyholders. To determine a company's rating, agencies conduct independent investigations of an insurer’s financial health.

Agencies then assign letter grades. Higher letter grades — typically anything with an ‘A’ — indicate better financial performance. A few of the agencies that rate insurance carriers and their top ratings include:

If you have enlisted an agent, discuss your situation in complete detail. Ask questions about the policy benefits that will help you the most. Your agent will then recommend a policy. From the time you submit an application, it may take four to six weeks before your policy is issued. In some cases, even longer.

Step 2: Complete your disability insurance application

Are you on board with the policy recommendation you received? If so, the next step is actually applying for coverage. First, you will complete a form that gathers:

  • Personal information
  • Professional information
  • Basic medical information

You will also need to provide supporting documentation, including:

  • Proof of employment
  • Proof of income history
  • Medical records

Employment and income documents must be submitted by you, whereas you need to authorize the release of your medical records. Some insurers will also check your driving records and your credit report. In that case, you will have to authorize the release of those documents as well.

Needless to say, it’s crucial that you answer every question on your application accurately and completely to the best of your knowledge. Unnecessary delays and even denial of coverage can result from missing and/or inaccurate information. The person processing the application will have to contact you or your agent to track down the information before being able to move forward.

Step 3: Take your disability insurance medical exam

Now it’s time to schedule your paramedical exam. As you can imagine, this is a crucial part of how insurance companies assess your health and any potential risks it may pose.

A disability insurance medical exam is similar to a physical checkup. It should take about 30 minutes and will consist of an interview to gather a medical history. The examiner will record your:

  • Height
  • Weight
  • Blood pressure
  • Pulse

The examiner will also collect:

  • Blood
  • Urine

Unless you’re terrified of needles, this seems like a pretty painless process, right? That’s the goal. However, oftentimes the simple act of getting your medical exam scheduled can delay the issuance of your coverage. What’s more frustrating is the fact that young, healthy individuals need to confirm must prove what they already know about themselves.

Step 4: Go through disability insurance underwriting

Once you complete your medical exam, the examiner will send the results to the insurance company’s underwriter. The underwriter will also review your medical, financial, and employment records that you submitted with your application. Meanwhile, your personal physician will be asked to fill out a form called an attending physician’s statement (APS).

The goal of underwriting is to assess your overall risk of filing a claim for disability benefits. In other words: What are the odds that you actually end up needing to use the disability insurance that you pay for?

This will determine if you can qualify for coverage. For those who do qualify for coverage, underwriting also determines the monthly premium rate you will pay.

If you thought taking a medical exam was burdensome, wait until you see how long it takes for your application to make it through the conventional underwriting process.

Of course, underwriting speed varies by company, sometimes tremendously. However, it’s safe to say that most of this 4-6 week process can be attributed to your time spent in underwriting.

Step 5: The issuance of your disability insurance policy

The finish line is officially in sight. Based on your risk assessment, you will now hopefully receive an offer for coverage with a monthly premium amount.

If you accept the offer, the insurance company will issue your policy. If you opt to decline this offer, you will need to start from scratch with another insurance carrier.

Once the policy is delivered, you will have a specific number of days to double-check that it is the right coverage option for your needs. This is known as a free-look period. By law, insurance companies must provide a free-look period once your policy is issued.

Having walked through the conventional disability insurance buying process, it’s easy to see why old-school insurance carriers need 4-6 weeks to issue coverage.

Claiming disability benefits

Like any type of insurance, getting disability insurance coverage is just the beginning. You also need to understand what to do in the event that you become disabled and need to put your policy to work.

Of course, no one ever hopes to actually use their disability insurance. But if the time does come for you to collect disability benefits, follow these best practices to ensure a swift claims process.

Don't miss any deadlines

First and foremost, understand that there will be deadlines to meet. And missed deadlines can negatively impact your ability to collect disability benefits from your insurance carrier.

Depending on the insurance carrier you select, you may have anywhere from 20 to 30 days to notify the company that you experienced a disabling event. However, it’s in your best interest to tell them as soon as possible.

Once you’ve reported your disability, the insurance company will send you claims forms. This step also may have a strict deadline for when you must return the forms with all accompanying documentation.

Best Practice: Contact your carrier ASAP.

Proving your disability

To collect benefits, you will have to prove that you suffered a disabling event, be it an injury or illness. In addition, you will need to demonstrate that the disabling event adversely affects your ability to work.

At this point, insurance carriers will require a written statement from your treating physician. This document will:

  • Detail the nature of your injury or illness
  • Explain why you can’t work or why you will be limited in the tasks you can perform
  • Include an estimate for how long your ability to work will be limited
  • Describe your treatment plan

The insurance company will also need various medical records, including:

  • Medical history
  • Physician notes
  • MRIs
  • X-rays
  • Lab reports

Like any other part of the application and claims process, your honesty is key to a successful outcome.

Best Practice: Stay calm, cool, and collected to help the doctor prove your disability.

Approval or denial

Disability insurance companies sometimes deny claims for a variety of reasons. If this occurs, you may have to go through the legal process, such as mediation or civil court, to get the insurer to pay claims.

If your disability insurance claim is approved, you won’t receive benefits immediately. Your policy will include an elimination period. Also known as a waiting period, this is the amount of time between when the disability occurs and when benefits are paid. The elimination period for disability insurance is similar to the deductible on property insurance. It’s the part you pay out-of-pocket before benefits kick in.

For example, say you have a policy with a 60-day waiting period. It would not pay benefits for the first 60 days after you become disabled. Elimination periods can range from 30 days to a year or more. The longer the elimination period on your policy, the less you will pay in premium. Typically, a 90-day waiting period is the most cost-effective option.

Best Practice: Crunch some numbers, and find out how long could you afford to live off savings before your disability benefits kick in.

Jack Wolstenholm is the head of content at Breeze.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.