Having a disability can be an added challenge to an already challenging world, but it’s part of life. In fact, more than a billion people have an impairment in their body that limits how they move or perform. This can be caused by different factors, but one of the ways people cope with their situation is by having a disability insurance policy. (1)
A disability policy serves as a hedge of protection when you become debilitated or very ill. It can keep you afloat financially, especially if it hampers your capacity to earn money. But with many options, choosing the right policy requires a rigorous understanding of what you’re getting and what your conditions are.
This article will discuss some common pitfalls to avoid when choosing a disability policy. Continue reading to learn more.
Failing to consult with a lawyer
Choosing a disability policy without asking for the guidance of a legal counsel proves to be one of the most common pitfalls. If you’ve been diagnosed with a condition, injured yourself while doing your work, or decided to apply for a disability policy, a disability insurance claim attorney can help you navigate your situation. They have a thorough knowledge of laws and regulations when it comes to disability policies. Having their assistance by your side is an invaluable advantage in searching for the best coverage.
Going through your options alone could spell the difference between life and death. However, a lawyer who specializes in disability insurance can look at the terms and conditions of the policy, point out possible ambiguities, and make sure that your welfare is prioritized. They can also ensure that you’re adequately insured without overpaying for unnecessary coverage.
Misunderstanding what disability means
Disability isn’t a one-size-fits-all condition. Its meaning may vary, and how it’s interpreted in policies may have an implication on the coverage of your choice.
For instance, a stereotype about disability is that it’s the same as inability. While any form of disability can impair how a person functions, people with certain conditions can function in more ways than one. A clear understanding of how disability makes sense in a policy enables you to maximize it according to your unique circumstances.
Statistics reveal that one in four individuals in their 20s will experience some form of disability before reaching retirement age. This information could be leveraged by disability insurance companies when crafting their policies. They might define disability in a manner that suits their interests, such as deeming an individual disabled only if they’re incapable of performing any job or classifying them as disabled solely if they can’t carry out the specific duties of their occupation. (2)
Insurance provisions may differ depending on how they use terminologies. The coverage has bounds that are qualified and quantified. That’s why meticulously comprehending how a disability policy defines disability is paramount to ensure it covers your condition.
Overlooking the elimination period
The elimination period refers to the gap between the time you’re injured and when you’ll receive benefits from it. In this waiting period, the policyholders are accountable for the tending they need. Then, the expenses they incurred will be deducted.
With this in mind, consider the elimination period for their policy. Opting for a brief one means having a higher premium while a longer one means a lower premium. Determining the suitable amount of time entails evaluating one’s financial means to have a budget during the elimination period.
Finding the equilibrium between a reasonable premium and an elimination period is key.
Failing to consider future income potential
Your age and health during your application play a role in your disability policy. While it’s generally an excellent choice to get one as early as you can, people undergo income increases as they continue their professional careers. So, choosing a policy should also take into consideration the trajectory of your future income. Policies set a limit on the value they’ll replace, so it’s possible that it may not be aligned with your earnings as you continue with your occupation.
To navigate this situation, look for policies with room for adjustment in the coverage as your earnings increase. Some offer flexibility to modify coverage limits without requiring additional medical underwriting. Moreover, evaluate how your occupation and industry may have an impact on your succeeding paychecks. If your field exhibits high earning potential, a policy with elevated coverage limits could be prudent to safeguard against substantial income losses.
As a rule of thumb, make sure you’re financially protected by having your policy reviewed from time to time and updated as necessary to reflect your evolving financial circumstances and needs.
Withholding information during the application process
Usually, when filling out policy applications, you’ll see a clause at the bottom reiterating the need for comprehensive and truthful disclosure of information. It basically states that you must disclose in the form all facts reasonably knowable regarding the risk being proposed. This should be done thoroughly and faithfully to avoid complexities down the road. Failure to do so may void the issued policy. (3)
Dishonesty during the application process can result in significant financial ramifications as insurance providers may not give payouts or reimbursements for medical expenses if it’s found out that you’ve not been transparent. Companies reserve the right to impose exclusions to existing policies, potentially voiding coverage in severe cases of misrepresentation or non-disclosure.
Withholding or misrepresenting information related to your medical history, lifestyle, or occupation could lead to policy cancellation or denial of claims. That said, honesty and transparency are paramount when applying for disability insurance, as insurers rely on accurate information to assess risk and determine appropriate coverage.
In Closing
Choosing a disability policy is an all-important task that requires careful consideration of the options available. Take your time in evaluating them and don’t be pressured by the different insurance providers. After all, it’s your future at stake. Knowing these common pitfalls will keep you from being tricked. Remember, always make an informed decision.
References:
- ‘Disability’, Source: https://www.who.int/news-room/fact-sheets/detail/disability-and-health
- ‘Group and Individual Disability Insurance Overview’, Source: https://www.investopedia.com/articles/personal-finance/110415/group-and-individual-disability-insurance-what-you-need-know.asp
- ‘How to Easily Understand Your Insurance Contract’, Source: https://www.investopedia.com/articles/pf/06/insurancecontracts.asp#:~:text=coverage%20or%20costs.-,Insurance%20Contract%20Essentials,of%20your%20contract%20is%20to%20encourage%20illegal%20activities%2C%20it%20is%20invalid.,-You%20may%20not
Michael Harrelson is an insurance specialist and writer from Detroit, Michigan, whose passion is helping people find the most ideal insurance policies for their unique circumstances.