Getting Disability Insurance
Is it difficult to get disability insurance?
There are still five or six major companies in America that sell disability insurance. It's not as easy to qualify for disability insurance as it used to be because insurance companies are very careful about who they insure. Disability insurance is different than life insurance. On life insurance, very few people want to commit suicide and die and submit a claim. However, on disability insurance people do things that you wouldn't believe. For example, sometimes a person's income goes down. For example, a lawyer or a doctor finds that their income has gone down because of competition; a doctor says that the HMOs and the PPOs are driving them out of business, and they have a big disability policy. Insurance companies have in the past found that people who would ordinarily never put in a disability claim are putting in claims fraudulently and they've had to deal with this; they've lost lots of lawsuits over this. Insurance companies now are looking for people that are not only physically healthy but mentally healthy. One of the big issues also is that in your major cities, the people who typically want to buy disability insurance today go to psychiatrists, psychologists, LCSWs, and MFCCs, all these types of psychotherapists. When the doctors release the medical records to the insurance company, which has to be released if you want to qualify for disability insurance, one of the things that happens is that the doctor might put down things in your medical records like, you really don't like your job, you really don't like your career. If your insurance company is insuring you in your occupation and they know that you don't like what you do for a living, then they know that you'll either malinger on a claim if you have a legitimate disability, or maybe you'll even fake a disability. So, insurance companies like people typically for disability insurance who want to go back to work and love what they do, and they're looking for healthy people. People that take psychiatric medications, people that have severe medical problems; those people really do have a hard time getting disability insurance. A good insurance agent still has ways of getting disability insurance for that type of person, and it usually has to be done through Lloyds and London, or other specialty companies that handle very high-risk programmes.
What does it mean to be insured in my occupation?
Disability policies have a clause that says whether or not they are going to insure you in your own occupation, in your speciality. Now, there are lots of types of doctors. There is a speciality physician doctor; we are talking about cardiologists, surgeons, internists, dermatologists, psychiatrists; let's take a plastic surgeon. They don't make their money from diagnosing problems like an internist does. Let's say that a plastic surgeon has an injury to his right hand, and that's his main hand. He now finds out that he cannot do surgery any more. His income might have gone from $700,000 to nothing over night. That's because he can no longer practice as a plastic surgeon. So, a policy that has its own occupational definition says "If you can't do your speciality, doctor, as a plastic surgeon we still consider you as if you're disabled. Even if you become an internist or open up a grocery store, or you become a lawyer or do something else and make tons of money, even more money than you did as a doctor, you would still be eligible for benefits."
How are disability premiums determined?
Disability insurance premiums are determined by a couple of things. Number one, the company will look at your occupation, some occupations are safer than others. An insurance company will look at the occupation and actually give it an occupation class. So, as an example, an architect or an attorney might be in the premier class but somebody like a plumber or an eletriction might be in a much lower class. The chances of being disabled for an electrician are higher as an electrician might be electrocuted, and he would have a much higher chance of being electrocuted and becoming disabled. So, the insurance company will say, based on their knowledge of your occupation, "We are going to surcharge the premium to offset that". They are also going to look at your health and stability of your occupation, your tax returns, they're going to look at a lot of things. Your health history is critical and they are going to come up with a price. There are people in insurance companies who have expertise in putting a dollar value on disablitily insurance. Based on all of the other factors they come up with a price and of course you have to decide if you are going to go ahead with the insurance or not.
Why does a disability insurer want to see my tax returns?
Disability insurers look at your tax returns because one of the biggest causes of fraud in disability insurance is somebody being over insured. For example, let's say that an attorney wants to buy disability insurance and he tells me, the agent, that I'm making a million dollars a year. That might qualify him for a thirty or forty thousand dollar a month disability policy. I issue the policy, the company does not ask for a tax return. But a year later, or two years later the client gets disabled and they find out that the client never earned anything close to that. Now they're issuing a forty thousand dollar a month benefit to a person that never should have qualified for it. They have learned over the years that when people are over insured, they tend to put in more claims than the average.
How does a change in my family status affect my disability insurance?
The need for disability changes when you have more responsibilities in your life. When you have more children, you have more expenses. You have to make sure that your income is more stable, because you're going to have to pay for their ultimate college educations, their primary educations. When you have a wife or a spouse, you know that you're going to have to incur certain expenses to take care of that person. So the only thing that is involved when you have people in your family is that you've got to make sure that you have the right amount of coverage. If you need $5,000 a month, you should have $5,000 a month coverage. A $2,000 a month benefit may not do enough if you need $5,000 to maintain your lifestyle.
