Too often when purchasing insurance price is king. Too often a detailed explanation of what you are getting for your money is overlooked. There will always be policies that are priced low and priced high… and usually for a very good reason.
Disability insurance is no different. It is important to understand the definitions in the contract to determine if the policy is priced low, just right, or high.
Renewability
Some disability insurance policies are non-cancellable. The insurance company cannot change the price, terms, or conditions for a set period of time once a policy is issued. The set period of time is usually to age 65, but not always.
Some disability insurance policies are guaranteed-renewable. Nearly identical to non-cancellable policies, but the insurer can change the premium.
Lastly, some disability insurance policies are “cancellable.” The policy won’t say cancellable anywhere in the contract, but the carrier can change the terms of the contract during the period of coverage. Cancellable disability plans are almost always employer group plans where both the employer and insurance company have the right to cancel with a 30-day notice.
For many years most individual disability policies were locked-in for a set period of time (usually age 65,) meaning the insurance company could not cancel so long as the policyholder upheld their part of the contract… paid premiums, no fraud, etc. Today there are some individual disability policies that allow the insurance company to cancel with a 30-day notice. This is an example of how two policies viewed side by side may seem identical, yet one is more expensive than the other. Deep in the fine print one says they can cancel with a 30-day notice, the other policy is locked-in coverage, hence the premium difference.
Definitions
There may be variations in what it means to be disabled, and it is very important read what the insurer defines as disabled. To be considered permanently disabled usually entails a physician confirming that there is no chance of recovering. Totally disabled usually means that the policyholder cannot perform the material and substantial duties of their occupation. The definition also likely states that the policyholder cannot perform any occupation that they are trained for by education.