{"id":1621,"date":"2008-02-27T05:00:04","date_gmt":"2008-02-27T13:00:04","guid":{"rendered":"http:\/\/getrichslowly.org\/blog\/2008\/02\/27\/the-disability-insurance-maze-how-to-select-and-purchase-a-policy\/"},"modified":"2023-10-04T15:24:36","modified_gmt":"2023-10-04T21:24:36","slug":"the-disability-insurance-maze-how-to-select-and-purchase-a-policy","status":"publish","type":"post","link":"https:\/\/www.getrichslowly.org\/the-disability-insurance-maze-how-to-select-and-purchase-a-policy\/","title":{"rendered":"The disability insurance maze: How to select and purchase a policy"},"content":{"rendered":"
This article was written by Suzanne S.<\/strong> It’s very<\/span> long, but it’s about an important topic. You may want to bookmark it for later reading.<\/em><\/p>\n Personal finance isn’t just about growing your finances \u2014 it’s also about protecting what you have. Most experts advise insuring your home, your car, your health and your life. What many of us never get around to doing is insuring our earning power.<\/p>\n According to The Wall Street Journal<\/em> in a December 2006 article \u201cThe Growing Appeal of Disability Insurance\u201d:<\/p>\n Even consumer advocates who are often critical of the insurance industry for pushing unnecessary products (such as life insurance for someone with no dependents) say that a disability policy can be a smart buy. \u201cDisability insurance would probably be the one insurance product that is undersold,\u201d says J. Robert Hunter, insurance director for the Consumer Federation of America<\/a>.<\/p><\/blockquote>\n If you have benefits through your employer, you are probably smugly thinking that you are already covered. Check again. You likely have a false sense of security and don’t have coverage. If you do have coverage, it likely is for short-term only (for example, just for five years), or the benefits paid are not enough. What you need is long-term coverage, until social security kicks in (at age 65).<\/p>\n If your employer is paying the premium, you will be taxed on the benefits, so factor that into your calculations. According to the Bureau of Labor Statistics, less than a third of all workers in private industry have long-term disability insurance. Only 40% of managerial and professional workers do. What’s your situation?<\/p>\n If you have a coverage gap, or if you are self-employed, you need to find your own disability insurance. Unfortunately, it’s not easy. In fact, it’s been one of the most confusing processes I’ve ever undertaken.<\/p>\n During your working years, you are more likely to face disability than death. Nearly one out of every three workers will suffer a disability lasting three months or more at some point during their career, according to the Life & Health Insurance Foundation for Education<\/a> (LIFE).<\/p>\n And disability isn’t a one-time event. The repercussions can continue for months \u2014 sometimes years \u2014 impacting the financial security of you and your family. If you can’t do your job, money isn’t coming in, and the bills start piling up. As financial guru David Bach puts it: \u201cWhat this means to you and me is that the greatest threat to our ability to finish rich<\/a> may be the risk we all face of serious injury or illness! And the younger you are, the greater your risk actually is.\u201d<\/p>\n Also, according to The Wall Street Journal<\/em> article:<\/p>\n Americans are recovering and living longer from accidents and diseases such as cancer, but they aren’t always able to go back to their jobs. And some research, such as a recent Hartford Insurance Co. study, suggests that rising rates of obesity and diabetes are leaving workers disabled at younger ages than in recent past. Cancer was the number one cause of long-term disability last year at the largest disability insurer, UnumProvident, the company says. Other top causes include complications of pregnancy, musculoskeletal diseases, back injuries and heart disease.<\/p><\/blockquote>\n Buying disability insurance is hard. It’s confusing, and you can’t do it by simply filling out a form online. There are a number of avenues to try:<\/p>\n You can search online for \u201cdisability insurance\u201d<\/a> and check which companies offer this type of product. After searching, I went to the MetLife and Mutual of Omaha sites and sent in details online asking for a broker to contact me. Never heard back from either one. Life got busy and I left this task for several months. I tried again on both of these sites. After a week or two (including a week-long conversation with a customer service rep of MetLife while she kept apologizing to me that no one was calling me and I kept emailing back to say that I still hadn’t heard from anyone), I got calls from both companies.<\/p>\n The MetLife agent told me he thought my husband would be in an occupational class that would give us a better rate. I subsequently found out that this would never have made it through underwriting. Also, the policy he suggested was \u201cown occupation\u201d for the first two years of disability and then \u201cany occupation\u201d after that.<\/p>\n The Mutual of Omaha agent told me that they do not insure general contractors to the age of age 65 and that the best he could offer was a 10 year policy with fewer benefits than we needed. He also told me that no one does guaranteed renewable in our state any more.<\/p>\n If you have a trade association, you can often take advantage of their group policies. I spoke to J. Robert Hunter, insurance director from the Consumer Federation of America<\/a>, who recommends that you still shop around because there are some very bad group policies out there. I called our local builders association to see what they offered. Through MetLife, the association had the same policy offered by the MetLife agent, which would cover my husband to age 65, but has a change from “own occupation” to “any occupation” after two years of disability. That was a deal-breaker for us.<\/p>\n The standard advice is to ask friends and family. We didn’t know anyone who had purchased disability insurance. We asked our AllState house\/auto insurance agent for a recommendation, and he passed us on to a colleague. AllState doesn’t offer disability insurance, but she worked with another company to come back with a quote that offered “own occupation” coverage for two years and changed to “any occupation” after that. In addition, the policy was only for five years which the broker told me was the only option given my husband’s occupation as a general contractor.<\/p>\n Through additional online research, I learned that Assurity and The Standard both offer policies for general contractors. I called Assurity and they could not sell to me direct, so they put me in touch with an agent. Turned out this agency (Disability Insurance Services<\/a>) could only sell to brokers, so they volunteered to put me in touch with one. The broker took my details and sent them to DIS. DIS then worked with eight different insurance carriers and sent back what they recommended as the best options in less than 24 hours. I finally felt like I had cracked the system.<\/p>\n Unfortunately, the options came back with just one policy that worked which was with The Standard. It was also much more expensive than we had been anticipating.<\/p>\n Frustrated that I only had one<\/em> quote that actually matched what we needed (and facing a difficult conversation persuading my husband that we needed to spend this kind of money on insurance), I went to the Massachusetts Mutual Life Insurance site and found their local representative. The contact there was incredibly responsive but ultimately let me know that they do not underwrite general contractors.<\/p>\n We ended up buying The Standard policy. Frankly, we had no other choice. The policy was the only one to have everything we wanted: “own occupation”, valid to the age of 65, a waiting period of 180 days and guaranteed renewable. This was also a policy which we had been told by at least two agents was not available for us in our state.<\/p>\n I asked Bob Hunter from the Consumer Federation of America if my experience was \u201cnormal\u201d for someone buying individual disability insurance. He said that it was likely \u201ctypical.\u201d Here’s how you can make your experience easier:<\/p>\n<\/span>Why Do You Need Disability Insurance?<\/strong><\/span><\/h2>\n
<\/span>What Should You Look For in a Disability Insurance Policy?<\/span><\/h2>\n
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Applying Directly to Companies<\/h3>\n
Working With Professional Organizations or Associations<\/h3>\n
Finding a Broker<\/h3>\n
The Final Result<\/h3>\n
<\/span>What Can You Learn From My Experience?<\/span><\/h2>\n