Thursday, October 7, 2010
When looking at disability insurance policies, they are not all created equal. In prior articles we have looked at the difference between a group benefit and a personal policy, and we have compared the varying definitions of disability.
Another really important factor to weigh into your decision is the list of limitations and exclusions. From your own perspective you want to make sure both lists are as short as possible. Some policies will limit how long they’ll pay benefits in the event of a “soft tissue injury” – a strain or sprain to us. Will the policy pay benefits if you are injured in a car accident for which you are convicted of impaired driving? Is there a limitation or exclusion for insurrection or war? We don’t suggest there is imminent war in Centre Wellington’s future, but what if you’re driving through a protest march and someone hurls a brick through your windshield?
Some limitations are put into the policy because of pre-existing medical conditions. Does that limitation have a time limit on it, or is it on as long as you own the policy? Your broker should have had discussions with the insurer at the time the policy was issued to try and reduce the impact of any limitation imposed by the insurer.
Some policies are underwritten at the time of issue, so you have to prove your income level and you have to go through whatever medical requirements the insurer sets. This is preferable to a policy that will underwrite you at the time of claim – when you are at your most vulnerable. In this latter case the insurer can decline your claim for a reason unrelated to the illness that caused you to stop working. There have been articles in the papers and on television about people caught in this unfortunate situation when they have thought they were insured through their bank or mortgage lender.
This concludes our series on disability income protection. We would like to hear from you if this has been a useful exercise, or if you have any questions regarding this important part of your insurance program.