How to Apply for Disability Insurance

What you need to know when you apply for Disability Insurance.

When you apply for Disability Insurance, here are a few things that are helpful for you to know in advance.  

The general application process includes the following:

  • Insurance Application
  • Medical Underwriting
  • Financial Underwriting
  • Approval Review and
  • Policy Acceptance

While this list may seem daunting at first glance, there’s good news for all you millennials, tech gurus, iPhone addicts, and just plain super busy professionals out there…the days of long cumbersome paper applications are gone!  

Insurance Application

Your first step when you apply for disability insurance will be to complete a Disability Insurance Application.  The entire disability application can be completed in roughly 10 minutes together over the phone, followed by an email link where you can electronically review and sign your application.  

Or, if you prefer to do it yourself (depending on which carrier you are applying to), we could simply send you a link to an electronic application to complete yourself.  In addition, for anyone who prefers, we could mail the full paper application to you to complete and return via fax, secure email, or traditional mail.  It would be our pleasure to provide whichever option is best for you, but just know that there are a few carriers no longer offer paper applications and require you to complete the application electronically.

Medical Underwriting

Your next step to apply for disability insurance would be to complete your medical and financial underwriting.  The word “underwriting” simply means that the carrier you have chosen will need to evaluate your information before extending an approval offer to you.  For students, residents, fellows, and first year attending physicians, a full medical exam is not typically required.  You would only be asked to complete a short health questionnaire over the phone with the insurance carrier.  This call would take roughly 20 minutes with the carrier inquiring about your health history.

For those who are required to take a full medical exam, an appointment could be setup very easily for you when you are ready to apply, and this exam would be fully paid for by the insurance carrier whose Disability Plan you are applying for.  You have the option of a licensed nurse practitioner coming to your home or office or having your examine conducted at a designated exam location if you prefer.  The exam typically consists of a routine physical with a blood draw and urine sample as well as standard health questions.  Examiners are usually available during normal business hours as well as in the evenings and weekends and will make every effort to book a time that is convenient given your schedule.  

Financial Underwriting

Financial underwriting simply means the insurance carrier may ask you to provide a copy of your pay stub and/or tax returns so they can verify your employment and income earning levels.  Financial underwriting would not apply for students or anyone still in training. If it is your first year in private practice, the financial underwriting is usually not required since you would not have any income documentation yet. But, if you are an independent contractor or you own a practice, the carrier may request your last two year’s of tax documents.

Approval Review

The typical underwriting time frame takes anywhere from 2-6 weeks from the time you have completed your application and taken your medical exam.  For anyone with a minimal health history, approval might come through in about two weeks.  For anyone with a health history that need to be evaluated, it might take as long as six weeks for the carrier to review your records before you are issued approval.

Once an approval is issued, we would review the approval details with you to make sure you are happy with the official offer of coverage.  Most of the time your application would be approved exactly as applied; however, there are some cases in which an approval is modified by the carrier based on one’s health or financial history.  At this time, you would also be able to make changes to your plan’s design if you wanted.  You could add or remove riders, change benefit amounts and make other desired tweaks to the way that your plan is set up before moving forward and accepting the policy.

It is important to mention at this point that when you apply for disability insurance, there is a possibility of getting denied coverage based on your previous health history.  If this does happen, we can look at other options in the market that might be more suitable for your situation.

Policy Acceptance

Once you have been approved and have confirmed your plan design, it’s time to accept your policy.  Your signature and your first payment are required to officially bind your coverage.  After that, your coverage will be effective immediately, and you can feel secure knowing you are protected.

The benefit of working with a seasoned, independent insurance agent is that they will be able to help you shop the market, select a plan that is best for you, and make the application and approval process simple and smooth.  

As always, we’re here to help!

Chris Wimberly

The Disability Doc

Request Quotes Here

*This information is solely used for general market educational purposes.  It does not provide legal rights or actual carrier policy language.  Please review the respective policies for the complete terms and conditions.

Graded Premiums & The Student Loan Rider

Graded Premiums and The Student Loan Rider.

With an individual Disability Insurance Plan, you have the option to choose between two types of premiums:

  1. Level Premiums or
  2. Graded Premiums  

Level Premiums (also known as “fixed” premiums) do not increase in cost throughout the life of your disability plan.  This ensures that you will pay the same rate month after month and year after year, making it easy to budget and also the most cost effective plan throughout the entire span of your career.

Conversely, Graded Premium Plans offer the same benefits as Level Premium Policies but Graded Premiums starts out at a significantly lower rate that increases annually.

Due to the initial lower cost, Graded Premiums can prove much more affordable for medical students or residents that are still in school or training.  While some carriers do not offer the Graded Premiums option, many do and most Graded Premium Plans also provide the option to convert your plan from “graded” to “level” premiums when you are ready to do so.  In most cases, it makes sense to do this once you are finished with training, since with the Level Premium plan, your rates will never increase once your policy is converted.

Student Loan Rider

A select number of carriers also offer an option for a supplemental Student Loan Rider.  If you are encumbered with a significant amount of student loan debt, a Student Loan Rider is worth examining as it will reimburse you for the cost of your student loans each month (up to s specified maximum reimbursement amount).

This rider is structured to pay an additional monthly benefit (on top of your regular monthly benefit) so that you can repay student loans as well as pay your bills in the event that you become disabled. The Student Loan Rider does come with a slightly higher premium on your plan.  Yet, it may be worth the cost until your student debt is paid down or paid in full, especially if it will take several years to accomplish this.  At that time, you have the flexibility to drop the Student Loan Rider from your plan.

The Graded Premium option and the Student Loan Rider are both great strategies for younger professionals still in the beginning stages of their career.  But, as mentioned earlier, the Level Premium plan still tends to be the most cost effective option over the entire span of your career since your rates will never increase once your  Level Premium policy is in place.  

As always, we’re here to help!

Chris Wimberly

The Disability Doc

Request Quotes Here

*This information is solely used for general market educational purposes.  It does not provide legal rights or actual carrier policy language.  Please review the respective policies for the complete terms and conditions.

Cost of Living Adjustment (COLA) & Catastrophic Disability

Cost of Living Adjustment (COLA) and Catastrophic Disability Riders

The Cost of Living Adjustment (COLA) and Catastrophic Riders are both optional riders that can be included as part of your Disability Plan.  These riders serve separate purposes; so, I’ll break them both down individually.

Cost of Living Adjustment (COLA) Rider

The Cost of Living Adjustment Rider is most commonly referred to as the COLA rider and is essentially designed to combat “inflation”.  During a span of five, ten or twenty years, it’s easy to observe the rising cost of life’s necessities, such as gasoline, food, housing, utilities and many other daily needs. Not taking inflation into account when customizing your Disability Plan can prove very costly should a disability occur and that’s where the COLA rider can come into play.

If you choose to include this rider on your plan and you become disabled, your benefits would increase each year that you remain disabled in effort to keep up with rising costs so that you can maintain your standard of living.  If your disability lasts longer than two or three years, you would definitely notice the value of the COLA rider’s protection since your benefits would increase significantly over time.

It’s good to know that each carrier offers different versions of the COLA rider.  Some carriers allow your benefits to increase by a flat 3% each year, while other options are tied to the Consumer Price Index (CPI) to determine how much your benefits would increase yearly.  You can also choose between your benefit increase occurring on a “simple” or “compound” interest basis.  

It’s typically recommended that if you are a young professional (especially if you are still a resident or fellow in training), that you strongly consider getting this rider, as there is still a significant amount of time left in your career.   As you get midway through your career, you could drop the rider from your plan to reduce your premiums since there is less time left for the rider to make as big an impact.  This is a very common strategy.  

If you’re already later into your career, the increase in premiums might not be justified.  A good insurance agent will help you examine your options to determine if you need the COLA rider, and if so, which version would best suit your needs. You would ultimately have to decide what feels right for you in this regard, but a good agent will help you navigate your options and have your best interest at heart.

Catastrophic Disability Rider

Now, on to the “Catastrophic Rider”.  There is a list of criteria that would have to be met for a disability to be considered catastrophic.  Most insurance carriers have very similar language in this area, but in general, a catastrophic disability would commonly include: loss of a hand or foot; loss of eyesight; loss of speech; loss of hearing; quadriplegia; paraplegia, Alzheimer’s and other injuries and/or illnesses of this nature.

It is important to note that your disability plan automatically includes “Catastrophic Coverage”.  You do not need to add the Catastrophic Rider in order to be covered in a catastrophic disability scenario and receive your regular disability benefits.  In the event your disability is considered “catastrophic”, however, having a Catastrophic Rider included in your disability plan could increase your benefits anywhere from an additional $5,000 to $10,000 a month (on top of your regular benefits)! And typically, you can add this rider for a relatively low cost–sometimes only a few dollars per month–depending on how your plan was originally designed.

If you decide to include either of these riders, it would definitely increase the strength of your Disability Plan’s benefits, but would also result in an increase in premiums.  So, it’s important that you consult a knowledgeable agent who will help you tailor your plan to fit your current budget while protecting your financial future.  

As always, we’re here to help!

Chris Wimberly

The Disability Doc

Request Quotes Here

*This information is solely used for general market educational purposes.  It does not provide legal rights or actual carrier policy language.  Please review the respective policies for the complete terms and conditions.

Business Overhead Expense (BOE) Disability Insurance

The Business Overhead Expense (BOE) Disability Insurance Policy.

The Business Overhead Expense (BOE) Disability Insurance Policy is primarily designed for self employed professionals. It is especially beneficial for Medical or Dental Professionals who own their own practice or are seeking to start or purchase a new practice.

In the event that you become disabled, a BOE policy would pay a monthly benefit based on your actual business expenses.  These policies are most commonly designed with a one or two year benefit period. The reasoning for this is that typically within one to two years of filing a disability claim, you will know if your disability has left you permanently disabled and unable to continue in your profession. Or, hopefully, you will have recovered and and have resumed your practice.

The intent of a BOE policy is to cover crucial business expenses during this interim such as: rent, materials, inventory, and employee labor.  Some BOE policies can be designed to cover the salary cost of a temporary replacement dentist or physician who can handle your patients’ needs while you are evaluating whether or not you can continue operating your practice.  

In addition to covering Business Overhead Expenses, BOE policies can also be designed to give you “Bank Loan Protection” (BLP). Often, banking institutions require proof of Disability Insurance when businesses secure new loans in effort to ensure that if borrower becomes disabled, payments to the bank are covered.  A BOE plan can be tailored so that you can meet these loan requirements when/if purchasing a new practice.  

If you are a self employed individual or you own a medical of dental practice, a BOE policy is an important consideration.  In the event you become disabled, this valuable plan will afford you the time and ability to keep your practice thriving while you evaluate what to do next.  If you decide that you need to sell your practice, a BOE may help you retain a higher patient base during your absence so that your business maintains its value and you can sell it at a higher price.

BOE Policies are especially beneficial to Dentists, Dermatologists, Internal Medicine Physicians, Plastic Surgeons, Orthopedic Surgeons, or any other specialty that operates their own practice.

To cover yourself personally and professionally, I would highly recommend that you have two separate disability policies:

  1. An Individual Disability Insurance policy to protect your personal finances, and
  2. A Business Overhead Expense policy to protect the practice that you’ve worked so hard to build.

As always, we’re here to help!

Chris Wimberly

The Disability Doc

Request Quotes Here

*The information presented here is solely used for general market education.  It does not provide legal rights or actual carrier policy language.  Please review the respective policies for the complete terms and conditions.

Financial Strength Ratings & COMDEX Score of Insurance Companies

Financial Strength Ratings & COMDEX Score for Insurance Companies

When evaluating a Disability Insurance Policy, it’s highly recommended that you work with an insurance carrier that has a good track record and a reputation for making smart business decisions.  Researching a company’s “COMDEX” score is a good way to help you gauge their financial strength and reliability before making any purchasing decisions.  

The COMDEX score is a composite score based on the average rankings of four major financial rating agencies–Fitch, Moody’s, A. M. Best and S&P.  On a scale of 1 to 100, a COMDEX score will let you know where the company you’re considering ranks in financial strength and profitability among all other companies that have been rated.  Just like a math test, the closer a carrier’s ranking is to 100 the better.  Scoring in the 90’s is a very high rating, and it’s commonly recommended that you pick a carrier with a COMDEX score no lower than the mid-80’s.  

Fortunately, there are no instances where a major insurance carrier has gone bankrupt leaving its policyholders without coverage.  When you are working with a company that is considered to be financially weak, often they will sell their company to a larger insurance carrier at a discounted rate.  If this happened, more than likely you would still have a valid insurance contract, but it would be taken over by the new insurance company and they would service your policy moving forward.

Purchasing a policy from a strongly rated, profitable,well-established insurance carrier versus a financially weak institution will lend you more confidence that your carrier will be servicing your policy for years to come in the event you need to file a disability claim.  An experienced insurance agent can advise you as to carrier’s COMDEX score as well as other ratings to help you make an informed decision..  

As always, we’re here to help!

Chris Wimberly

The Disability Doc

Request Quotes Here

*Information presented here is solely used for general market education.  It does not provide legal rights or actual carrier policy language.  Please review the respective policies for the complete terms and conditions.

Disability Insurance Tax Considerations

This video covers Disability Insurance Tax Considerations.

When you purchase a disability plan, there are some important disability insurance tax considerations.  With an “individual” market disability plan, most of the time you would receive your benefits completely tax free.  This is because you have been paying your premiums with “after tax” dollars, and most disability plans take this into account when designing their policies in order to give you tax free benefits in the event that you ever became disabled.

However, please be aware that there are a couple of scenarios that could cause your benefits to become taxable.  

  1. If you are a self-employed individual and you decide to deduct your premiums as a business expense, this could result in your disability insurance benefits becoming taxable should you ever suffer a disability.  I would definitely advise you to consult with a tax professional in effort to evaluate if the reduction in current income taxes is worth the long term risk.  
  2. If you have group disability benefits through your employer, the benefits in these types of plans are most commonly taxed, especially if your employer pays your premiums.  Occasionally, group plans offered through employers are designed in such a way that the benefits are tax free, such as if the cost of your disability premiums is added to your gross income. So, it’s important to talk with your employer so that you know well in advance whether or not your benefits will be taxable if you ever become disabled.

Hopefully this information is helpful, and as always, we’re here to help!

Chris Wimberly

The Disability Doc

Request Quotes Here

*Information presented here is solely used for general market education.  It does not provide legal rights or actual carrier policy language.  Please review the respective policies for the complete terms and conditions.