EXCLUSIONS AND LIMITATIONS ARE THE NEW TREND IN DISABILITY INSURANCE
As of October 1, 2016, nearly every disability insurance company will either exclude or limit disability insurance claims related to mental nervous and/or addiction related impairments. This applies to both Individual Disability Insurance (“IDI”) policies as well as employer sponsored group Long-Term Disability (“LTD”) insurance plans.
Historically, IDI policies were issued without exclusions or limitations for mental health and/or addiction related impairments. Conversely, nearly every LTD plan issued contained less favorable coverage, such as exclusions and 24-month limitations for these impairments.
Studies confirm that 25% of professionals will suffer a disabling medical condition before they retire.1 The disability insurance industry cites these studies in its marketing materials to doctors, dentists, lawyers, and other professional occupations stressing the importance of income replacement coverage and their products.
However, studies show 15% of doctors suffer from a mental health and/or addiction related medical condition that will impair their ability to practice before they retire. Studies all confirm that dentists and medical specialists, such as anesthesiologists, are 2.5 times more likely to suffer from a mental health and/or addiction related impairment. Other studies indicate that over 33% of attorneys suffer from the same.
The disability insurance industry profits by the collecting premiums and limiting its financial liability. As approximate 50% of disability claims in the above professions relate to mental health and/or addiction related impairments, these companies stand to increase their profit margins by singling out the most common and stigmatized claims.
While the medical, addiction, and legal communities have made significant strides in protecting the rights of individuals with such conditions, little can be done to address the contractual limitations contained in a policy one willfully purchases. Moreover, most insureds fail to understand these limitations are in their policies or ignore the statistical data regarding the importance of the coverage until they submit a claim for benefits.
Regrettably, these limitations will deprive countless professionals of the insurance coverage necessary to avoid financial peril should they become disabled. Statistical analysis confirms 65% of working Americans would be unable to pay their normal living expenses within a year of losing their employment income.2 This same study confirmed that 38% would be unable to pay their bills within three months.
A disability insurance policy is a contract, pure and simple. It is governed by the terms and conditions specified in the agreed upon contract. After the review period passes when the policy is purchased, the terms of the contract, not one’s subsequent expectations of coverage, govern at the time of disability. It is imperative insureds understand the terms and limitations of their policies, as well as whether better coverage is available.
1: U.S. Social Security Administration, The Facts about Social Security’s Disability Program. SSA Publication No. 05-10570, January 2015↩
2: Council for Disability Awareness, Disability Divide Consumer Disability Awareness Study, 2010↩