A big fear people have with long-term disability insurance is that, if you get injured, the insurer won’t pay out because of some loophole. Exclusions — disabilities that aren’t covered by the policy — play a large role in that assumption. But it’s an unfounded fear that exists because people don’t really understand disability exclusions.
Exclusions are a misunderstood part of disability insurance because they protect both the insurer and the policyholder — and they don’t put you at risk the way you probably think they do. Here’s what you need to know about disability exclusions, and why you need long-term disability insurance even if you’re wary of them.
What is a long-term disability exclusion?
We go into more details on disability exclusions here, but essentially exclusions are instances where a disability benefit won’t be provided when a claim is filed. This is resulting from a specific pre-existing medical problem, a condition to a particular part of the body, or a certain dangerous activities or hobbies. Typical disability insurance exclusions involve back problems and mental or nervous conditions.
Exclusions help keep disability insurance costs down
Exclusions might seem like they limit your disability policy, but they actually benefit both carriers and policyholders. How? If carriers had to cover all pre-existing medical conditions, the cost of disability insurance would skyrocket. Exclusions help carriers limit what they pay a benefit for — and are only applied to very specific pre-existing circumstances. Plus, putting an exclusion on a policy doesn’t raise the prices of the policy.
Exclusions are also the only tool that protects insurance companies from someone waiting until they have a disability to buy a policy and file a claim.
In the end, exclusions allows carriers to control the cost of policies. This makes their lives easier, allows them to issue a policy where otherwise they would be unwilling to take on the risk for a pre-existing condition, and, most importantly, makes income protection affordable for policyholders.
If you have a pre-existing condition, you should still apply for disability insurance
When thinking about long-term disability insurance, a shopper might ask themselves “Can I get disability insurance with a pre-existing condition?”, hear about claims not being paid due to exclusions, and decide that the answer is no.
But if you have a pre-existing condition, you should absolutely still apply for disability insurance.
Disabilities are typically caused by an unforeseen issue. If you know you have a pre-existing condition and are treating it, it’s probably less likely to cause a disabling event than a surprise illness or injury. Disability insurance helps to cover the unknown, because no amount of planning can prepare you for that otherwise. There are many scenarios that can cause a disability, and it doesn’t make sense to avoid protecting against them just because you have one condition that may be excluded. You’re cutting off your nose to spite your face.
It’s also important to know that while existing injuries will typically cause an exclusion, injuries account for less than 10% of all disability claims.
In other words, odds are, if you have a pre-existing condition, that won’t be what causes a disability and you’re avoiding protection for everything else for no reason.
If you become disabled, you should still submit a claim
You should also submit a claim if you become disabled, but have an exclusion on your policy.
That’s because, again, exclusions are usually very narrowly defined. New injuries, lacerations, fractures, or trauma usually aren’t included in an exclusion. And just because you have an exclusion doesn’t mean that nothing is covered.
Let’s say you had a herniated disc. When you apply for disability insurance, you might have an exclusion on that specific part of your spine. Any disabling conditions that arise from that herniated disc, like degenerative disc disease, wouldn’t be covered by your policy.
But if you got into a car accident and that part of your spine was fractured, and your disability was unrelated to the underlying condition, you would get your disability benefit (assuming you qualified based on the rest of your policy’s provisions).
Becoming disabled can happen to anyone, at any time – one in four people will become disabled in some form during their working years. That’s why it’s important for even white collar jobs to find the best disability insurance companies for them. Just because you have a condition that may qualify as an exclusion, that’s no reason to shy away from coverage. Compare disability insurance quotes and talk to an expert to see what your options are. Protecting your income is easier than you may think.