Congrats! Your application for long-term disability insurance has been accepted! But wait, there’s a catch – your insurance company is offering you something they call a "modified offer of coverage," full of things they call "exclusions." What’s going on here?
Insurance companies use exclusion riders to limit the kinds of claims that your disability would cover. Why would they want to do that? Let’s say you have a pre-existing medical condition. That medical condition may mean that you have increased risk of disability in the future. For example, let’s say you’ve suffered from asthma since you were a kid and your disability policy has an exclusion rider that excludes asthma from your coverage. If, five years from now, complications from asthma mean you have to stop working, your long-term disability policy may not pay out benefits.
Exclusion riders may also be used to exclude potentially risky activities, such as rock climbing or scuba diving. If you were to become injured while performing one of these activities, your long-term disability insurance policy with an exclusion rider would not pay out benefits.
The exclusion rider has absolutely no effect on claims that are not related to the excluded medical condition or activity. Basically, the exclusion only affects a specific part of the body or a specific activity. Everything else is still covered. Let’s continue the example above – if you have exclusion rider for your asthma, but submit a claim when you become disabled due to liver cancer, the exclusion rider will not affect that claim.
Even if your disability claim is related to a condition or activity excluded by your policy, your insurance company may still decide to pay out benefits. For example, you may have an exclusion rider that excludes disability claims related to your spine. But if you’re involved in a car accident and you suffer an injury to your spinal cord, your insurer may decide to pay out benefits because the car accident would’ve caused injury regardless of your pre-existing condition.
Some exclusion riders may have reconsideration periods where, within a few months or years, you may be able to petition the insurance company to remove the rider. If a company offers a reconsideration period, that typically means they want to make sure that a medical condition is resolved, healed, and not getting worse.
Take note that all of these are just examples. Each claim is evaluated individually, and each insurer will have different policies in place around exclusions and pre-existing conditions. You should talk to your independent broker about all of your options.
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