Q

Does disability insurance cover mental illness?

A

You can get disability insurance if you have a mental illness, but your coverage could be somewhat limited. Shop around for a plan that fits your needs.

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If you have disability insurance, you’ll receive monthly payments from your disability insurance company if you become disabled and can’t earn an income. If you have a pre-existing condition, it may be excluded in your policy or cause you to be denied coverage in the first place.

It’s common for people with mental illness to face some kind of coverage limitations or to pay more for the same coverage offered to someone without a mental illness. But it depends on the type or severity of your mental health condition. Not only can some people get disability insurance coverage with a mental health diagnosis, in some cases, they may be even eligible for full coverage.

Disability insurance and pre-existing conditions

When you apply for disability insurance, you must disclose any physical or mental health conditions you have. If you fail to do so, the insurer can cancel your policy.

Having a pre-existing condition can result in several outcomes when you apply for disability insurance, depending on the severity of the condition and the insurer’s own underwriting guidelines:

  • Your application is rejected.

  • Your application is accepted, but the pre-existing condition may be excluded from coverage.

  • Your application is accepted, and your pre-existing condition has limited coverage.

  • Your application is accepted with no limitations or exclusions for the pre-existing condition.

To get disability insurance coverage for a pre-existing condition, you may need to show that you’ve been seeing a physician or healthcare professional who’s treating it.

Unfortunately, having certain pre-existing conditions can cause you to be placed in a less favorable insurance classification (also known as risk class). That means you’ll pay higher premiums than someone in a more favorable risk class.

Are mental illnesses excluded from disability insurance coverage?

How a disability insurance company covers mental illnesses depends on whether the mental illness is a pre-existing condition or whether it develops after your purchased coverage.

Mental illness as a pre-existing condition

Each insurer uses a different set of underwriting guidelines when determining whether you’re eligible for disability coverage. Depending on the type of disorder, the prognosis, and its severity, you may be offered individual consideration for full coverage; a denial of coverage; or lesser coverage, including lower benefit amounts and shorter benefit periods.

It’s up to the insurer to determine how much risk a certain disorder poses to you and the likelihood that you’ll become disabled because of it. Mental disorders like anxiety, depression, and bipolar disorder are more likely to be covered than conditions like schizophrenia, which are more difficult to treat.

If you’ve survived a suicide attempt in the past, the insurer may require that a certain number of years has passed — usually 10 — before you can be considered for disability insurance coverage.

If an insurer won’t cover you because of your mental health, you may still be able to get coverage from another insurer. A licensed representative at Policygenius can find you a policy with coverage for your mental health condition while being sensitive to your individual needs.

If you or someone you know is in crisis, you can call the National Suicide Prevention Lifeline at 1-800-273-8255, or text the Crisis Text Line (text HELLO to 741741). Both services are free and available 24 hours a day, seven days a week. The deaf and hard of hearing can contact the Lifeline via TTY at 1-800-799-4889. All calls are confidential.

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Takeaway

Disability insurance replaces around 60% of your pre-tax income while you're disabled and can't work.

Mental illness and substance abuse limitation rider

Whether your mental illness is a pre-existing condition or was diagnosed after you purchased coverage, your disability insurance may be governed by a limitation rider. Insurers may call it different things, such as:

  • Mental/nervous & substance abuse (MNSA) limitation rider

  • Mental disorder/substance abuse limitation rider

  • Mental and/or substance-related disorders (MSRD) limitation rider

This rider limits the benefit period — the span of time during which you can receive disability insurance benefit payments — to just two years for disabilities caused by a mental illness. (Some versions of the rider make this limitation just six months.)

That means if you’re still disabled after the shortened benefit period ends, you’ll no longer be eligible for benefit payments. The benefit period for other disabilities remains unchanged.

Depending on the state you live in, your insurer may require you to have this rider. Limitation riders are also required for guaranteed issue disability insurance, which doesn’t require medical underwriting but could have a smaller benefit amount.

In other cases, the rider may be optional and free to add, and you could potentially receive a discount of as much as 10% off your premiums for adding it. If you’re willing to pay higher premiums, you can get a disability insurance policy without this rider, giving you unlimited coverage for mental disorders if you’re otherwise eligible.

The mental illness and substance abuse limitation rider may be required for some people in certain professions. But higher-paid professionals, such as attorneys or certain types of doctors, may qualify for a disability insurance policy without a limitation rider.

Short-term disability insurance and mental illness

You may have heard that short-term disability insurance (STDI) doesn’t cover mental illness. In fact, it’s more accurate to say that whether STDI covers mental illness or not depends on the insurer, just like long-term disability insurance.

Since it’s difficult (and financially unwise) to purchase STDI coverage on your own, you’re more likely to receive an STDI plan from your employer. Be sure to request a copy of the policy from your benefits administrator to make sure it contains coverage for mental health.

How Social Security disability insurance covers mental illness

Social Security disability insurance can cover you if private disability insurance does not. However, it’s not a replacement for long-term disability insurance. If you are eligible for the latter, SSDI only offers a limited benefit amount and may be very difficult and time-consuming to qualify for. Rejections and appeals can take months to resolve.

In order to qualify for SSDI, you don’t need to pay anything, but you do need to show that your mental health diagnosis is severe enough that you can’t work and likely won’t be able to work for at least 12 months. That means that, while there technically aren’t any exclusions or limitations, you do need to meet a strict definition of disability that many people with a mental health condition may find difficult to prove.