After you apply for disability insurance, you must go through the underwriting process. An underwriter evaluates your risk profile, by reviewing your job duties, income, and health records to decide if you're eligible for disability coverage. How they classify you will affect how comprehensive your disability coverage is and the premiums you pay for the policy.
Underwriting has three main parts: financial, medical, and occupational. Your occupation greatly impacts your classification, with more hazardous occupations resulting in higher rates or limitations on your coverage. The underwriting process takes approximately four to six weeks, but an insurance broker can help guide you through the process.
Your job has a large impact on disability underwriting and whether the insurance company considers you risky to insure. Some occupations come with higher chances of injury than others. An architect, for example, is less likely to get hurt on the job and file a disability claim than a professional athlete.
The disability underwriter will look at your work history and job responsibilities, then assign you an occupational classification (essentially a risk rating). Occupation classes usually have a number and letter designation (e.g. 1A to 5A) — a higher number means you pose less risk, which could also mean lower premiums.
How your occupation is classified can also differ between insurance providers, but they commonly take into account:
Job duties: Your day-to-day tasks matter in assessing your risk. The manager of a construction site has a less risky job than the employees doing construction work.
Employment history: Your seniority at a company and your salary can impact your classification. A senior manager will have a higher occupation class than a sales agent.
Occupation claim history: If you work in an industry that has a higher volume of disability claims, it may increase your risk factor.
Financial underwriting for disability insurance helps your insurer decide how much your monthly benefit should be if you make a claim. A disability policy is meant to protect your income, so the underwriter will look at your financial details to make sure you don’t under- or over-insure yourself (in other words, that you’re not buying too much or too little coverage).
Disability underwriters also use your financial information to confirm that you can afford the premium payments. A higher income usually means you’ll get larger disability benefit payments, which could mean higher premiums, too.
When you apply for disability insurance, you’ll have to share tax documents with your insurer as proof of your income. The documents you need vary by insurer, but they’re usually based on the type of company you work for and your employee-status (like whether you’re self-employed or a business owner, for example).
The chart below shows examples of common tax forms the insurance company may request as part of the underwriting process:
Non-owner W-2 employee
Most recent Form 1040 including schedules and W-2s
Non-owner 1099 employee
Form 1040, including Schedule C
Owner of sole proprietorship
Form 1040, including Schedule C
C corporation owner
Form 1120, U.S. Corporation Income Tax Return; 1099s; and W-2s
S corporation owner
Form 1040, with W-2s and relevant schedules; or Form 1120-S, U.S. Income Tax Return for an S Corporation, with Schedule K-1 and W-2s
Form 1040 with relevant schedules; or Form 1065, U.S. Return of Partnership Income, with Schedule K-1
Limited Liability Corporation (LLC), single member, individual
Form 1040, including Schedule C, E, F.
Limited Liability Corporation (LLC), single member, Corporation
Form 1120 or 1120-S
Students, residents, new professionals
Your health & hobbies
Insurance companies look at your health history for signs that you might become seriously ill or injured and need to file a disability claim as a result. This takes into account information like:
Age: Premiums are lower for younger people.
Gender: Women tend to have higher premiums than men for disability policies.
Health and lifestyle habits: Smoking would be considered a risk factor
Hobbies: Dangerous activities, like scuba diving, will typically be added to your policy as an exclusion.
Medical history: The healthier you are, the lower your premiums will be. Some conditions that might affect your disability underwriting include diabetes, heart attacks, and back issues.
Pre-existing conditions: Some medical conditions and illnesses like cancer may not be covered by your insurance company.
In addition to providing your medical details in the application, your insurer may request a medical record from one of your doctors — called an attending physician's statement (APS) — that provides more context about your health, such as how well you're responding to treatment for an illness.
Medical underwriting is one of the longer steps of the disability underwriting process because doctors can take some time to release your records.
When you get an individual disability insurance policy, you may be required to undergo a medical exam and drug test. (It’s usually not required when you get group disability insurance.) A medical technician can perform the exam in your home or work or at a lab to gather information about your blood pressure, cholesterol levels, and more.
The disability underwriting process
Some disability insurance companies offer simplified issue underwriting, which speeds up the approval process by skipping the need for financial or medical records, including the medical exam.
Your eligibility for simplified issue disability insurance depends mostly on your occupation and age, and this type of underwriting may only be available to certain age groups. The benefit amount may also be smaller than what you'd get from a policy with traditional underwriting, but it depends on the insurer.
What happens after disability underwriting?
When the underwriting process is complete, you'll get an application decision from the insurance company. If you have a greater risk factor than expected, then you may be approved with some changes to your policy, which can include:
Additional premium (a flat fee to account for a risk factor in your history)
Higher premium than initially quoted
Exclusion for illness or injury from a specific event (injuries from skydiving, for example)
Lower benefit amount, shorter benefit period, or longer waiting period before payments start
Your disability premiums will also be affected by the amount and length of coverage you buy.
Disability insurance underwriting might seem complicated, but the experts at Policygenius are here to help. There's little you have to do after providing some initial personal information and have your medical exam. Your insurance agent or broker can keep you on track and informed throughout the entire process. If you’re thinking about buying disability insurance, you can get free quotes from Policygenius.