Definition of Total Disability
Residual Disability Insurance
- Are your rates guaranteed?
The first aspect of any disability insurance policy one needs to understand
is the renewability feature. There are three basic types of renewability
on the market today.
Non-Cancellable and Guaranteed Renewable
This, in my opinion, is the strongest possibility as far as renewability
goes. It guarantees you that after you place a policy in-force that there
will be no changes to your premium schedule, your monthly benefits, or your
policy benefits to age 65 or a certain age. The insurance company legally
can not change a thing unless you want them to. Many people do not have
a guarantee that their income will never go down again, under a Non-Cancellable
policy even if your income goes down later in life, if you are totally disabled
the company will pay you the total disability benefit you originally placed
in-force. Under a Non-Cancellable policy even if you changed jobs from being
a white collar, low-risk occupation to a professional weight lifter the
company could not change your benefits for the worse. Quite simply, there
is no reason to go with an individual disability insurance policy that is
not Non-Cancellable and Guaranteed Renewable.
This type of renewability feature is a step down from Non-Cancellable and
Guaranteed Renewable. The basis behind the definition says that an insurance
company will probably not change anything about the policy, but they
can ! Almost every insurance carrier that offers a guaranteed renewable
contract used to offer a Non-Cancellable and Guaranteed Renewable contract.
There is a reason why they moved to this type of renewability.
They can change the premium by state, policy year, or occupational
class with approval from the state. For an individual disability insurance
policy, it is my opinion that you would be making a mistake by going with
a GR policy. I believe you are setting yourself up for a possible disaster
several years into the future. Look for the words on your policy "Non-Cancellable
and Guaranteed Renewable", They may not be on the proposal,
but they must be on the policy! If it is just Guaranteed Renewable, you
may be missing something.
The worst option of the three, a conditionally renewable policy offers you
as a consumer virtually no guarantees for your disability insurance policy.
Different companies have different conditions for you to renew your insurance
every year, but the only guarantee you can get is that the conditions will
be very hard to meet at the worst possible time. Stay away from these