Renewability of Disability Insurance

"The best disability insurance policy is the one that is in-force at the time you need to file a claim." - Unknown

Policy Provisions
Definition of Total Disability
Renewability
Residual Disability Insurance
Presumptive
Recurrent
Elimination Period
Benefit Period
Optional Riders
Policy Exclusions

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Renewability - 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.

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.

Conditionally Renewable

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 policies!!!