Disability insurance series, Pt. 1: Introduction to disability insurance

By Steve Savant

A tribute to Disability Insurance Month in May with special guest Marcy Pruitt.

Disability insurance is paycheck protection. Disability insurance is the lost indemnification sale. All financial plans are based the ongoing ability to generate earned income, and the probability statistics of a disability event are too high to ignore.

Social Security

Social Security disability benefits are rigidly defined as the complete inability to perform any work with a five month waiting period. Close to 70 percent of the claims are denied on their first filing.

The product

Disability insurance is a morbidity product and not a mortality product like life insurance. Medical requirements collect APSs and blood and urine. Some DI carriers wave the blood and urine exams if the monthly benefit amount is under a certain threshold. Simplified issue may wave APSs, para- exams, but still check prescriptions and the Medical Information Bureau. Fifty percent of policies are issued as applied for, 10-12 percent of policies are declined and 20 percent are rated, issued with riders, modified with exclusions.

It takes about 2-2.5 percent to cover 60 percent of your net paycheck to insurance your income. Financial underwriting is extremely important. A copy of the client’s tax returns may be required.