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Before diving into coverage, you have to understand the limitations, restrictions, and exclusions included in your insurance policy.
In this article, we will attempt to demystify these terms and help you make informed decisions about your insurance policy.
Limitations on Disability Insurance
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Definition of Disability
The definition of disability varies from one insurance policy to another. Some policies consider you disabled if you're unable to perform any job, while others may only consider you disabled if you're unable to do your regular job.
It's crucial to understand how your policy defines disability. This is almost always a defined term in the policy document. The exact wording should be carefully scrutinized in advance before you buy a policy. Certain policies will require you to look at a couple of different provisions in the contract, which can make it harder to understand.
Benefit Period
This refers to the length of time you will receive disability benefits. Some policies may offer benefits until you reach the age of 65, while others may limit benefits to a specific number of years. For example, a Lloyds of London policy is typically written for 5 years.
Waiting Period
The waiting period, also known as the ‘elimination period’, is the time between your disability onset and when you start receiving benefits. This period can range from 14 to 90 days, or even longer. The longer the waiting period before any benefits are paid out, the cheaper the premium, this is because the likelihood of there being a claim reduces.
Understand the terms of your disability insurance policy to ensure you're adequately covered.
Restrictions of Disability Insurance
Pre-Existing Conditions
Many disability insurance policies exclude coverage for pre-existing conditions. If you have a medical condition before purchasing the policy, any disability resulting from that condition may not be covered.
Exclusion Period
Some policies have an exclusion or ‘lookback’ period for certain conditions. If you become disabled due to these conditions during the exclusion period, you will not receive benefits.
Exclusions in Disability Insurance
Disabled Due to Self-Inflicted Injuries
Most disability insurance policies will not cover disabilities resulting from self-inflicted injuries, or injuries resulting from participation in illegal activities.
War and Civil Unrest
Disabilities caused by war or civil unrest are typically excluded from coverage.
3 Considerations to make When Purchasing Disability Insurance
When purchasing disability insurance, consider the following factors:
- Understand the policy's definition of disability which includes checking the benefit period
- Determine the waiting period
- Be aware of any policy exclusions
By understanding these factors, you can ensure you're purchasing a policy that best suits your needs.
The Hollowtree way
Understanding the limitations, restrictions, and exclusions of disability insurance can help you make an informed decision when purchasing a policy. It's essential to read the policy carefully and discuss any questions or concerns with your insurance provider.
The information provided in this article is for educational purposes only. It is not intended to be a substitute for professional financial advice. Always consult with a qualified insurance professional before making any decisions about your insurance coverage.
For more detailed information, consider seeking advice from insurance professionals or financial planners. The more you understand about disability insurance, the better equipped you'll be to make the best decision for your unique situation.
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