One of the trickiest health conditions to navigate in disability insurance underwriting is a mental nervous disorder. It used to be the kiss of death for any hopeful proposed insured, and thankfully has gotten much better.
Because mental nervous disorders are hard to prove or disprove, and because they tend to come with the territory of a stressful high income professional career (the crowd most disability insurance carriers like to target) any sign that it could be a problem down the road is an immediate time out for underwriting.
Today we'll dive into how to deal with disability underwriting if you have a history of mental nervous disorder, and how to prepare.
Restriction of Coverage
Some disability insurance carriers restrict their coverage for mental nervous disorders. So, even if you do have a policy that pays benefits to age 65, if you have to be out of work because of depression, they're only going to pay for 2 years (which is the most common maximum).
This is how a lot of companies have decided to deal with this situation, to “improve” their underwriting capabilities. It may sound cheap, but honestly if your prospects for coverage are dubious because you have a history of the blues, this may be more beneficial than restrictive.
Despite this, there are still a few companies that offer unlimited coverage for mental nervous disorders, and those companies will certainly be much more discerning when it comes to the risks they are willing to cover. For these companies, riders that drop certain ailments from being covered may also be an option.
For those people who have no history and happen to live in or near Vermont, I'll share a nifty secret about the Green Mountain State. It's the only state in the Union that does not allow a carrier to restrict coverage concerning mental nervous disorders.
So, all of the budding lawyers, doctors, and business professionals in the area, should shoot us an email and get coverage in this great state to ensure they have unlimited coverage no matter what. 😉
The Big “D” will still Put You Down for the Count
Depression is the hot button word, and it's the main reason this sort of thing used to be an immediate decline. In the past, disability insurance underwriting lumped all other mental nervous disorders in with depression.
Underwriting has become more robust over the years to parse different ailments rather than to assume they are all the same. Depression of any ilk is bad news, seasonal or otherwise. It's commonly a decline, not even an exclusion rider will take care of it.
What to do when Applying for Disability Insurance
If you have a history of mental nervous disorder (which also includes substance abuse or dependency) it's important to be ready to be as upfront as possible about it.
This is a good general rule for all types of underwriting, but it's especially true for disability insurance when you have a history of some mental nervous disorder. You want underwriting to believe you are as upstanding and cognizant as possible.
Get a hold of Your Doctor's Notes
For something in the neighborhood of 25 cents per page you can order your Attending Physician's Statements (APS). The insurance company is going to do it, and you should too in this case.
In this case, you're looking for anything that might be misconstrued by an underwriter. If you can get access to actions taken, and medical billing codes, even better.
Ensure that what is in your APS is accurate. This is a time when a good relationship with a good agent/broker who really understands disability insurance is crucial.
It's advisable to review the APS with the agent/broker and use his or her expertise in determining what might be a problem. Sometimes off-hand cryptic remarks made by your doctor in your records can be interpreted incorrectly and result in a decline or rating that is unjust, and very difficult to reverse.
What To Look for in the APS when it comes to Disability Insurance
Makes sure dates are accurate. When did you first seek treatment? How long where you on treatment? What medication (if any) was prescribed? Was treatment successful? If you never followed through with the doctor to check up on your condition, now would be a really good time to schedule an appointment to ensure everything is A-okay.
Don't live in denial about what was prescribed.
I and just about every underwriter out there with a few years under his or her belt has heard something to the effect of “Well, sure I was on <insert name of anti-depressant here> but that was only for a minor issue with anxiety not depression.”
Trust me when I tell you, that isn't going to fly with underwriting. On the flip side of things, when a doctor does suggest medication, practice a little diligence when it comes to accepting the treatment.
There are certain medications that can be used for ancillary purposes. If you've been prescribed medication for a purpose that might need a little extra explanation, be sure to have that explanation ready.
Keep the Insurance Company's View in Mind
I hate saying that, but this is one of those moments when it helps to be worldly about your thoughts. Rejection hurts, even when it comes from large financial corporations.
If your history with a mental nervous disorder does leave you with a declined disability insurance application, remember these policies tend to place a significant amount of financial stress on the books of the insurance company (relative to other products).
The individual disability market does have substandard risk options (don't get too emotional over the label they put on it, coverage is coverage).
Every once in a while I run into someone who tells me they are waiting to buy disability insurance until they are older and more likely to use it. It seems this relatively young (and super financial savvy) individual believes that they've dreamed up the perfect strategy for making sure insurance companies don't get too much of his/her money and it only took them 20-30 years of existence to come up with this.
The problem with this strategy is that disability insurance has them beat when it comes to time existed by at least a factor of 3 and every major player in the market has crossed this path numerous times.
Procrastination does not benefit the pocket book, and it could leave you in a rough spot. The longer you wait, the larger your medical history, meaning the more opportunities you're giving underwriting to decide there's something they don't quite like about you.
I've said it before, you can bitch and moan about how unfair this is all you want to, but it's not going to get you any closer to your end goal. It's not all that common that I run into people who tell me their plan is to “wait,” and I've never run into anyone who, after telling me this didn't agree, that it seemed like a silly strategy most likely doomed to fail.
I'll note again, this product is primarily used by professionals who have reasonably high incomes, work longer than average hours, and subject themselves to a relatively high amount of stress.
Mental nervous disorders are par for the course in this world and every major disability insurance carrier is well aware of this.
If you have a history, and are looking for coverage, it's time to be transparent and work with a knowledgeable agent.
If you're a newly minted professional you may be working on a tight budget, but believe me–individual disability insurance is one of the most crucial financial products you can add to your plan, even before your retirement plan; you can't save money if you can't work to earn it.