Many professionals purchase individual disability insurance (IDI) to supplement employer-provided disability insurance or because an employer does not provide short-term or long-term disability coverage. Insurance companies that offer IDI rely on extensive screening processes to protect their financial interests. Not every individual who wishes to purchase IDI is approved.
According to LIMRA (formerly the Life Insurance and Market Research Association), 40% of disability insurance applications are either declined, rated or are only accepted with an exclusion. Here are some reasons why applicants are denied IDI:
Poor health – This is the obvious one. People who have chronic conditions, use tobacco or are generally poor health are a risk that many insurance providers avoid. Pre-existing conditions that could lead to a denied application include cancer, hepatitis, blood disorders, multiple sclerosis and Parkinson’s disease.
You are overweight or underweight – If your body weight falls too far outside the medically recommended range, the red flags that raises may cause insurers to deny long-term disability coverage. It’s not just overweight people that cause concern. Being underweight could suggest nervous disorders, anorexia or health problems.
Your job is high-risk – Some vocations simply scare insurers because of the risk of long-term disability they pose. Law enforcement, firefighting and air traffic control are examples of jobs that may cause an insurer to deny long-term disability coverage.
Your extracurricular activities are high-risk – Some people love scuba diving, rock climbing or racing cars. That’s great, but realize that it could make finding an insurance company that will sell you an individual disability policy more difficult.
You have a poor driving record – Sorry, but it’s true. A driving record that indicates an increased risk of a motor vehicle accident may result in a denied application for disability insurance. Or may be able to get a policy with an exclusion written into it.
Denied claims are a different matter
It’s wise to apply for disability insurance while you are healthy and before pre-existing conditions exist. Paying higher premiums or applying for coverage from a substandard carrier are possible solutions, as is having exclusions written into your coverage.
Denied applications for insurance are a fact of life. Denied claims after you have a policy are another thing altogether. You may be able to fight a denied claim if you are a policyholder, but it is always wise to enlist help from a knowledgeable disability insurance and ERISA attorney.