Written By Dennis Hornsby, CSLC®
A disability insurance agent, or broker, functions much like a broker you’d encounter in many other industries. They’re the middlemen of disability insurance policies. But since when is dealing with middlemen a good thing?
Most disability insurance agents are independent, meaning they can research quotes for you across multiple disability insurance companies. Some also provide life insurance quotes as well, like yours truly. Although you can certainly take a DIY approach to finding the right disability insurance policy for you, working alongside an agent has a few valuable advantages.
Disability insurance agents connect the dots for you
Disability insurance agents aren’t just handy to have in your corner when it comes to understanding industry jargon, like benefit amount, benefit period, definition of disability, own-occupation disability insurance, death benefit (for a life insurance policy), exclusions, elimination period, and all the optional riders.
NOTE: Insurance counselors also exist in some states. They charge a fee for advice about insurance, but they don’t sell policies.
Here are just a handful of additional ways an informed disability insurance agent can help you avoid headaches.
They flag potential roadblocks in advance
Let’s say you have a medical problem or history that makes you uninsurable. You decide to apply for a cheaper disability insurance policy from a third-party provider before getting a quote for a Guaranteed Standard Issue (GSI) policy.
GSI policies are offered at some medical residencies. They require no medical underwriting, and their terms are predetermined, so it isn’t as flexible as other policies. However, all insurers share a central database, so if you’re declined in the underwriting process for a third-party company, you might now be denied GSI coverage.
A good disability insurance agent would foresee this issue and — assuming you’re truthful about your medical history — could ascertain if this might be a problem for you.
They handle reconnaissance for you
Some agents even prescreen with the company themselves, so there aren’t any surprises in the underwriting process. If you have a condition they believe might warrant a GSI, a good broker will refer you to a competitor (even if they get nothing for doing so) because it’s right for the client.
They share inside information
A really smart agent might even know that Guardian actually accepts GSI applications that were denied for regular underwriting, as long as the regular policy was also through Guardian (they don’t want to play back-up for the prom, who does?).
A smart agent could take advantage of this and see if you’d qualify for the cheaper policy before having to apply for the more expensive GSI. There are also rare cases where there’s an exclusive unisex GSI available with a different insurance agent, and that could be a big discount for female clients.
They assist you even after you’ve purchased a policy
Disability insurance agents usually help you with questions about your policy in the future. Need to submit a disability claim in a few years? Email your broker, and they’ll help you through the process.
Want to drop your student loan rider after five years because you paid off your student debt? Your broker can help with that, too. Ultimately, word-of-mouth referrals are an agent’s best source for future leads, so expect them to offer white-glove service whenever they can.
How does an agent take my individual needs into account?
Let’s run through some example scenarios of different clients. If your specialty is anesthesiology, insurance companies would add a mental and nervous limit to your policy.
Age considerations
Let’s say your 30th birthday was last December 1st, and you’re finishing residency the upcoming July. You plan on starting your attending job in August. You might assume that you can just wait until July to apply for long-term disability insurance, and still get the resident discount.
But not so fast!
MassMutual actually calculates your age as the age you’re closest to as of June 1st. In the example above, on June 1st, your age is closer to your next birth date at age 31. MassMutual therefore calculates your premium based on your age at 31 instead of 30.
This means the rate you’d pay for coverage goes up on June 1st! All the other companies wouldn’t raise your age until December 1st.
Where you live
If you currently live in a high-cost-of-living state but are moving to a low-cost-of-living state next month, wait to buy insurance coverage until you’re in your new place. Why? Some providers limit policy perks in certain states. For instance, you might only get a simple 3% cost of living adjustment (COLA) rider benefit in New York or California, while a low-cost-of-living state could open up a compounding COLA rider.
The reverse applies if you’re moving from a low-cost-of-living state to a high-cost-of-living state.
What about those who are in America on a visa? These carriers might treat you differently if you live abroad part of the year, versus living in the U.S. full time.
Budget and existing coverage
What if you’re a very price-sensitive client? Do you really need true own occupation disability coverage? Do you even need an individual disability insurance plan at all? What if you don’t even have much of an income at all and you can’t afford premiums on a private policy? It’s possible Social Security disability insurance is enough for you.
If you’re unsure about these questions, I can offer clarity by pulling quotes from the “Big 5”: Guardian, Mass Mutual, Principal, Standard and Ameritas.
How are disability brokers paid?
Most disability insurance agents are paid a commission based on the policies they sell. This is also the reason there’s no fee for a consultation.
The commission is paid by the insurance provider. It lasts not just for the first year you purchase a policy but for several years afterward. This acts as an incentive to sell you a policy that’s uniquely tailored to your long-term needs.
Find a disability insurance agent that prioritizes your interests
One of the most valuable assets you have in life is your income. Disability insurance protects your income in the event of an unexpected disability, just as life insurance protects your loved ones and their standard of living in the event of your passing.
Connecting with an insurance broker gives you an expert who’s on your side from the start. They provide clarity about your disability insurance policy options and can offer specialized knowledge and advice regarding your financial planning strategy.
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