5 Questions to Ask When Buying Disability Insurance

How can you make sure an insurance broker’s interests are aligned with yours when purchasing an own-occupation, long-term disability insurance policy? Although being an insurance agent requires having a license in every state where they sell policies, the possibility of ethical lapses remains. 

These five questions are designed to help you figure out whether the agent you’re considering is trustworthy and a good fit for your needs.

1. Can you get quotes from all of the “Big 5” disability insurance companies?

The answer you’re looking for here is “yes.” 

Some agents only work with one company — maybe they’re lazy, or prefer the higher compensation that the company offers. Still, the best way to see if a disability insurance agent can be trusted is having them walk you through multiple quotes from a few different companies. If they’re steering you toward one provider specifically, ask them why. 

An example of an ethical lapse here would be an agent only quoting a policy from Guardian. Guardian is an extremely highly rated company that also happens to offer the best commissions of the Big 5. The commission agents get isn’t just for the first year after you carry the policy or even for the first 10 years — it’s for the entire lifetime of the policy. 

Related: Disability Insurance Broker Fees? How to Protect Yourself

Fortunately for insurance brokers, Guardian is extremely popular in the physician community, and it frequently sells itself by reputation alone. Sometimes, that reputation doesn’t come cheap. Ever look at the price of store-brand cola versus name-brand Coca-Cola? 

Paying a little extra for premiums isn’t the worst case here. Rare scenarios can happen where Guardian wouldn’t consider you insurable, but another company would. If you apply for coverage with Guardian and get denied, it’s likely no other company would approve you at that point — that’s the worst-case scenario. Make sure the agent can get quotes from more than one company.

2. Should I buy disability insurance coverage from another agent?

Exclusive discounts for medical and dental residents from certain programs do exist. Consider a scenario where another agent can sell the same MassMutual policy that I can, but the other agent can offer a 20% discount that I can’t. 

If MassMutual is the best option for a client, then I’d ask the broker who owns the exclusive if they’d offer a split on the commission in exchange for me using their discount. Under this proposal, they’d essentially make money for doing nothing. 

It isn’t always an option, though. For example, on an Ameritas GSI (guaranteed standard issue) policy, agents aren’t allowed to split commissions. Sometimes, the other agent won’t even accept a split — they want your client, and you get nothing. I think that’s pretty rude, personally. 

What would the agent you’re talking to do in this situation? Suppose MassMutual or that Ameritas GSI policy doesn’t exist? Hopefully, they’d show those as options, too, and just cross their fingers that you don’t choose it.

3. Do I need a GSI policy?

Guaranteed standard issue policies are available for many residency programs. They’re usually more expensive than buying your own policy, and you can’t customize them as much. However, there are cases where a GSI is the right policy for you to buy.

Related: Can I Have Two Disability Insurance Policies?

When to consider GSI: Poor health or preexisting conditions

The most important instance when a GSI policy makes sense is for health reasons. When an applicant is in poor health or has serious preexisting conditions, they should be heavily considering this type of policy. Here’s why: 

• GSI policies require no medical underwriting.
• The insurance company must accept all applicants from the residency program as long as they apply before the deadline.

It’s important to note that if an applicant has a serious preexisting condition like depression or atrophic retinitis, it’s likely the insurance company excludes the condition from the definition of disability on the policy. Can’t work for a while because of depression or eyesight getting worse? The company can deny paying your monthly base benefit. 

When to consider GSI: Applicant is “uninsurable”

Another instance is when an insurer considers an applicant to be uninsurable. If you apply for a long-term disability policy and get declined by one insurer, you might not be able to get an insurance policy, period. 

Can you trust the agent you’re meeting with to refer you to another agent (for possibly $0 commission) on the chance that you need a GSI policy they can’t sell you?

When to consider GSI: Cheaper premiums

A less serious scenario to choose a GSI policy is when the premiums are cheaper than a regular policy. 

For an obese applicant buying their own policy, premiums can cost more due to the insurer classifying them with a higher “rating.” This rating is how the company indicates they consider you a higher risk because of your BMI. In this case, buying GSI might make sense because the company wouldn’t ask if you’re overweight. 

A small number of GSI programs are unisex and can cost less because men and women pay the same rate. Awkward insurance fact here: Women typically pay higher premiums than men for disability insurance — by a lot. A unisex rate could heavily benefit a female applicant but be a worse option for a male applicant. This is likely why most GSIs are no longer unisex.

4. Are there any significant differences between the policies quoted?

The cheapest policy isn’t necessarily the best. The fine print is crucial, and careful comparisons of policy riders, long-term value and other considerations can uncover differences that aren’t immediately noticeable in the basic premium cost.

Compare policy riders

Riders can drastically impact your coverage. For example, Principal is the only carrier that doesn’t offer a student loan rider. A student loan rider pays an extra fixed monthly amount toward your loans in the event of a covered disability. If you have private student loans, this could be very important. 

I’ve had cases recently where one insurer wouldn’t offer a benefit increase rider (BIR), only a future increase option (FIO). Both allow the policy owner to increase disability monthly benefits with additional evidence of financial insurability only — not health insurability. However, two big differences exist between them:

• FIO increases the premium, while the BIR (Guardian calls it a “benefit purchase option”) doesn’t. 
• FIO allows you to increase every year on your policy anniversary, while BIR is only every three years. 

If two different policies cost the same monthly premium, the one that offers FIO would be superior to one that only offers BIR.

Related: Disability Insurance Riders: 4 Riders You Need (and 3 You Might Not)

Long-term value and company reliability

An example of this is MassMutual offering a 10% dividend after year six of the policy. Assuming the policyowner has never submitted a disability claim, the company refunds 10% of your premium payments every year (it’s not guaranteed, but they have a really long track record). 

If I had a quote for MassMutual and Ameritas with all the same riders and the same premium, I’d recommend a client go with MassMutual because it can be cheaper in the long run. Plus, the client would have a disability policy from a higher-rated company.

Other considerations for policy comparison

While these are more complicated cases, the basic thing to watch for is making sure all policies have the same:

• Elimination period or waiting period (how long it takes for your policy to pay the benefit amount in the event of a disability).
• Exclusions (for instance, is one company going to exclude eye-related illnesses while another isn’t).
• Partial disability riders that pay if your ability to work is limited but you don’t have a total disability.
• Benefit period or the length of time the policy is in force (i.e. until age 65, 67, etc.).

Additionally, price differences can pop up if one policy is non-cancelable while the other is only guaranteed renewable. Another difference is if part of the policy’s benefit is dependent on Social Security disability insurance (SSDI). I wouldn’t recommend that — the Social Security Administration takes notoriously long to approve or deny claims.

5. Is the insurance broker personable and quick to respond?

I’m serious. Is your insurance agent enjoyable to talk to, or do you not care for them personally? Your agent is your point of contact if you ever need to drop a rider from your policy, increase your monthly benefit, ask questions and — most importantly — make a claim on your policy. 

Long-term disability policies usually last until age 65 (some individuals might cancel their policy before then, assuming they’ve reached financial independence before retirement age). Will the broker still be in business then? That’s a long time to be tied to a person if you don’t like them. Assuming they don’t have an exclusive discount for you, go ahead and get disability insurance quotes from another broker if you don’t like their vibe.

Once you find an agent you trust, ask if they can run term life insurance quotes as well. I highly recommend it if you have young children or an expensive mortgage you’d like to protect in the event of your passing. 

One last bonus tip: If you buy an individual policy for disability insurance instead of relying on the group policy from work, your benefit amount is tax-free, since you’re paying the premiums. If your employer pays the premiums, you’ll have taxes taken out of your disability benefit payments.

If you’re on the hunt for disability insurance and don’t want to be a stepping stone on an agent’s path to prosperity, fill out the form below to get quotes from SLP Insurance. Our agents truly have your back, not just your wallet.