Tell me the many ways applications for disability income insurance can be declined or modified due to health reasons and I’ll tell you the many ways those actions might be remedied.
The focus for this article is arthritis. However, many other health conditions may also, depending on circumstances, be declined, modified or rated. These include asthma, alcoholism/drugs, carpel tunnel, cancer, Crohn’s disease, diabetes, epilepsy, heart attack, hypertension, lupus, mental disorders, multiple sclerosis, overweight, respiratory conditions, and sleep apnea.
Incidentally, there are reasons, other than health, that also can result in declination, rating or modification (see box).
As we all know, the human body with all of its components (skeleton, blood, organs etc.) is an engineering marvel. It’s a wonder we function as well as we do, considering the rigors of daily living.
But what happens when one of the “parts” (indicated on an application for disability income insurance) hasn’t functioned as well as a disability underwriter would like to see? In particular, what if the client has a history of arthritis?
The producer’s focus is to explore what possibly can be done to overcome a decline, exclusion or rating related to the arthritis (or other condition, where it applies).
Fortunately, several possible remedies might be acceptable to the underwriter. Keep in mind that the underwriter would prefer to issue, if at all possible.
The potential remedies are:
1. Use a shorter benefit period.
2. Use a longer elimination period (either overall, or just for that condition).
3. Apply for a smaller benefit amount.
4. Exclude the condition.
5. All of the above.
Assuming an exclusion is made, does that mean that when the insured is disabled, the person will never be paid for that condition?
Not necessarily. The person might receive payment, especially if the exclusion was for a specific period of time, say one year, and at the end of that period, the carrier favorably reconsidered its removal and the claim occurred thereafter.
Note: There are no guarantees that a carrier will remove an exclusion. But, once removed, even if there is a re-occurrence, the exclusion cannot be reinstated.
In any event, even with an exclusion, there is a chance the insured will still be paid for the excluded disability.
How does that happen, if there is an exclusion in place? First, most exclusions are written in very broad language, perhaps excluding more than the specific problem. This then allows some leeway at claim time, especially if the excluded condition wasn’t a factor in the claim, e.g., the insured suffers a burn to the wrist which is independent of the exclusion.
What to keep in mind about arthritis: There are two types of arthritis– rheumatoid arthritis (RA) and osteoarthritis (OA).
These both affect joints in two different ways. RA is an autoimmune disease, in which the body turns on itself and attacks the tissues that line the ends of bones, causing serious inflammation. It’s a body-wide ailment. OA, by contrast, is often confined to one joint and occurs when the cartilage breaks down, causing the bones to rub together.
For both arthritic conditions, medical treatment begins with the simplest and least risky intervention and then progresses to more intense medicine such as cortisone shots. There are nine general categories of treatment: topical, supplements, strength and balance, exercise, anti-inflammatory drugs, disease-modifying drugs, opioid analgesics, joint lubrication, surgery and replacement.
If a client who wants DI insurance has arthritis, the underwriting outcome may follow along these lines.
o If the person has rheumatoid arthritis, this will normally be a decline. However, there are carriers that might issue the case as a sub-standard risk.
o If the client has osteoarthritis and if the condition is localized, it can be excluded from DI coverage. Note: occupation is also an underwriting factor.
Larry Schneider is a disability specialist and owner of Disability Insurance Resource Center, Albuquerque, N.M. His e-mail address is firstname.lastname@example.org.