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Disability insurance: Overcoming barriers to entry

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Many financial professionals are comfortable discussing the need for life insurance with clients, and many financial plans provide risk protection from premature death. Shouldn’t a holistic financial plan also include risk protection from illness or injury, too? An illness or accident could leave us unable to work and earn a living, challenging our ability to pay our everyday expenses and save for the future. It’s a scenario few Americans like to think about, but it’s one that could easily become a reality for any one of us.

See our infographic: Could a disability happen to you?

You can ignore the problem, but it’s hard to ignore the facts. Among wage earners, 64 percent believe they have a 2 percent or less chance of being disabled for three months or more during their working careers. The actual odds for a worker entering the workforce today are about 30 percent.1More than 1 in 4 of today’s 20 year olds will become disabled before they retire.2 And while many people may think disabilities are typically caused by freak accidents, the majority of long-term absences are actually due to back injuries and illnesses, such as cancer and heart disease.

For these reasons, and considering group DI plans may cover only 40 to 60 percent of a person’s wages, shouldn’t individual disability income insurance be considered an important part of preparing a holistic financial plan for clients?

One of the biggest barriers often cited by financial professionals as a reason not to discuss disability income needs with clients is a concern about handling less-than-ideal underwriting outcomes and managing customer expectations. Perhaps by understanding the way underwriters approach each case, you can begin to gain a broader perspective of disability insurance and its underwriting process.

Managing expectations

The first step in the underwriting process is assessing risk. The goal of the insurance underwriter is to predict the risk for large groups of applicants with similar health concerns. For instance, life insurance underwriters predict the long-term probability of survival (mortality risk). For disability insurance, they predict the probability of a disability (morbidity risk).

With non-cancelable and guaranteed renewable disability insurance, the risk assessment and the cost of that policy are locked in as long the policy remains in force. If the policyholder’s health deteriorates, the premium to cover the increased risk can’t be changed.

Some clients might receive different outcomes than expected during the application process, which can pose a challenge for the advisor. The problem is not insurmountable and can be overcome by employing the following four-step approach.

1. Listen carefully to the application responses, verify all details and discuss concerns during the application process, so your client knows what issues might arise.

2. Explain the possible outcomes before going through underwriting to avoid confusion or disappointment. Unless a case is declined because the client’s risk level is uninsurable, the case will be issued in one of these ways:

     a. As applied for, with the best possible rates.
     b. With a rating that causes increased premium.
     c. At an underwriting class with higher premium than applied for.
     d. With reduced benefits, such as a 5-year benefit period when a period to age 65 was applied for.
     e. With an exclusion rider for a medical condition or impairment.

3. Be prepared to offer solutions if the outcome is not what the client is expecting. For example, discuss an alternative benefit or elimination period for a disability policy that is issued with a premium outside your client’s budget due to a substandard rating.

4. Focus on the reason they applied. If the policy isn’t issued as requested, that doesn’t make the coverage less important. While ratings and exclusions may seem negative, they actually benefit policy owners by helping them receive the coverage they need:
     a. These options allow policy owners with health concerns to receive coverage, rather than simply being declined.
     b. The policy owner may request reconsideration of their policy if the risk level changes for some reason (e.g., their    condition improves or a new treatment changes the risk of the condition) 


The more informed your clients are from the beginning, the more likely they will be able to accept the policy terms, even if a rated policy isn’t ideal. By doing the research ahead of time and being prepared to discuss all the options that are available to clients, you are far more likely to be able to successfully provide a holistic plan that’s tailored to the financial needs of your clients. This approach may also help to enhance your value to clients and make overcoming the barriers to entry when it comes to disability insurance worth it in the long run.


1. CDA Disability Divide proprietary research, March 2010.

2. Social Security Administration Fact Sheet, March 18, 2011.

See also

Disability insurance: the 60% myth

Trends in DI: Working with Gen X and Millennials

5 celebrities we hope had disability insurance

The views expressed herein are those of the author and do not necessarily reflect the views of MetLife and/or any of its affiliates. This document should not be construed as legal, tax, accounting or any other professional advice or service. No one should act upon the information contained herein without appropriate professional advice after a thorough examination of the facts of a particular situation. Like most insurance policies, MetLife’s policies contain charges, limitations, exclusions, termination provisions and terms for keeping them in force. Contact your financial representative for costs and complete details.

Disability insurance is issued by Metropolitan Life Insurance Company, 200 Park Avenue, New York, NY 10166.