So, you’ve just been approved for life insurance at the insurance carrier’s best health class.  It would seem reasonable to expect similar treatment on your disability insurance application, right?  I wish it were that simple.  There are so many differences in the underwriting processes that I have to make sure I  adjust the expectations of my life insurance clients who are applying for disability insurance.

These are some of the things I tell a client when we submit an application for disability insurance (especially when they have purchased life insurance):

• A disability insurance application almost always takes longer to underwrite than a life insurance application.  If both life and disability insurance applications are submitted at the same time, the life application will most probably be approved sooner than the disability application.
• The maximum monthly benefit of a disability policy is directly tied to your income and the amount of individual and/or group disability coverage you already have.  You may have been quoted based on an estimated annual income, but the final amount approved for you will be based on financial documentation submitted with the application.
• Many medical conditions, while not life-threatening, may be disabling or present a risk of disability.  A bad back, for instance, probably wouldn’t affect life insurance underwriting, but in most cases would have an effect on disability underwriting.
• Life insurance underwriters assign health classes, thereby adjusting premium based on the risk presented.  A disability insurance underwriter might request a higher premium, but more typically will exclude a preexisting condition (temporarily or permanently) and/or adjust some of the benefits (e.g. shorter benefit period, elimination of some riders, etc.).

Complete your application thoroughly, informing the insurance company of any medical conditions, etc.  Your agent, upon reviewing your application, should have a pretty good feel as to how the insurance company will view your information and make any adjustments to your coverage.  We are always conservative in our estimates so as to minimize disappointment when the underwriter makes those adjustments.

Do you have an upset in your life (who doesn’t?)?  If you work or are in a relationship or have children and/or other relatives, chances are you have been upset about some part of your life.  However, be careful of what you tell your physician about these upsets – it might come back to haunt you.

I have had several clients who have given a “yes” answer when asked the question, “are you depressed?” by their physicians.  In these cases, my clients had some situations in life that were “bringing them down,” or upsetting them in one way or another and thought that “yes” was the appropriate answer to that question.  However, when they went to apply for individual disability policies, those answers came back to bite them.  They were either declined coverage or had their policies severely restricted in regard to mental/nervous claims.

You see, in order for a physician to receive payment from an insurance company for services rendered, they must assign a code to the diagnosis and treatment given.  In the cases mentioned above, the physicians determined that my clients were Depressed and assigned them the relevant codes.  The word “depressed” had very different meanings to the insurance companies than to my clients.  To my clients, they were upset about something or had some difficulties at work or with a spouse, etc.  To the insurance companies, based on the codes assigned by my clients’ physicians, they were suffering from DEPRESSION!!!  There’s a big difference between those explanations and, as a result, my clients paid the price when the underwriters reviewed their medical records.

I’m not condemning the physicians who assigned those codes or the insurance companies that require these types of codes in order to pay a claim,  Nor am I condemning the disability insurance companies for their underwriting practices.  These condemnations belong in another BLOG on another subject.  I merely wanted to point out to you the liability of discussing your personal problems with your medical doctor.  It might cost you in the future if you apply for a disability insurance policy.

This BLOG post should in no way be construed as medical advice.  If you have a serious medical problem, by all means see a physician.

As as public service to visitors of our Disability Insurance Blog, we are offering these top ten ways to avoid disabling accidents and illnesses during the holiday season:

1.  Don’t drink and assemble toys, especially those you need to plug in.

2.  Don’t stand under the mistletoe at an office party.  The spouse of the person standing with you under the mistletoe might be present, which might result in broken bones.

3.  Don’t decorate your roof alone.  Watch “National Lampoon Christmas Vacation” for details.

4.  If you’re weak of heart, avoid the mall on Black Friday or December 24th.  If you must go, don’t forget your flak jacket.

5.  Drive defensively INSIDE Costco.  Those flat carts really hurt!!

6.  No matter how anxious you are to set it up, that 60 inch Flat screen TV is really heavy.  Get help.

7.  STAND AWAY FROM THAT FRUITCAKE!!!

8.  Yes, the person who snuck into the parking spot at the mall you were patiently waiting for is a jerk, but it’s not worth a fist fight.  Get another spot.

9.  Do not look up the chimney on Christmas eve.  What if he really does come down there?

10. The Santa suit you rented?  Before you put the beard on, consider for a moment what must be living in there.

By following these tips, we hope your holiday season is accident and illness free.

Wishing you a Happy and Healthy Holiday.

As heart disease is a leading cause of disability, I thought it might be a good idea to present these holiday health ideas presented by Dr. Mehmet Oz on abcnews.co.com:

Limit drinking; never have two drinks in a row

Alcohol is acutely toxic to the heart, Oz says.  It can literally irritate the heart muscle and increase the body’s autopilot response to boost your blood pressure and your heart rate.  The heart’s natural pacemaker gets thrown off, and so does your heartbeat.

“Have one drink of alcohol, then a glass of water,” Oz advises.  That will also make you feel better the next day. because hangovers are primarily the result of dehydration of the brain.

Avoid high-fat foods; never have food in both hands at the same time

Studies show a high-fat meal can lead to a dysfunction in artery lining for 6 to 12 hours after eating.  That dysfunction makes the heart vessel spasm, so if you already have a little bit of blockage, it closes off the vessel even more, and that can lead to a heart attack.

Oz advises avoiding fried appetizers and any fats that are solid at room temperature, such as frosting.  And he has a simple tip to avoid overeating, “Always keep one hand free to shake hands,” he says.  “At no time during a party should you ever have food in both hands simultaneously.”

Stay 6 to 8 feet from a burning fireplace

Fine particulates from fireplace smoke can lodge in your lungs and trigger a clot and a heart attack.  “It can cause spasm of some of the arteries,” he says.

There is no perfect distance because it depends on the room’s ventilation, but he says try to stand 6 to 8 feet away.

Know the Symptoms of Heart Attack

“If you think you’re having symptoms of a heart attack…call 911 and get a chewable aspirin, “Oz says.

For women, symptoms of a heart attack include indigestion, shortness of breath and sweating.  Men are more likely to get chest pain than women are.

And, finally, this is not from Dr. Oz – it’s from me.  The holidays should be a time of joy, so enjoy them.  If you’re feeling stressed during the holidays, take a long walk and appreciate the sights.  Or, perform a random act of kindness toward another.  It works for me every time.

I have had several clients ask me recently about the Medical Insurance Board (MIB), so I thought I’d give a brief description of who they are and what they do.

MIB Group is a membership corporation owned by member life insurance companies in the United States and Canada.

They maintain a database for member companies to exchange confidential information of underwriting significance when an individual applies for life, health, disability income, long term care or critical illness insurance.  This information is maintained and safeguarded in a coded format that is accessible only to authorized personnel of a member company to which you have applied for insurance and have authorized the company to use MIB as an information source.

How does your information get into your MIB file, you might ask?  When an application is made to an MIB Member company, any information that is of significance to health or longevity (whether admitted on the application or discovered during the underwriting process) is sent to MIB by the Member company in a coded, encrypted format.  Use of these codes ensures that the confidential information is protected.

What does an MIB file say about you?  Coded information identifies medical conditions or medical tests that are reported by MIB members to MIB under broad categories.  There are also a few codes that are non-medical.  Those codes report potentially hazardous avocations or hobbies, or results of a motor vehicle report showing a poor driving history.  MIB has no actual “reports” or “medical records”on file, only the coded “resume” provided by the Member.

What do these companies do with your information?  Authorized underwriting personnel of the Member company review the application information provided by the person applying for insurance and compare it to what is in the person’s MIB file.  The information in the person’s MIB file is used only as an alert.  No underwriting decision can be made solely on the basis of a coded report, such as issuing a policy with an extra premium or declining to offer coverage.

How can you find out if you have an MIB file and what information about you it contains?  The federal Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of 2003, allows a consumer to request free disclosure of his or her consumer report annually.  Only you can request an MIB file on yourself.  If you are a US resident, call MIB’s toll-free telephone number – 866-692-6901 (TTY 866-346-3642 for hearing-impaired) to request disclosure of your file.  You will be asked for some personal identifying information  so that your record can be located, if one exists.

This was a question asked of me today by a frustrated client whose disability application is in underwriting.  He wanted to know why we asked a series of questions on the application only to then have the same questions asked by the medical examiner and then again in an interview by a representative from the insurance company.

While I understand his frustration and would be equally frustrated by being asked repetitive questions, I also understand why the insurance company does this.  You have to first understand that you are passing a specific risk to the insurance company.  As such, the insurer must do its due diligence to ensure that they understand the risk and then underwrite it accordingly.

I asked an underwriter why they repeat the same question, sometimes exactly as written and sometimes re-worded.  This underwriter told me that quite often an applicant doesn’t always remember answers to some of the questions and the repetition serves to jog an applicant’s memory.  Sometimes, an applicant won’t feel the answer to a question is relevant and will leave out some of the information.  Most often, the applicant has no intention of deceiving the insurance company, but literally forgets the information or just doesn’t think the insurance company wants “all the details.”  By asking multiple times, the insurance company usually gets all the answers they’re looking for.

My advice is to always answer all the questions honestly and to the best of your recollection.  The insurance company will probably ask some or all of the questions again.  Don’t take it personally or think that they don’t trust you – they do this with all applicants.  By doing so, they can accept your risk of becoming disabled and insure you for it properly.

When describing disability insurance to prospective buyers we, as agents, often deal in hypothetical situations – “if you injure your hand, if you have a heart attack, etc.”  However, I find that real-world situations make a better case for the need for disability insurance.  The following story is an excerpt (with name change) from a Service Bulletin I received from one of our insurance companies, Berkshire Life Insurance Company of America:

Janice, a partner in a dental practice, one day felt a lump and sought a medical explanation.  Early diagnostic efforts suggested it was a benign mass but treatment would reveal a form of leukemia that would lead to a more aggressive treatment regimen. Devoted to her practice, Janice worked regularly though early treatment, often working up to three out of every four weeks, leaving little time to recover from the rigors of chemotherapy. However, the next phase of treatment would include added challenges, including a bone marrow transplant, for which she had to relocate to another city.

As Janice was not able to return to her practice during this period, she naturally received benefits for total disability. Furthermore, given that she also had coverage for residual disability, and a qualifying loss of income, she received residual benefits beginning with the onset of her chemotherapy, even though she was continuing to work at that time.

While her transplant was a success and she was able to return home, Janice will be unable to return to her practice of dentistry for some time. Fortunately, her disability insurance will be there for her and the insurance company will continue to pay her benefits until she returns to work.

I will try to include these claims stories in future blog entries, as we hear of them.  I think these stories make a better case for the need for disability insurance than any hypothetical I can conjure up.

From the AP – Social Security officials say they expect an even larger spike in new disability claims than they had predicted, as aging, injured baby boomers tumble out of the work force and need income.

Officials estimate they’ll receive 3.3 million new disability claims over the next year, up from their previous estimate of 3 million projected just five months ago.

The unprecedented wave of new applications raises questions about the agency’s ability to curb historic backlogs and cut processing delays, a problem that has plagued the agency for years. Officials had been making progress in reducing a massive backlog of disability appeals cases.

Also adding to the problem are recent moves in at least 10 states to furlough hundreds of employees who process initial benefit claims.

Agency officials say the extraordinary increase is driven by the recession and an aging baby boomer work force reaching their most injury-prone years. Long waits for the agency to process claims and resolve appeals can leave some claimants struggling to make ends meet.

Since October, the number of people waiting to have a claim processed has jumped a stunning 30 percent, from about 556,000 eight months ago to more than 736,000 in July.

A recent study was performed on the impact of disability by the consulting firm, Milliman, Inc. that highlights many misconceptions Americans have about the impact a disability can have on their lives.  I noted with interest several myths the study rebuked:

• Disability insurance is more important for married people – FALSE.  The study shows that the financial impact of a disability is, in fact, significantly greater for non-married individuals than for those who are married to a working spouse.   Typically, only a portion of the total household income is lost when a married individual becomes disabled, according to the study.  Additionally, a single person might lose their medical insurance while, for the married person, it still might be available through the spouse’s employer.
• The financial impact of disability is much higher at higher incomes – FALSE.  Actually, the impact is much greater at lower incomes.  This is because the added healthcare costs incurred during the disability are a greater portion of income at lower income levels.  Also, according to the study, the tax savings from reduced income is proportionately greater for individuals earning higher income prior to disability.
• The financial impact of disability reduces over time – FALSE.  Again, the reverse is true – the financial impact actually increases over time, because both incomes and expenses tend to increase with inflation.

Recently, the nonprofit LIFE Foundation and America’s Health Insurance Plans (AHIP) engaged the consulting firm Milliman, Inc., to conduct a study examining the impact of disability on individuals in the United States. In this study, titled “The Impact of Disability”, Milliman outlined several expenditures that make up additional costs incurred as a result of disability. The impact of Healthcare costs is the one that got my attention.

In the study, Milliman found that healthcare expenditures can jump significantly during a disability. First of all, medical insurance may not be available to the individual who becomes disabled or may only be available at substantially higher premiums. If protection under the Family Medical Leave Act applies, according to the study, an employer is responsible for continuing the medical insurance to the worker facing a disability for up to 12 weeks. Following this 12-week period, the same medical coverage may be purchased under COBRA for the next 18 months. After the COBRA insurance ceases, the individual may seek coverage through high-risk medical pools sponsored by some states or pay the healthcare expenses out of pocket.

The study anticipates that healthcare expenditures for a person disabled for five years could be 175% to 200% higher than the healthcare expenditures for a healthy worker over the same period. If a person’s disability is severe enough to qualify for Social Security disability benefits, he or she becomes eligible for Medicare 24 months after qualifying for disability benefits. In this case, a large majority of medical expenditures is covered. The big question is will you qualify for Medicare?

I will be examining this report and sharing with you various facets of it in future postings.