Devastating Disability Insurance Mistakes People Make

Updated: September 3, 2018 at 3:10 pm

disability insurance mistakesSelecting the right disability insurance policy is no laughing matter. We all need the proper coverage. Yet, when we review policies from non-clients (people looking for our help), many of them have made some devastating disability insurance mistakes.

These mistakes aren’t in the basic realm of  “I have the wrong benefit coverage” mistake. (Purchasing an additional policy or exercising a purchase option fixes these mistakes.) These are serious mistakes that were made for one reason or another. The mistakes we are going to discuss are devastating disability insurance mistakes that you generally can’t recover from.

Devastating Disability Insurance Mistakes #1 – Shopping Around On Price

Purchasing disability insurance, or any insurance, is not like shopping for a car. You can’t stop at dealer XYZ and see what the price of a car is, and then go to dealer ABC and see if you can get the car for $5,000 less. Purchasing disability insurance doesn’t work that way.

Premiums are set by the states and the carriers. Agents have no bearing or influence on them. They can’t discount, and agent incentives to you are against the law.

When you shop around, you are treating disability insurance as though it is a commodity like bread, gas, and milk. You erroneously equate the value of disability insurance to the premium cost only. In our opinion, the premium cost is actually a third of the value, at most.

The other two-thirds is the agent who helps you with the policy.  Knowledgeable, honest disability insurance agents are worth their weight in gold. Their value is priceless. I am sure you can agree that when you find someone who works only in your best interests, you don’t want to lose that person. You value his or her knowledge. Great agents continue to serve long after the application. They help you during the underwriting process and provide service long after the transaction.

How To Avoid Mistake #1

The key to avoiding mistake #1 is to find a dedicated and honest disability insurance agent who works in your best interests only. This agent should have access to many carriers to match your specific needs to the right disability insurance policy. Let the agent do the shopping for you. If he or she has access to over 40 insurance carriers, there will be one carrier policy that meets your situation and budget.

Why is shopping around yourself a devastating disability insurance mistake? Because you are only focused on price and not the overall value. Most times, you will select the lowest cost option, thinking it is the right one for you. This is a potential, long-term, expensive, and damaging solution. How does this happen? Here is a real situation:

You are a dental hygienist and find a policy for yourself. It is cheap, through your local association. You lose feeling in your hands. Your doctor diagnoses you Raynaud’s disease. He says, right now, you can still work, but just not full-time. You a limited to working two days per week. Knowing you have a disability insurance policy, you file a claim for partial benefits. You are disabled, right? The plan does not pay. You did not meet the carrier’s definition of partial disability which requires a total disability first. You wonder how you are going to fill the income gap when you have limited use of your hands. (And, you are angry, too.)

As you can see, by focusing on cost only, you just made a devastating, long-term expensive mistake.

Devastating Disability Insurance Mistakes #2 – Not Accepting The Policy

When you apply for a disability insurance policy, there is no guarantee you will receive the premium rate quoted. In fact, nearly all carriers adjust the final offer one way or another. This isn’t a bad thing.

In order to obtain the lowest cost policy for your given situation, you need to be honest and disclose any and all health conditions or lifestyle risks. Then, agents have the ability to design an accurate quote (but still an estimate). Generally speaking, you also need to go through medical underwriting which includes a paramedical exam, height and weight check, blood/urine sample, and potentially additional questions. Many carriers offer a non-medical underwriting process for benefits under a certain amount.

If you get a higher premium than originally quoted, such as a rating, it is important to remember who is the recipient of this disability insurance money. The recipient is not only you, but your wife, husband, children or another loved one. Why would you sacrifice their financial security by not accepting the policy? You can always accept the policy and then work with your agent (or another one) to work on improving the policy. Most times, we have found, people decline the policy, then procrastination sets in. Months and years might go by. Suddenly, they need disability insurance, and but they have the inability to purchase a policy because they just had open heart surgery or some other significant health condition. They jeopardized their family’s financial security.

A premium increase isn’t that much more when you really analyze it. For example, an additional $10 per month in premium might seem a lot, but it is only $0.30 per day. We can find $0.30 per day, right?

How To Avoid Mistake #2

And, if you are a smoker or use tobacco, nearly all carriers will drop you to non-tobacco rates once you are tobacco-free for a year.

Most of us have health conditions which make disability insurance premiums higher compared to the premiums of a healthy person. This is where a qualified agent helps. He or she can review your situation and then match a policy at the lowest cost possible.

Let me guess…you’ll just invest the money you would have paid, right? As the saying goes, if I had a nickel everytime someone told that to me, I would be a very rich man. I am honest about that.

“Steve” runs a successful massage therapy studio. He told me he has anxiety, but upon underwriting and delving into his doctor records, he is actually bi-polar and has borderline schizophrenia.

Those mental disorders are very hard to cover, but the carrier approved him for a modified policy. The policy excluded these conditions, however.

Steve became angry when I told him about the modified policy. He declined it. The policy still covered him in case anything else was to happen, such as an illness.

And something did. Steve was an avid bicyclist. A year later, I learned he injured his head and other body parts when a car struck him. He is lucky to have lived.

Steve lost his career, though, and money became tight. He did contact me about revisiting the disability insurance policy (how I learned about his situation). Unfortunately, due to other events, he is not insurable.

So, just take the policy. There are more important people in your life connected to that policy.

Devastating Disability Insurance Mistakes #3 – You Are An Expert

We are all experts at something. If you are a hair stylist, you know how to style and cut hair the right way for your client. If you are a mechanic, you have a skill set unmatched by many people. Same if you are a physician, dentist, veterinarian assistant, a teacher, and on and on.

Disability insurance agents are experts, too. Sure, determining your need is not rocket science. We put together an easy, and accurate, disability insurance needs analysis for you. What is difficult is finding the right fit for you and your family’s needs.

This is something you don’t want to go alone. Would you try to fly an airplane without an experience? Of course not.

The mistakes we have seen are from people who simply purchased a policy themselves and did not understand how disability insurance works.

Moreover, many agents think they know disability insurance, but they don’t. That happened to my family. A personal story: my wife needed disability insurance. A co-worker referred an agent to us. My wife had a temporary condition during the pregnancy of our first child which at that point, occurred a two or three years before. The condition wasn’t disabling by any means. She was working just fine when we met the agent. We even had another child at that point with no issue. We submitted the policy.

My wife was later declined due to the condition. It made no sense. And, the agent was nowhere to be found to help us through it. We did finally obtain disability insurance, sans the agent. (That was actually when I delved into the disability insurance area and have been helping individuals and families ever since.)

How To Avoid Mistake #3

Many agents or advisors think they know disability insurance, but they don’t. There is more to the disability insurance equation than cost and coverage determination. Good disability insurance agents know the underwriting process and benefits of each carrier. They educate you on your needs, your family needs, and that their recommended carrier is the right one for you. They also talk about your case to the carrier. Good agents should do that to avoid what we went through.

They should also talk about how and when your policy will pay. Wouldn’t you like to know that BEFORE you purchase a policy?

How to avoid mistake #3? Simply, find an honest and knowledgeable disability insurance agent.


Have you made any of these devastating disability insurance mistakes? If so, there is still time. Have you started the process or know that you need disability insurance, but you don’t know how or where to begin? Contact us or use the form below. We only work with your best interests and are happy to help you and your family.

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I am a CFP® Professional and have an MBA. I founded My Family Life Insurance to provide honest, trustworthy advice and economical insurance solutions to individuals, families, and business owners. Contact me if you have any questions. There is no risk! If I can't help you, you've learned a little more, and we'll part as friends. Seriously! Can your current agent say this?

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