We all want to buy the right insurance for our needs, and this insurance includes disability insurance.
However, technology has changed how we purchase. We open our iPad or phone, go online, and purchase goods.
It’s easy to just go online and buy things, right?
The same is true for insurance.
You can go online and purchase auto and home insurance with no issues.
The same nowadays for life insurance for the most part. Additionally, dental and health insurance carriers allow online enrollment and purchase.
You can buy insurance while wearing your pajamas now!
Currently, there are a couple of carriers that allow the online purchase of disability insurance.
That’s right. You just click on their link, make some selections, and apply. You don’t need to meet with an agent!
While that seems like the easy thing to do, you may end up with the wrong plan or product.
Additionally, you’ll potentially waste your hard-earned money if you don’t know what you are buying. (Don’t worry; we will show you.)
Why? Disability insurance is a bit different than other types of insurance. You really want the “best” disability insurance that fits your needs.
- Insurance Buying Habits Of Today
- The Moving Parts Of Disability Insurance
- The Wrong Way To Buy Disability Insurance
- The Best Way To Buy Disability Insurance
- Comparison Of The Wrong Way And The Best Way To Buy Disability Insurance
- Now You Know The Best Way To Buy Disability Insurance
Let’s jump in and quickly discuss the buying habits of today.
How People Are Buying Insurance Today
I think you will agree with me that technology has changed how we buy things and do business.
If we need something, we go online and buy it. Nowadays, the product arrives the next day!
We do our banking online, order our food online, and go to church online (if we prefer to).
Now, we can purchase insurance online.
For example, you can buy term life insurance directly yourself. It takes 10 minutes to apply, and then the carrier makes a decision instantaneously.
However, disability insurance is another story. It’s not as easy to buy disability insurance online as many think.
Before we discuss the reasons why, let’s discuss the moving parts of disability insurance. This will really explain why it’s hard to buy disability insurance online.
The Moving Parts Of Disability Insurance
As you are aware, disability insurance pays you a benefit if you are hurt or sick and can’t do your job. That is it in a nutshell.
It is extremely important insurance. This type of insurance essentially keeps you in your home and puts food on the table if you can’t work.
However, as simple as it sounds, it can be a complex product with many moving parts.
The first thing is disability insurance underwriting is way more complex compared to, say, life insurance.
For example, your occupation plays an important role in determining the right carrier for disability insurance. It’s a key component in the underwriting process.
Same with your income and health.
In addition, most carriers offer many riders. Riders customize your policy to your needs.
Plan structure, underwriting, and riders are all different. So, you can’t just apply with any carrier.
If you want to buy the right disability insurance for your situation, you need to know all of this. This brings us to our next section about the wrong way to buy disability insurance.
Here’s The Wrong Way To Buy Disability Insurance
In our last section, we touched on the moving parts of disability insurance. These moving parts include:
- Plan structure,
- Underwriting, and
While carriers align, generally, on other types of insurance like term life insurance, that’s not the case with disability insurance. (Moreover, with term life insurance, I wouldn’t suggest applying online directly unless you are generally healthy, not overweight, with no recent hospitalizations and limited medication.)
For example, a web designer contacted us after being declined by a disability insurance company for her anxiety and depression. After discussing her situation, we felt the carrier was conservative with their underwriting. We were able to get her disability insurance with another carrier.
Talk about a disparity!
I’ll show additional, real examples of this disparity among carriers. It can be significant.
Lately, agencies have been offering disability insurance directly to you, the consumer, online. They say things like, “here’s the smartest way to buy disability insurance” or something like that.
They want you to apply right on your computer with them. That’s great, right?
Buying disability insurance online isn’t like buying a shirt. You can’t necessarily “return” the disability insurance if it doesn’t fit.
If you end up with the wrong plan, that is on you. You probably won’t know that until you make a claim.
Currently, You Apply With One Carrier
What you don’t know is that, currently, when you apply for disability insurance online, you are applying with one carrier (maybe 2 carriers). (Note: I am talking about an actual application, not an online contact us request for more information such as we have.)
That’s like William Ford saying, “Any customer can have a car painted in any color, as long as it is black”.
In other words, you have one (or two) options. How do you know that the carrier you are applying with is the right one for you?
You really don’t if you blindly apply online.
What if you were the woman I described earlier and declined?
Declines show up on your MIB. Potentially, declines are a cause for concern with future applications.
If you’ve spoken to me before, you know I always say that some coverage is better than none. However, the assumption with my statement is that you have researched and determined the carrier you are applying with is the right one for your situation.
So, what I am saying here is that, currently, applying online isn’t the way to go for disability insurance.
Additionally, neither is applying with a captive agent…at least right away.
What are captive agents? They only work with one carrier. So, your choices are limited to that one carrier. Additionally, the agent is beholden to the carrier he or she works for, not for you.
Sorry, but that is the truth.
Now, I am not saying those policies offered by captive agents are bad. No, they aren’t. They are some of the best all-around.
But, how do you know which is right for you?
Now is a good time to discuss the best way to buy the right disability insurance for you.
Here Is The Best Way To Buy The Right Disability Insurance For You
So, if buying online directly and possibly from a captive agent (more on that in a minute) is the wrong way, what is the best way to buy the right disability insurance for you?
Simply, it is to seek out an independent agent experienced in disability insurance.
Of course, we are independent. However, this isn’t a shameless plug.
An independent agent knows the market and can offer a plan that is unique to your situation. He or she works with many carriers. The more carriers, the more solutions.
It is really the best way to buy disability insurance. At least, currently.
There is no need for “square-peg-round-hole” or “everything-looks-like-a-nail” solutions. The agent should have a disability insurance solution no matter your situation, even if you have been declined for disability insurance before.
Sure, going online and applying is easy, but it could be the wrong choice in the long run.
Why? Again, as we said before, there are many moving parts with disability insurance. For example, do you know what a partial disability benefit is? Likely not. It’s important. Moreover, did you know that carriers differ, sometimes greatly, on their definition of a partial disability?
That would stink if you applied to a carrier that had a weak definition and then you faced a partial disability.
That can happen when you blindly apply online or you don’t do your homework. It’s why it is important to work with an agent who knows disability insurance and works with many carriers (hint, hint My Family Life Insurance).
Let’s briefly discuss captive agents. Is working with them bad? No. It is not. However, they have only 1 product available to them. Of course, there are fine captive agents offering fine products. You, however, just want to make sure what they are offering fits you and your situation. If not, then a reputable independent agent can help.
5 Steps To Buying The Right Disability Insurance
There are 5 easy steps to buying the right disability insurance coverage for you.
- Start researching what disability insurance is
- Contact an independent agent to help you through the process
- Understand disability insurance underwriting and how it may affect you
- Choose disability insurance riders and other options that fit your situation
- Apply once you jointly agree with a plan
OK, John. Can you show me some examples?
Sure, now is a good time to show examples of the wrong way and the best way to buy disability insurance.
Comparison Between The Wrong Way And The Best Way To Buy Disability Insurance
Here are some real examples if you purchased disability insurance online compared to working with an independent agent like us.
To keep comparisons easy, the comparisons include a 90-day waiting period and 5 year benefit period. We assumed non-tobacco and non-marijuana use. Premiums are subject to change.
Female Dental Hygienist Age 30
We help many dental hygienists obtain disability insurance, and we know which carriers work best for that occupation.
Let’s say the hygienist makes a $50,000 salary. By working with us, she will have a $2,500 monthly benefit, true own occupation for the 5 years, with a guaranteed purchase option, and residual benefits for about $56 per month. It also includes a provision that increases her benefit automatically by 3% per year for the first 5 years.
The online plan?
Well, they can offer a $2,980 monthly benefit. But, the other options are similar. Their plan costs $80 per month.
(Note: if you think the premium increase is due to the monthly benefit, it really isn’t. Taking the online plan to $2,500 yields a premium of $70 per month.)
So, would you spend $56 or $80?
What would happen if you saved that $24 per month?
Well, over 35 years, that difference would yield about $56,000 by age 65, assuming an 8% interest rate.
Male Massage Therapist Age 40
The massage therapy occupation is another occupation we help quite a bit.
For simplicity, let’s say our massage therapist makes $50,000 and is self-employed.
He can receive a $3,125 monthly benefit. He will have the true own occupation definition for the duration of the 5-year benefit period. The cost is about $73 per month.
The online option can offer a $3,420 monthly benefit, but $1,220 coordinates with social security. They’ll force him to coordinate based on his occupation class. As we wrote in our disability insurance rider article, we believe you should avoid any coordination if you can help it.
Moreover, their true own occupation definition only lasts 2 years. If you are still disabled after 2 years, the disability definition reverts to the stringent any occupation definition.
On top of it all, their plan costs $116 per month.
That’s a $43 per month mistake by going online without doing your homework. Translate those savings for 25 years. What does that yield? At an 8% average return, about $41,000.
Female Digital Marketer/Web Designer 37 Years Old
Here’s a recent case we did for a client. She is a web designer/digital marketer.
A little change here. She goes to the chiropractor 2 times each year for maintenance. There’s no record of back, neck, or spine issues.
Additionally, she smokes marijuana recreationally. Not a lot. On average, 1 time per month.
In her case, we were able to get her a $3,500 monthly benefit, true own occupation definition, residual disability with guaranteed purchase options and automatic increase benefits. This all costs $66 per month. Moreover, there were no exclusions on her back and spine and no rate up for the marijuana use.
What about the online, direct option? They offer a monthly benefit of $3,420. So, about the same. However, they place an exclusion on the spine and back. Additionally, they rate up marijuana use and categorize it as tobacco use, even for recreational use. Finally, because of the rate up, they do not offer a guaranteed purchase option or an enhanced residual benefit. Their cost? It is about $121 per month.
It is obvious whom you’d want to apply with. However, what if you applied directly online? That would stink.
The list goes on and on. It doesn’t matter what occupation you are. We can always help you obtain the right level of benefits for the premium. We also work with a Christian organization that offers disability insurance. If you are a practicing Christian, then this is a solid and affordable option for you.
Now You Know The Best Way To Buy The Right Disability Insurance For You
Buying online is easy, right? Usually, yes. In this case, however, buying disability insurance online may not be the easiest or best case for you. The reason? You are currently limited to a couple of carriers…at most. How do you know if they are right for you? You really don’t. This isn’t like buying a shirt online. You are buying a very important type of insurance.
The best way to buy disability insurance is to work with an independent agent who understands the market. Of course, we would love to help. However, truthfully, there are great independent agents everywhere. What about captive agents? There are great captive agents as well; you just want to make sure the one carrier they offer is right for you.
We gave real examples of the policies we placed versus the online, direct carrier. We allow our clients the best possible coverage for the lowest price for their unique situation.
Would you like to learn more? Feel free to contact us or use the form below. I think you can see we will put your needs and interest first. It is the only way we know how to work with our clients. If we can’t help, we will point you in the right direction as best we can. You can always reach back out to us anytime if your needs change.