If A DI Prospect Has A Health History, Consider Impaired Risk DI

IRDI often uses a "graded benefit" structure, which effectively phases in the maximum level of benefits payable over a number of years, e.g. 25% in year one, 50% in year two, 75% in year three, and maximum benefits payable thereafter.

The contractual language is usually much more restrictive than standard policy forms, in that "own-occ" definitions of disability or residual disability features are usually unavailable.

Notably, the underwriting process used by companies that offer IRDI coverage is usually much easier than the process the applicant may have undergone initially and which resulted in a declination. This is because companies that offer IRDI often use the medical documentation developed by the company that initially declined coverage.

From an agents perspective, informing a client that a DI policy was rated, ridered or even declined, is not likely to be an easy conversation. But there are some simple steps an agent can take to prepare themselves and their client for this possibility:

First and foremost, sell, resell, and sell again the applicants personal need for DI coverage.

Always complete in detail a non-medical Part II, whether or not a paramedical or full medical exam is required.

If the completed Part II reveals the client has a health history that is likely to lead to an adverse underwriting action, let the applicant know immediately.

If it seems likely that an applicants health history will result in a rated policy, quote the coverage with a rating if the illustration software has this capability.

If the software cant illustrate a rating, consider quoting coverage at a lower occupational class to illustrate the effect of the rating.

Bottom line: Keep in mind that impaired risk DI coverage is available. Fortunately, many impaired risks are covered on a standard policy form, which has been rated or ridered. This means the client may still benefit from many important benefits, including own-occ coverage, non-can premiums, presumptive disability benefits and other valuable policy features.

, CLU, is a life and health insurance broker in Longmeadow, Mass. You can e-mail him at [email protected].

Reproduced from National Underwriter Life & Health/Financial Services Edition, November 18, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.