The Top Three Reasons a Disability Policy Will Not Pay Out

There are a few reasons why disability
life insurance may not be paid out.

I recently attended a seminar and was surprised to learn that 70 to 75 per cent of all disability policies do not pay out. To ensure this does not happen to you, review these top three reasons that can result in a claim being denied.

1. Client Fraud
Client fraud covers a wide range of terms, but basically revolves around the client not disclosing a health or lifestyle issue on the application. An example of this is an applicant who has heart disease or diabetes and did not disclose this. This also includes an applicant who does scuba diving but fails to disclose this lifestyle activity.

It is crucial that you review the application you are signing thoroughly to make sure your health and lifestyle information is not misstated. You should also receive a copy of your application with the policy.

LSM Tip: “You have 10 free days to review your policy. If you are not happy with your policy, you can get a refund.”

2. Not understanding the policy
Disability insurance policies generally have three types: any occupation, regular occupation, and own occupation. Any occupation policies are the weakest definition of disability insurance. Many group disability policies switch from regular occupation to any occupation after 24 months.

The types of disability policies are just a small part of what you must know and understand about disability insurance. Not understanding your policy can result in having your claim denied. In the past, people have misunderstood the following:

  • The insured thought the policy had a shorter waiting period than it actually had
  • The insured did not understand the definition of “disability”
  • The insured did understanding certain policy exclusions, such as a back or knee exclusion related to a pre-existing condition

LSM Tip: “Our agents will fully explain your policy, and we encourage you to ask questions. Don’t be shy! If there is anything you would like further explained or that you feel we did not cover, do not hesitate to ask. Once you receive your policy, look it over thoroughly and contact us immediately if there is anything you do not understand.”

3. Time taken to process the claims
Each claim has a processing period, and this period can vary based on different factors. Some claims are “denied” pending a process. While not exactly a declined claim, many insurance carriers indicate a claim is denied if it is pending during a reporting period. For example, a claim may take a few months to pay out if the insurer had to write the claimant’s doctor. The policy may have had a 30-day waiting period but taken 180 days to be approved and for payment to start. In this instance, the insurer will back-pay the months a benefit was not paid.

LSM Tip: “We are happy to provide you with the status of your claim. We process claims as efficiently as possible while always taking the appropriate steps to confirm the legality and legitimacy of each claim.”

There are several reasons a disability policy will not pay out, but by fully disclosing your health and lifestyle issues, understanding your policy, and being aware of the issues that may delay a claim, you greatly reduce your risk of denial. If you have any questions, please contact us at 1-866-899-4849 or visit our disability insurance quote page.

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