What If I’m Already Sick or Hurt & Want to Buy Income Protection Insurance (also known as Disability Insurance)

Photo by Eunice Lituañas on Unsplash

In this series of posts, we’re going to shed some light on some of our most asked questions about our Income Protection Insurance Policy (disability insurance.) We want you to understand Income Protection Insurance so you can make the best buying decision for your situation. So, without further fanfare, the #1 most asked question to our customer service team.

“I’m having surgery next week and will be out of work for 8-10 weeks. I would like to buy short-term disability to cover the time I’ll be out, what can you offer me?

Short Answer:

A short-term disability insurance policy would not cover you for an injury or illness that you already know about or a doctor has diagnosed. Any immediate illness or injury you know about before you buy your policy is viewed as a pre-existing condition. A policy will only cover you for unexpected events after you buy a policy.

Longer Answer:

One of the topics we’re going to cover here is how an insurance product is priced. This is only part of the story and we’ll get in to it a little more in depth in another blog post, but for today, what we’re going to get in-depth on is why a disability insurance policy does not cover an illness or injury you may be facing when you want to buy a policy.

As we highlighted in our last post about disability insurance and pregnancy, insurance products are created to help a person cover a risk she has in her life. A risk, as defined by the Merriam-Webster Dictionary is the “possibility of loss or injury”. The key word in that definition is “possibility” or the chance something will happen in the future. If there is an illness or injury suffered in the past, even in the recent past, that leaves ongoing physical or mental effects is pre-existing and is no longer a possibility, but a certainty. Insurance products are created to spread the risk of something happening across a whole group of people that an event might happen to.

When a Disability Insurance Policy is created and priced, a team of actuaries scours through loads of data to try to figure out what someone’s percentage chance of getting hurt or injured in the future based on factors like age and the type of job she does, to name a few. Based on that data, a price is created that creates a delicate balance between making the product affordable for someone to have, allow the company to cover overhead expenses, and reserve money in case the policyholder must file a claim for benefits. The amount a company needs to cover a person’s claim is spread out over, potentially, years of premium payment, with the assumption that something bad won’t happen to you, but if it does, the money collected by all its customers will be more than enough to cover 1 person’s claim.

This isn’t unique to Disability Insurance; all insurance is meant to cover a future risk. For example, you can buy life insurance to offset the risk that you pass away early and leave your family in a financial bind. If a loved one tried to buy a life insurance policy shortly after a death in the family, it would not be covering a risk, but a definite event and there can be no price high enough to cover definite events.

That’s why, if you already have an illness or injury, buying a disability insurance policy can’t help with that situation. Disability Insurance policies are created to ease the risk of illnesses or injuries in the future, not definite events that are currently occurring.

Do you have any questions? We’d love to hear from you. Leave a comment below or contact our Help Desk and we’d be happy to talk.

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