Part 3: The Pitfalls of Applying for a Disability Insurance Policy

Part 3: The Pitfalls of Applying for a Disability Insurance Policy

This post is the third in a six-part series of blogs on a Private or Individual Disability Policy. Click to read the first and second blog post in the series.

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Pitfalls of Applying for a Disability Policy

Applying for a Private/Individual Disability Policy is more onerous than signing up for Group Benefits at work (in most cases). Your agent/broker will usually walk you through this. It is important that you feel comfortable with your agent and that they are being as thorough as possible in going through this process with you.

The questions that you are asked to answer are often compounded and complicated and easily capable of being misinterpreted or downplayed. It is better to err on the side of more disclosure rather than less.

Provide Full Disclosure

While you want to obtain the coverage for the lowest cost possible, you also want to ensure that you have done your best to provide full disclosure on your prior medical to reduce the possibility of your policy being voided or rescinded later for either a negligent misrepresentation or a fraudulent misrepresentation. In short, in the event of a future claim, the insurer will likely review extensively, whether there is any possibility of avoiding payment on the claim by searching for a misrepresentation on the application.

With the first 2 years (the contestability period), the insurer can rescind the policy for failure to disclose a “material” fact that would have influenced the decision to issue the policy or not. After 2 years, they must allege a fraudulent misrepresentation, which is a higher test that in general can be described as a reckless misrepresentation or omission of facts that the applicant knew or ought to have known at the time of the application.

If you have any more questions about this topic, or if you or you think someone you know has a disability claim. Learn more about what Share Lawyers does.

Disclaimer: You should not act or rely on any information in blog. Each person or company’s legal needs are unique, and you should ask a lawyer directly to assess your specific needs. You should also be aware that there are time limitations and notice requirements that may affect your rights.