When purchasing disability insurance coverage, there are certain features that need to be considered on your plan. One of the most important of these is that of the renewability of your disability insurance policy. This refers to whether or not the plan may remain in force, as well as how – or if – the insurance company may cancel the coverage altogether.
If a disability insurance policy is cancelable, this means that the insurance coverage may be canceled at any time by the insurance company or the insured. If, however, the insurance company cancels the policy, it is required that it provide notice to the insured. The company must also refund to the policy holder any of the prepaid premium.
If the insured decides to cancel a policy, it is important that they have replacement coverage in place before doing so. Otherwise, if he or she becomes disabled while they are not insured, they will be unable to obtain disability benefits after the fact.
Guaranteed renewable essentially guarantees the policy holder the right to renew his or her coverage at each of the policy’s anniversary dates – provided that the premium has been paid. The guaranteed renewable feature prevents the insurer from canceling or changing any provisions of the disability policy. Here, the insured must continue to pay his or her premiums in order for the provision to remain in effect.
It is important to note, though, that the insurance company can increase premiums based on poor claims experience – however, it typically requires state approval, and the increase must apply to all policies within a given classification of insureds.
In other words, the insurer cannot just single out one particular policy holder and increase the premium on their plan. If the premiums go up, all of the policy holders in the class will be subject to the same amount of premium increase.
Non-Cancelable and Guaranteed Renewable
The non-cancelable and guaranteed renewable feature is usually preferable for insureds. This is because it prevents the insurance company from canceling the policy, as well as from changing its provisions or increasing its premiums for the entire life of the policy.
Therefore, this feature essentially offers the policy holder an added level of security in the event of a disability. Because this option typically represents a higher risk to the insurance company, however, it is usually only offered on low-risk group policies at a high premium cost.
It is important to review the renewability of your disability insurance. Work with Insuring Income today.
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