Loss of Disability Insurance

You can lose disability insurance, or be refused underwriting, for being honest. Yes, loss of insurance, insurance denied - these can be yours.

Your Sore Back Can Cost You

This page doesn't apply to everybody.

Do you have group insurance, possibly with your employer, or with an association? Does it include benefits like chiropractic, physio therapy, massage therapy?

Do you have back pain?

Do you have neck pain?

Do you have - or expect to need - a mortgage?

Then this page is for you!

We would NEVER encourage you to lie, but...

If you have back or neck pain, don't let on to your insurer.

Don't claim treatment by chiro, physio, RMT for back or neck pain.

If you want to get such treatment and have it paid by the insurance that's part of your employee benefits, claim for some other body part.

If your insurance requires that you get a doctor's prescription or formal referral before you can collect reimbursement for your chiro or physiotherapist, ask the doctor to avoid mentioning back or neck in writing.

Why?

Someday, you might apply for a mortgage. Your bank or other lender might require that you be insured, in order to assure them that your mortgage payments will continue if you get hurt or very sick, and unable to work.

Fine.

In order to do so, they contract with an insurance company to underwrite you and allay the risk that you'll stop earning. Life insurance is usually not such a big deal. If you look like a risk, the insurer will simply charge more.

But the bank also wants you insured for disability. You might want that, too - you don't want your spouse stuck with the payments if you get injured and can't earn money.

The mortgage arrangements will probably include the insurance, with your premiums rolled into the monthly payments. That will start immediately. But the insurance company needs to assess what you are likely to cost them, so once they are informed about the arrangement, they follow up a month or two later with an assessment. From that, they decide how much they'll cover you, and what it will cost.

That's where the problem can come up.

Busted!

Elsewhere on this website, we've mentioned that a good chiropractor can be valuable if you are suffering from any kind of back or neck problem, or from any of a thousand other pains and problems that come out of back, neck... or leg and foot... issues.

We've positively raved about how much good a good physio therapist and a good massage therapist can do for you. You bet!

But, there's a two-part problem:

• You might be covered by your employer-sponsored group insurance, or by your spouse's employer-sponsored group insurance, for some or all of those kinds of treatment.

• The insurance company that underwrites the loan insurance for your bank or other lender might be the same one that provides the group insurance where you claim for physio or massage treatments.

You can be refused disability insurance.

How does that work?

Databases, my man. When you come under a plan, you get identified and noted in an insurance-company database. When you make any claims against that plan, those are recorded. It's not a big deal. It's expected. Some people will claim more than others, but that's already been accounted for, when your employer or professional group negotiated a group plan with that insurer.

The thing is, while they can't deny you coverage when you are part of an insured group, an insurance company can indeed deny you disability insurance coverage if you apply singly. As a general rule, they want your business and they are happy to insure you - unless you are an excessive risk to become disabled.

If that's the case, then they really don't want to offer you disability insurance, because the chance is higher for you than for other people, that you might actually start claiming against that insurance.

If they have a record in their database that says you've already claimed for a condition that their actuaries know is a common precursor to disability, then they refuse to extend individual disability insurance to you. It's within their rights to do that. It's just no fun for you - or your spouse, if you get hit by a bus after taking on a big mortgage.

So how to prevent loss of disability insurance?

When the interviewer calls or shows up at your house (to take blood pressure and ask you questions), don't admit to neck or back problems. If you do you will be disallowed for disability insurance - such as on a mortgage / line-of-credit. You might still get life insurance, but you'll be refused coverage for the possibility of being disabled and unable to make your mortgage payments.

This might be a big deal if you are an employee. Or if you are in a business that requires your constant presence and action in order to keep the money coming in.

If you have investment income or a business that generates long-term residual income, then you have less need/desire for disability insurance. You'll still have income and be able to meet your obligations even if you are flat on your back in traction...

But that's the minority. Most of us still work for somebody, or have a small business, and if we stop working - say, because we became disabled - the money stops coming in, the mortgage stops getting paid. If there's no disability insurance, that could be a bad situation.

So, your best long-term bet, to prevent being denied disability insurance, is to ensure that no record gets into insurance-company databases that you have ever claimed for treatments related to back pain or neck pain.

Those are real red flags, and the insurance company knows that they make you far more likely to later become disabled (or at least to claim disability) due to back or neck problems. They don't want to throw their money away on a bad risk like that, so you don't give them reason to see you as that bad risk.

By the way...

You recall how we mentioned, above, that the usual procedure is for your bank/lender to write up the mortgage papers, have you fill out applications for life and disability insurance, and roll those payments into the mortgage payments? Well, if/when the insurer's representative contacts you two or three months later with some qualifying questions, and if they decide that you aren't insurable, your coverage stops - or never starts... but you are still making payments along with your mortgage payments as though you are covered.

Many banks won't bother to stop charging you, if they even notice that they are doing so, or that the fees they are charging you are too high for the amount-or-type of coverage that the insurer eventually decided to sell to you. That is, the initial payments might very well continue, month after month, for years, without you or the bank correcting for the smaller amount that the insurance company should really be getting because they decreased or denied your liability coverage.

Contact your bank/lender and make sure that any insurance premiums you are paying along with your mortgage payments are correct - that you are not being overcharged.

If you went through a mortgage broker, enlist them to pester the right people at the bank/lender. If you were denied disability insurance, you don't want to be paying for it.

Good luck

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