Non-Cancelable versus Guaranteed Renewable

In addition to the level and duration of benefits for your long term disability income insurance policy you also need to address the important issue of renewability. You want to make certain that your disability insurance coverage will continue in force.

Most disability income insurance polices come with one of two types of renewability provision; they are either “non-cancelable” or “guaranteed renewable”. If a policy is non-cancelable, the insurance company cannot change the premiums and benefits shown in the policy as long as you pay your premiums on time. If a policy is guaranteed renewable, the insurance company cannot change your benefits if you pay your premiums on time, but it can increase your premium on a policy anniversary as long as it makes a similar premium increase for your entire class of policyholders. You will pay more for a non-cancelable policy because you are paying for the protection against a premium increase.

While most individual disability income polices are either non-cancelable or guaranteed renewable, other options do exist. One of the most common alternatives is a conditionally (or optionally) renewable policy, which gives the insurance company the right to cancel on any policy anniversary, by class, geographic area, or for other reasons that are stated in the policy. The insurance cannot cancel the policy because your health is deteriorating. At its discretion, an insurance company can extend conditionally renewable policies at each policy anniversary.

What the Policy Does and Does Not Cover

You need to be sure your policy covers disability resulting from both accident and sickness. Many policies provide coverage only when disability results from an accident. Known as accident only policies, this type of policy is far less expensive than a policy that covers disability for both accident and illness. You will want coverage for both because as you get older, you are far more likely to need coverage for disability resulting from illness than from injury. Be sure to consider carefully the kind of protection that is best for you and your family.