GSI vs Fully Underwritten Disability Coverage

What Are the Advantages of GSI Coverage?

According to the Milliman 2021 Annual Survey of the U.S. Individual Disability Income Insurance Market, 50% of individual disability insurance policies are either modified (34%) or declined (16%). A GSI plan avoids this and reduces the approval process from a matter of weeks or months to a matter of days.  

There are several advantages to GSI coverage:

• ·         GSI coverage is typically the most robust disability policy with the most favorable definitions.
• ·         Most if not all the company’s riders are included or are at least available.
• ·         There is no medical underwriting. Regardless of prior injuries, medical conditions, or prescriptions, you’re able to get the most robust policy.
• ·         It’s easy. Simply fill out the application, and you have coverage.
• ·         It’s often less expensive than any alternative. GSI policies are generally deeply discounted so that males pay less, and females pay substantially less            than traditional individual coverage.

What Are the Disadvantages of GSI Coverage?

Nothing is perfect in life, and there are some disadvantages to GSI coverage:

• ·         Pre-existing conditions will be covered under a GSI policy. However, some GSI offers will only honor pre-existing conditions after you’ve owned the              policy for at least one year. These policies should pay claims during the first year for any accidents and any new medical conditions. (A GSI policy                which honors pre-existing conditions after a year still provides coverage where a traditional individual policy may not.)
• ·         Some GSI policies may have mandatory two-year limitations on areas like mental, nervous or substance abuse coverage. It is important to look                    closely at the details.
• ·         GSI rates are almost always less expensive, but this isn’t always the case. Males in some specialties may pay less buying a traditionally underwritten            policy. You should compare terms and rates with your local agent to find the best fit for you.
• ·         If you have been declined by an insurance company for any reason the GSI offer will not be available, it’s extremely important you know the facts                  and options before applying for a fully underwritten policy. 
• ·         During the past 90 days you cannot have missed work for any type of illness or injury.
• ·         In the past 10 years if you have been diagnosed with loss of speech, hearing in both ears, or use of both hands or feet you will NOT be available to              apply for the GSI offer.

Fully Underwritten Disability Policies:

 Disability insurance underwriting is extensive. Underwriters will review your prescription history, driving record, avocations and will typically obtain and review your medical records. An issue in any one of these categories can pose a problem.

 Disability insurance medical underwriting is not like the clinical medicine you are practicing. The insurance companies must group you together with similar risks, consider the risk that the condition(s) will impair your ability to practice your specialty, and consider the likelihood for future recurrence/relapse. They do not know who will have a problem in the future, only that someone or many will. This means that many conditions that you have recovered from can and probably will, particularly if within the last five years, be excluded from coverage or result in limited provisions or benefits.

Here are the key factors considered in disability insurance underwriting:

Medical History and Current Health Condition

The medical history and current health condition of an individual play a crucial role in disability insurance underwriting. Insurers review medical records to assess pre-existing conditions, previous injuries, and ongoing medical treatments.

They consider factors such as chronic illnesses, surgeries, mental health conditions, and lifestyle habits like smoking or excessive alcohol consumption. Understanding an individual’s health status helps insurers determine the likelihood of a disability claim and the associated risks.

Occupation and Job Duties

Another vital factor in disability insurance underwriting is an individual’s occupation and job duties. Some occupations inherently carry higher risks of disability due to the nature of the work involved.

For instance, jobs that require manual labor or involve hazardous environments are considered high-risk occupations. Insurers consider the physical demands, the risk of injury, and the stress level associated with a particular occupation. These factors influence the premium rates and coverage options offered.

Lifestyle and Hobbies

Disability insurance underwriting also considers your lifestyle and hobbies. Engaging in activities that carry a higher risk of injury or disability, such as extreme sports or dangerous hobbies, may impact the insurer’s assessment of risk.

Similarly, lifestyle choices, such as frequent travel to high-risk destinations, can affect underwriting. Insurers evaluate these factors to determine the overall risk profile of an individual and adjust coverage accordingly.

Financial Information and Income

Financial information, including income, is essential to disability insurance underwriting. Insurers consider an individual’s income to determine the appropriate coverage limits and monthly benefits.

If you’re a business owner, you may have to consider business overhead expenses and other insurance premiums you’ll need to keep up with if you can’t work.

Higher-income individuals may require higher coverage to maintain their lifestyle in the event of a disability. Additionally, insurers may evaluate an individual’s financial stability and debt obligations to assess the need for disability insurance and the ability to pay premiums.

Being transparent here ensures you can access the disability income you need to keep up with your expenses.

Pre-Existing Conditions

Pre-existing conditions can significantly impact the underwriting process for disability insurance carriers. Insurers carefully assess pre-existing conditions and health problems to determine their impact on an individual’s insurance and coverage options.

While some pre-existing conditions may lead to exclusions or limitations in coverage, others may result in higher premiums. To ensure proper evaluation and coverage, individuals with pre-existing conditions must disclose this information accurately during underwriting.

3 Types of Disability Insurance Underwriting

When it comes to disability insurance, there are different types of underwriting processes that insurers use to evaluate applicants’ eligibility and determine their premium rates.

Understanding the various types of disability insurance underwriting can help you make an informed decision when choosing a policy that suits your needs.

 1. Fully Underwritten Disability Insurance

Fully Underwritten Disability Insurance is the most comprehensive and traditional underwriting process. It involves a detailed assessment of the applicant’s medical history, lifestyle, occupation, and other relevant factors.

The insurer may require the applicant to undergo a medical exam, which includes blood tests, urine analysis, and possibly other diagnostic tests. This thorough evaluation aims to determine the applicant’s overall health status and the level of risk they pose to the insurer.

During the underwriting process, the insurer may also consider the applicant’s past medical conditions, family medical history, and pre-existing conditions.

The information gathered during this assessment helps the insurer determine the premium rates, policy terms, and any exclusions that may apply to the coverage. Fully underwritten disability insurance typically offers higher benefit amounts and more comprehensive coverage options.

The 5 main insurance carriers will ask anywhere from 35 to 60 health and lifestyle questions plus do a phone interview. 

2. Simplified Issue Disability Insurance

Simplified Issue Disability Insurance offers a streamlined underwriting process compared to fully underwritten policies. It is designed to provide quicker coverage decisions and requires less medical documentation.

With simplified issue policies, applicants are not typically required to undergo a medical exam. Instead, they complete a detailed health questionnaire about their medical history, current health status, and lifestyle factors.

Insurers offering simplified issue disability insurance use the information provided in the health questionnaire to assess the applicant’s risk. This underwriting process benefits those who prefer a more convenient and faster application process.

However, it’s important to note that simplified issue policies may have limitations, such as lower benefit amounts and limited coverage options, compared to fully underwritten policies.

3. Guaranteed Issue Disability Insurance

Guaranteed Issue Disability Insurance is the simplest and most accessible form of disability insurance underwriting. It does not require documentation or health questionnaires because it skips the medical underwriting process.

Guaranteed issue disability insurance is ideal if you may have difficulty obtaining coverage due to pre-existing medical conditions or other health-related reasons.

With guaranteed issue disability insurance, the company guarantees acceptance into the policy regardless of health status. However, it’s important to note that this type of policy often comes with certain limitations and exclusions.

Benefit amounts may be lower, and coverage options may be more limited than fully underwritten or simplified issue policies.

Provides convenience and simplicity to ALL residents and fellows, the GSI process is not just for the uninsurable or the 40% who could be rated, have an exclusion, or possibly be declined from going through the fully underwritten process.