Disability insurance: How do 16 products from seven providers stack up?

Insurance Journal's sister company InsuranceINTEL compares 16 individual disability insurance products from seven providers in this magazine complement article. 

Non-cancellable disability insurance is considered a high-end product. The three providers that offer it guarantee that the policy is non-cancellable until age 65. This means that the insurer cannot change the benefits.

Guaranteed renewable disability insurance also allows clients to renew the policy to age 65 and sometimes beyond, but the insurer reserves the right to change the benefits over time, including the premium. 

Two living benefits specialists told Insurance Journal that advisors must understand the intricacies of individual disability insurance policies, especially during a pandemic. Not only has the pandemic heightened insurers’ vigilance about mental health issues during underwriting, but insured are also unsure about their disability coverage if they have lost their job due to the health measures.

Claudine Cloutier, Vice President, Living Benefits, and Associate at Groupe Cloutier, explains what happens in this situation, depending on the product. “If I am insured with a non-cancellable product, the insurer will pay a benefit if I cannot perform my regular activities. If I'm insured with a guaranteed renewable product, it depends on the product," she says. 

Every guaranteed renewable policy contains a clause that states what happens if an insured becomes disabled while unemployed, Cloutier continues. “Most often, the policy will reduce the amount of benefits (face amount), lengthen the waiting period before receiving benefits (elimination period), or reduce the duration of benefits,” she says.

The other major advantage of the non-cancellable product: The insured pays the same premium until age 65. “A guaranteed renewable product will either offer a premium that increases over time, for example every five years, or a level premium that is not guaranteed,” says Claudine Cloutier. In the case of a level premium, the guaranteed renewable contract does not provide for a premium increase, but the insurer reserves the right to do so, “as long as the increase applies to all insureds in the same job category.” 

Guaranteeing benefits 

Non-cancellable products offer comprehensive guarantees, which are reflected in its price. If price is an issue for the client, the advisor may suggest a product that offers similar coverage, but fewer guarantees. With this trade-off in mind, Veronique Caty, Sales Manager and Manager, Living Benefits, at Financial Horizons Group tries “to protect the client as much as possible.” She points out that each guaranteed renewable product has its strengths and weaknesses. 

She gives the example of iA Financial Group (Superior Program) and Humania Assurance (Prohealth). Humania Assurance is not included in InsuranceINTEL’s table because the insurer does not contribute data to the intelligence centre. “With iA, you can get disability benefits guaranteed by giving financial proof of the last two years’ salary. With Humania, there are no restrictions for a self-employed person who works entirely from home,” the Horizons Group sales manager says. 

Caty prefers non-cancellable to guaranteed renewable products “because nothing moves over time.” “For a contractor or self-employed person, I always try to choose a non-cancellable product, because they are better protected, with better disability definitions,” she says. 

Entrepreneurs and self-employed people absolutely need residual disability in their contract, which is available almost exclusively in non-cancellable insurance, Caty continues. Residual disability lets insured who are not totally disabled receive an annuity if they experience a loss of income. “The only one to offer it in guaranteed renewable products is iA's Superior Program, but for only 12 months. That's not enough for an entrepreneur or self-employed person,” she points out.

Nervous disorder exclusions 

Claudine Cloutier mentions that the number of exclusions is often decisive when choosing a policy. She says that non-cancellable policies contain four basic exclusions, compared with a dozen for guaranteed renewable policies.

In most contracts, nervous disorders are not excluded from coverage, Claudine Cloutier adds. However, if someone who has had a nervous disorder in the past purchases disability insurance, the condition may be excluded from their policy or the application may be denied. “It will depend on how long ago the condition occurred and how severe it is.” 

Cloutier says that nervous disorders are one of the two most common exclusions for disability insurance products. The second is the back pain exclusion. It specifically covers one of three areas: cervical spine, thoracic spine or lumbar spine. 

The insurer may agree to revise its decision if, after a certain period, the insured does not experience any symptoms of the condition covered by the exclusion. “It is very important for advisors to monitor the file because the client's situation may change as years go by. If the contract foresees a review of the exclusion in two years, the advisor must ensure that the exclusion is removed, if applicable,” Claudine Cloutier says. 

Véronique Caty notes that underwriters have become particularly jittery about covering nervous disorders. An applicant for non-cancellable insurance who has already been disabled for four months or more because of a nervous disorder will be denied coverage and will not be able to reapply for coverage for five years, she notes.

“Guaranteed renewable products are a little more generous,” Caty says. The insurer will accept a person who has been back to work full-time for a year, but with an exclusion and a surcharge. Why the extra premium? “People who have already filed one claim like this will tend to file more. When you're experiencing mental distress, you can get hurt easily. Other illnesses can develop because you have mental fatigue,” she says.