Non-cancelable disability insurance locks in your best rates when you first get your insurance, making it a policy you should seriously consider, especially if you’re a younger physician. Keep reading to learn how non-cancelable policies can help you save in the long-run.
What is a Non-Cancelable Insurance Policy?
Non-cancelable insurance policies are insurance policies (could be life, health or disability insurance) that can’t be canceled by your insurance company unless you fail to pay your premium. Some companies even offer non-cancelable auto insurance policies. A non-cancelable insurance policy is beneficial because it allows you to keep the same policy with the same premium and benefits, indefinitely. This is important because if your personal circumstances change, i.e., an illness, disability, etc., the policy you have in place must remain the same. In other words, a non-cancelable insurance policy is an effort to protect the insured. That said, non-cancelable policies are typically re-evaluated when the policyholder hits the age of 65. The exact age it gets re-evaluated depends on the policy itself that you purchased, as well as the insurance company.
What are the advantages of a non-cancelable insurance policy?
As noted, it is beneficial to the policyholder to get non-cancelable insurance. There are two main advantages to non-cancelable policies, including:
- Your premium is set in stone, even if your income changes. This means that what you pay in premium each year will not change. If you are a resident looking to buy physician disability insurance, it is wise to purchase your policy while you are still a resident, because you will be charged a very low premium. If the policy is non-cancelable, you can lock in that cheap premium for a long time and save bundles of money.
- You don’t need to re-qualify for your policy in the future. With many types of insurance, your policy premiums will rise as you grow older. Insurance is a giant game of statistics, so as your health changes and you become more at-risk for health issues, what you pay for protection will increase. With a non-cancelable disability insurance policy (or life, health, etc.), your rate will not change.
What are the downsides of a non-cancelable insurance policy?
While non-cancelable policies offer many benefits, there are a few things that you need to consider before going with a non-cancelable policy.
- Higher prices. With non-cancelable policies, you don’t get the ability to lock-in rates and benefits for free. These policies typically come with higher premiums than cancelable policies because the insurers are taking on a bigger risk. With such high premiums, if you end up in a situation where you can’t pay your high premiums, you could lose your policy.
- Age limits. Unfortunately, even a non-cancelable policy won’t remain the same forever. If your policy has a fixed term, chances are at age 65 your policy will be re-evaluated. However, that may be for the best, as people may not need their disability or life insurance policies at that time since they’re close to retirement.
Options Besides Non-Cancelable Disability Insurance
If you don’t want to purchase a non-cancelable policy, there are alternatives to that rider for you to consider:
Guaranteed Renewable
As the name suggests, guaranteed renewal policies’ main benefit is that they are guaranteed to be renewed by your insurer at the end of the policy term. Like non-cancelable insurance policies, with guaranteed renewable policies, you will retain the same benefits outlined in your original policy when it is renewed. The major downside of guaranteed renewable policies, however, is that the insurer can increase your premiums as long as it does for all other policyholders in your rating class. So while your policy is guaranteed to be renewed, your rates are not guaranteed to be the same. Plus, to start, your premiums will likely already be more expensive than cancelable or conditionally renewable policies.
Conditionally Renewable
Conditionally renewable policies tend to lure consumers in with lower premium options, but they give the insurance company more power than the buyer. Conditionally renewable polices allow the insurance company to change the conditions of your policy under certain conditions. With physician disability insurance, these conditionally renewable policies can allow an insurer to deny you a continued policy if you, say, leave your job for a new one.
How Much Does Non-Cancelable Disability Insurance Cost?
As with all insurance policies, the exact premium you pay will depend on your age, health, and the type of coverage you are seeking. Here is how an insurance company assesses the premium you’ll pay for your policy:
Age
The older you are, the more risk there is that you may experience a disability or medical issue. Therefore, the cost of disability insurance (as well as life, health, etc.) increases as your age increases. In fact, someone that purchases disability insurance at 30 years old will pay less in premiums than someone at 35 years old.
Health
This is huge. The cost of insurance depends on your overall health, which is determined during the medical underwriting process. Your height, weight, and any prior medical issues are all taken into account to determine how healthy you are. Additionally, if you smoke you can expect to pay up to 25% more in premiums than a non-smoker would.
Gender
Unfortunately for women, females are more likely to experience a disability or health condition and therefore typically pay more for insurance policies than males.
Medical Specialty
When it comes to physician disability insurance, insurance companies organize medical specialties into different occupation classes that determine risk. Some medical specialties experience higher claims and therefore will pay more in premiums.
Benefit Amount
How much you want to receive in benefits if you become disabled, lose your life or spend significant time in the hospital also affects how much your insurance premium will cost. This is called a “benefit amount” and is something you should ask your insurance broker about.
Benefit Period
After deciding how much you want to receive, the next question is for how long? This is called the benefit period. For example, with disability insurance policies, the policyholder can choose how long they want to receive benefits if they become disabled. The longer you want to receive benefits, the more expensive your premium.
Elimination Period
If you become disabled, the insurance policy will start paying benefits after a specific period of time, called the elimination period, or waiting period. You have the option to pick between 30, 60, 90, 180, or even 365 days before you start collecting benefits. The longer the benefit period, the less you will pay.
Additional Riders and Policy Benefits
Insurance policies of every kind are highly customizable and contain add-on benefits called “riders.” For example, a cost-of-living adjustment rider will increase benefits paid to keep pace with inflation. There are even features that allow you to receive benefits for student loan repayment and partial disabilities. All of these additional riders will increase the cost of your insurance coverage.
Should Doctors Always Opt For Non-Cancelable?
In short, yes. Physicians will want to stick with non-cancelable policies if they can swing it. These policies allow you to lock in much better rates when you’re first starting your career, so as you age, you don’t need to worry about fluctuating monthly payments from your disability insurance policy. Even if you end up becoming disabled and can no longer work, your benefits won’t suddenly drop because your income did. You’ll get the original benefits you secured when you first got your policy.
On the other hand, guaranteed and and conditionally renewable policies give the insurance companies the power to change your premiums or benefits, even if just under very specific circumstances. That being said, there’s typically an option amongst insurance companies that pairs non-cancelable and guaranteed renewal policies together to offer the best of both policies. At the end of the day, make sure to ask your insurance agent which type of policy will work best, as everyone’s situation is different.
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