Now Is The Time

A recent case we read which has nothing to do with disability income insurance reminded us once again that all policyholders, particularly disability income policyholders, must read and understand the terms of their policies carefully to make certain they have the protection they want.

The case we are referring to is American Automobile Insurance Company v. Murray, et als, 2011 WL 3966114 (C.A.3 Pa.))). The case basically concerned technical judicial procedural matters, but the underlying gist was that an insurance broker failed to provide a policyholder with proper coverage advice, thereby causing the policyholder loss.

The insurance broker failed to advise a beer distributor to include an alcoholic beverage clause in its comprehensive liability policy coverage. And, of course there was an alcohol-induced accident fatal to a third party.

Whether this basic error was caused by lack of knowledge, inattention, or simply a desire to close the policy sale and make a commission, the policyholder was left with no insurance to defend or pay a judgment. Cases such as this clearly support our continuing mantra – “Read and understand your insurance policy”.

What’s the point of having and paying for a policy which you were told covers you, but doesn’t? Insurance agents are human and have human frailties. Most won’t admit lack of knowledge or uncertainty; inexperience; inattention; failure to understand your needs and desires and, perhaps, an overwhelming need for money in their personal lives which affects their business judgment. Under such circumstances, mistakes are often made and policyholders may suffer.

Disability income insurance policies have a greater potential for such errors because of the wide variety of technical requirements which must be met before benefits are paid. And, because of the very lucrative commission structure attached to these policies, brokers are highly motivated to sell them.

When a person buys such a policy they do so with certain goals in mind, i.e:

* Obtaining replacement income when a disability strikes the family breadwinner.
* Coverage for the length of time the breadwinner can’t work.
* Benefits that come as close as possible to replacing the breadwinner’s usual income.
* Protection against a rising cost of living if the disability is long term.
* In high income situations, protecting the insured’s “own occupation” and securing adequate amounts of coverage in the event of disability.

Most of us who have personal policies purchased them from an agent or broker whom we assumed knew his or her stuff and did his or her homework before trying to sell us a policy. And, “sell” is the operative word. The agent or broker is interested in making a commission on the sale. That’s how they earn money to support their families. And, the commissions on disability insurance can be substantial – up to 50% of the premiums.

Do we know how scrupulous, knowledgeable or smart our particular broker or agent is about disability income insurance? Unless we are certain of the answer to this question, we have to ask a lot of questions and make sure we see the answers in our policy.

The policy is the contract which sets forth the terms of the deal between you and the insurer. If what you think is in there is not, then your coverage is incomplete and you and your family can be badly hurt in the event you become disabled.

If the policy is the contract, you must read it and satisfy yourself that it says what you think it does. The time to do this is obviously before you make a claim. After you claim, you can be certain that the insurance company will fight hammer and tongs against a claim which is not clearly covered in the policy. And, the chances are that under these circumstances the insurer will win, even in court.

When you buy a policy you are not looking to buy the right to sue the broker or agent for a mistake or oversight. You are looking for a contractual right to benefits from a solid financial entity – the insurance company.

To assure yourself, read your policy before it’s too late. If the language is not fully understandable to you, get somebody who knows insurance language to help.

Asking for help is not a sin. Depriving your family of a future because you were too proud to ask, is.