Similar to Life insurance, individual Disability insurance is something that must be applied for. In order to obtain coverage, you must submit an application along with other requirements to the insurance carrier you chose to work with. Upon receiving your application, the insurance company will review all requirements and make a formal decision on whether or not to extend you an offer. Throughout this process it is very important to maintain realistic expectations on pricing, timing and potential exclusions or ratings.
First of all, you should understand that a quote, illustration or proposal provided by your insurance agent is not guaranteed. This is simply an educated guess and projection of what your agent expects you to be offered. Without having a comprehensive discussion regarding your occupation, income, personal and medical history, an illustration can be far from what is actually approved. It is important to discuss all of these things with your agent, in order to start the process with accurate expectations on pricing. On average you can expect the cost of coverage to be anywhere between 1-4% of your annual salary.
Once you have decided on an insurance company to work with you will need to complete and submit all requirements including: an application, tax forms from two years prior, insurance medical exam and a personal history interview. Aside from the Personal History Interview (PHI) which is at the underwriter's request, these are all required. The application should be fairly simple and can be completed by phone or in person, depending on the person you work with. Tax forms should be collected at the same time as the application. The insurance medical exam will be scheduled directly with you and the examiner. At this point all requirements have been completed and only if the underwriter makes additional requirements will you have anything else to do.
You can expect the underwriting process to take anywhere between 4-8 weeks on average. If an application is submitted in perfect form and the applicant has an impeccable medical history, than perhaps an approval can be made within less than 4 weeks, but not normally. It is important to provide any additional information or clarification throughout underwriting in order to cut down on processing time. The main variable that can extend the time frame to 8 weeks or more is obtaining medical records from your doctors. This will vary depending on how quickly your doctor's office fulfills the request.
The final and most important part of the underwriting process is the medical portion. If you are in perfect health and have never been treated or examined by a medical professional for any medical condition, than you need not regard this. If you have however, it is important to understand two main concepts used with Disability insurance: a "price rating" and "exclusion". Price ratings are used when offering coverage to an applicant that is a higher than average risk. For example, someone who is overweight may have a 25% price rating or price increase. The second concept used is an exclusion. Exclusions are amendments attached to a Disability policy stating that a specific condition or body part is not covered under the contract. If you have an existing medical condition that has been or is being treated, you should expect an exclusion for that specific condition. Exclusions will not have any implications on the pricing of your policy, and are very common.
Applying for insurance is synonymous to asking an insurance company to make you an offer of insurance. Therefore it should be looked at in this specific way. The fact is that Disability insurance is underwritten very conservatively and it is difficult to be issued a policy that does not have any exclusions. Doing proper research and prescreening is very important, but you should go into the process understanding that you may be issued a policy that differs from what you anticipated.