Filing a disability insurance claim doesn’t mean you’ll instantly receive a payout.
Even though you purchase disability insurance to protect you in your time of need, insurance companies set exclusions and limitations.
The exclusions and limitations may feel frustrating, but knowing them ahead of time can help you understand the type of coverage you’re purchasing and how it will help you.
Why Disability Insurance Has Exclusions & Limitations
It might feel unfair, but insurance companies have exclusions and limitations to protect themselves.
They write insurance policies to protect you financially but can’t take excessive risks beyond what they can handle to stay in business.
The key to choosing the right disability insurance is understanding each policy fully to ensure it is the right fit for you.
Long-Term vs. Short-Term Disabilities
Certain conditions are only covered for a certain amount of time.
For example, mental health issues usually have a short-term limit of two years compared to a long-term disability, such as a physical disability that may be payable through retirement.
Where to Find Exclusions and Limitations
Your plan document is the most crucial part of your disability insurance policy. Review it carefully, looking for all exclusions and limitations within the fine print. If it’s too overwhelming, consider reading the Plan Summary, which highlights the policy’s terms and conditions.
If you are unsure of what’s excluded or have any questions, discuss it with your insurance carrier before purchasing a policy.
Every policy has different limitations, but here is a couple you may encounter.
- Previous Earnings – If you change jobs but keep the same disability insurance, the insurance company can limit your benefits to a percentage of your current income, not the previous income you had when you purchased the policy.
- Numerous Policies – If you have multiple policies, you may receive a lower payout from each. In addition, if your policy has a Social Security disability income offset provision, you may receive a lower payout from your private disability insurance based on how much SSI you receive.
6 Common Disability Insurance Exclusions & Limitations
Because each policy differs, reading the fine print and knowing what your policy excludes or limits is essential. Here are some of the most common.
- Preexisting Conditions
- Mental/Nervous System
- Substance Abuse/Alcohol
- Self-Inflicted Injuries
- Cosmetic Treatment Care
- Self-Reported Symptoms and Conditions
1. Preexisting Conditions
A preexisting condition is something you were diagnosed with and/or received treatment for before purchasing disability insurance.
Fortunately, most insurance companies don’t have a long lookback period or conditions they consider preexisting. Instead, most companies look at your medical history for the past 90 days to six months to find conditions recently treated for.
In addition to the lookback period, each preexisting condition has a waiting period. If you have a disability tied to the preexisting condition, the insurance company will exclude it from your benefits for one to two years, but it varies by company and location.
2. Mental/Nervous System
You’ll likely find the mental/nervous system limit in most policies. A mental/nervous system limit doesn’t exclude disabilities connected to your mental health, but they have a limitation, typically of one to two years.
3. Substance Abuse/Alcohol
Some insurance companies exclude substance and alcohol abuse from their covered events, while others cover it with limitations. Like mental/nervous system disabilities, most insurance companies put a time limit on the coverage, usually one to two years.
The substance abuse limitation may overlap in other areas of disability, so be careful. For example, if a doctor prescribes medication and the insurance company suspects abuse of the substance, they could limit your payout for the disability under the substance abuse limitations.
4. Self-Inflicted Injuries
Most disability insurance policies don’t cover injuries caused by self-harm, including suicide attempts.
5. Cosmetic Treatment Care
Most disability insurance policies don’t cover injuries or illnesses resulting from cosmetic surgery or other treatment.
6. Self-Reported Symptoms and Conditions
Self-reported symptoms and conditions often have a time limitation that disability insurance companies will cover. Insurance companies do this to limit the cost of issues, such as chronic pain or fatigue due to chronic problems, like fibromyalgia or migraines, as a couple of examples.
To get the issue covered, the insurance company may require substantial evidence of the disability directly related to the concern.
Certain circumstances may cause exclusions, too, including the following.
- Acts of War: If you are injured or become ill during your time in the war, the issues may be excluded from your disability coverage.
- Healthy Pregnancy/Childbirth: Disability insurance policies don’t cover normal pregnancies and issues accompanying them; however, they may cover complications that aren’t part of a normal pregnancy, such as those requiring bed rest.
- Incarceration: No disability insurance policy will provide benefits if you are incarcerated.
- Flights/Aircraft: If you’re a crew member of an aircraft or flight, disability insurance won’t cover any injuries or illnesses that occur. The only exception is if you are injured as a passenger on a scheduled commercial flight.
- Civil Disturbance: If you’re involved in any type of civil disobedience or disturbance, it isn’t covered under any disability policy.
- On-the-Job Injury: If you’re injured at work, your workers’ comp should cover your loss of income and medical bills; your disability insurance won’t.
Getting Around Exclusions & Limitations
If you face an exclusion or limitation for a disability, you may be able to work around it if other issues limit your abilities.
For example, if you reach your cap with a mental health issue, you may get around it if a physical condition limits your ability to work.
The physical condition may surpass the mental health limitation, allowing you to have benefits longer.
Frequently Asked Questions
Understanding disability insurance limitations and exclusions is essential before choosing a policy.
Here are some common questions others ask about disability insurance exclusions:
Is Applying for SSDI Benefits a Viable Alternative to Disability Insurance if I’m Unable to Work?
You can apply for Social Security benefits and long-term disability at the same time. However, SSDI may take longer to get and usually isn’t enough to cover your monthly expenses, so don’t rely on it. Instead, use it as a supplement. To qualify, you must be rendered disabled for at least one year, and there is a 5-month waiting period before you receive your first payout.
How Do I Appeal a Denied Disability Claim?
You have 180 days to appeal a denied claim. You must file the claim in court. If the judge favors you, you may be eligible to recover any other damages, including court fees.
The Bottom Line
Read the fine print when buying disability insurance. Most exclusions and limitations are similar among policies, but each company has different guidelines.
Know what is and isn’t covered, and pay close attention to the preexisting condition provisions to ensure you have coverage when you need it.