One factor people looking for long-term disability insurance (LTD) may not always take into consideration is their lifestyle choices’ effect on LTD eligibility. Many are likely aware that LTD claims and personal habits impact an individual’s long-range financial options and planning strategies, but they may be less certain of how lifestyle influences long-term disability approval. An insurance company’s estimation of an applicant’s personal risk factors can influence long-term disability eligibility for policy enrollment, the costs of their LTD premiums if approved, and eventually their approval or denial for benefits if they need to submit a claim. Understanding lifestyle choices’ effect on LTD eligibility both at initial enrollment and when it comes time to submit an LTD claim can help individuals to make wise choices in their personal long-range planning.
How Can Your Lifestyle Affect Your Insurability?
Most people are probably familiar with the idea that lifestyle can affect their eligibility to contract life insurance policies, as well as the premiums they may pay for maintaining coverage. Individuals whose lifestyle choices or occupations are considered to put them at higher risk for an early death or short life expectancy may be denied life insurance coverage or charged a higher premium rate than those with fewer risk factors. Denials for health insurance enrollment outright may be more rare than denials of health insurance claims, but Americans who were in the workforce and responsible for their own health care before the passage of the Affordable Care Act (ACA) will likely remember a time when pre-existing conditions were habitually excluded from coverage. Even now, many will be aware that insurance companies use the “lifestyle” questions about smoking, drinking, and history of drug use that are typically included on enrollment forms to estimate the insured person’s near-term risk of needing significant medical benefits.
Long-term disability insurance providers consider a similar set of lifestyle factors in their actuarial calculations. Unlike health insurance, however, LTD exclusions and denials of coverage are not governed by the ACA and in many cases may fall outside federal regulations entirely. Any policy sold within a state must meet the minimum requirements for the relevant type of policy within each state, but because disability insurance policies affect far fewer people than do auto insurance, home insurance, and health coverage, states may not always subject disability insurance to the same degree of scrutiny as these types of policies that affect a majority of their residents. For these reasons, it is especially important to perform your own close evaluation of the terms of any LTD policy you are considering, both prior to enrolling and in the event that you need to file a claim.
Lifestyle Choices: Effect on LTD Eligibility
Providers of health insurance, life insurance, and disability insurance are all interested in a potential enrollee’s lifestyle habits for much the same reasons that a company selling auto insurance policies will want to review a driver’s accident history and any recent traffic tickets. The company will almost certainly also want to know whether the individual has a history of arrests for driving under the influence of any controlled substances.
For insurance providers, the issue is not that the driver may have violated the law, but that the laws against driving while under the influence of substances that can impair reflexes and decision-making are on the books primarily because impaired driving is known to increase the likelihood and severity of traffic accidents. A history of multiple traffic citations can similarly suggest a pattern of risky driving behaviors, while a record of accident reports shows a correlation between the driver’s behavior and potentially expensive damage, even if no one has been seriously injured.
Actuarial Sciences
Insurance actuaries are tasked with studying risk factors that make the holder of an insurance policy more likely to file a claim for benefits. They also look for factors that are likely to increase the average expense per claim. For types of insurance in which the same policyholder may file many separate claims over the life of the policy, such as health or homeowners’ insurance, actuaries further seek to identify factors that are associated with a higher number of claims per policy. Examples would be living in a coastal area prone to hurricane damage, for homeowners’ insurance, and chronic illnesses for health insurance.
Actuaries develop formulas for calculating the correlation between an identified risk factor and average increase in the amount the insurance company spends on benefits for a policy affected by that risk factor compared to baseline. They also aim to analyze how multiple risk factors contribute to and compound the risks associated with an individual applicant. The results of these actuarial analyses can have a substantial impact on long-term disability eligibility for policy enrollment, but they also in many cases affect how lifestyle influences long-term disability approval of benefits for specific claims.
LTD Claims and Personal Habits: Impact of Averages on Individuals
Actuarial calculations are complex. Even the most accurate estimates highly skilled actuaries can produce are still based on population averages, not individual experiences. Just as a careful and responsible driver can be struck in an accident that they had no way to avoid, anyone can become disabled through genetic disorders they cannot control, a catastrophic accident that results in life-altering injuries, or the simple “bad luck” of diseases there is no sure way to prevent. Additionally, an adage familiar across many different fields of research holds that “correlation is not causation,” meaning that just because two events are frequently found together does not necessarily mean that they share a causal relationship.
How Do Lifestyle Choices Affect Long-Term Health?
At the same time, there are a few lifestyle choices that correlate with increased risks of adverse health consequences so consistently that they provide clues to insurance companies that an individual who participates in those choices is likely to present an elevated risk compared to their peers. Any occupation that poses a high risk of severe injury can increase an individual’s risk of becoming disabled. “Occupation” here includes not just dangerous working conditions, but many high-adrenaline hobbies.
Smoking is of course known for its adverse effects on long-term health. Chronic, heavy drinking or abuse of controlled substances can result in dependency issues that may impair an individual’s ability to function in the workplace. Any lifestyle habits that increase personal risk of diabetes can also increase an individual’s risk of becoming disabled, and the same is true for many lifestyle factors that increase the risk of chronic diseases. Many insurance companies take the lifestyle factors they have identified as high-risk into consideration when setting the criteria for policy exclusions.
What Does Long-Term Disability Insurance Not Cover?
Each long-term disability insurance policy will have its own conditions and list of exclusions, so you should always review the terms of any policy carefully before enrolling. You will also want to review the terms with equal care before submitting any claim under the policy. You may wish to consider speaking with an attorney experienced in disability law, who can go through policy terms with you and offer perspective on how terms like those outlined in the policy typically function when they are put into practice.
That said, there are a few exclusions that are so common in LTD policies that anyone selecting disability insurance should consider them when thinking about how lifestyle influences long-term disability approval. Two of the most prominent examples include:
- Disabilities due to criminal activity
- Disabilities due to self-inflicted injuries
Some policies also exclude any disabilities resulting from substance use or mental health issues. Others may not exclude these disabilities entirely, but limit their benefits. Mental illness is not a lifestyle choice in the same way that substance use may be, but for a number of reasons it is not unusual for policies to place mental health conditions and substance use disorders together in provisions laying out exclusions and limitations on coverage.
LTD Claims and Personal Habits: Impact of Lifestyle Choices on Long-Term Disability Eligibility
Many people who hold long-term disability policies may not be fully aware of the extent of their own lifestyle choices’ effect on LTD eligibility for benefits in the event of a claim. Approved or denied LTD claims and personal habits impact an individual’s immediate and long-term financial management strategies, so being aware of how lifestyle influences long-term disability approval for benefits is an important step to personal preparedness. For those who do not yet have an LTD policy in place, it is also important to consider how their documented lifestyle choices may affect their long-term disability eligibility in terms of their approval for enrollment and the cost of their premiums over time. Restrictions and eligibility criteria do differ from policy to policy, so always review the terms of any policy carefully prior to enrolling, ahead of submitting a claim, and frequently during the process of applying for long-term disability benefits. You may also wish to consider reviewing policy terms with an attorney who has experience in disability law cases, in order to identify potential pitfalls and plan for them.
