Though different, guaranteed renewable is something else everyone should consider when shopping for disability income insurance. Essentially, this rider renews the policy each and every year so long as premiums are paid on time. This removes the hassle of reapplying. With this guaranteed renewable, rates can still increase. Contrastly, guarantee of insurability ensures the premiums remain the same.
Guarantee of Insurability
There is a difference between guaranteed renewable and guarantee of insurability. Moreover, guarantee of insurability does not mean that a policy is guarantee issued. Simply put, guarantee issued involves proving income, as well as medical history; after providing proof of income and health, then the carrier issues the policy. As for guarantee of insurability, which is entirely different, it’s an added cost to a policy. Adding this to a policy guarantees benefit increases at appointed times like after three, five, or ten years. Once applied to the policy, the time frame is non-negotiable; it becomes hardwired into the policy. If the designated time frame is five years, then it’s important not to miss the five-year mark because the policy will not allow a benefit increase a year or two later.
With this add-on, all the insurance company requires is proof of income; it does not take into consideration a person’s health. To prove income, a policyholder must provide tax statements from the previous year. A person simply needs to prove that they’re making more money than when they originally bought the policy so that they can get the maximum benefit amount.
Guarantee of insurability is an excellent option for many to consider. Those looking to start their own business or practice, for instance, may only be able to get X amount of disability income insurance; however, if they expect to be solvent with a larger client base after so many years, then guarantee of insurability enables the policyholder to increase their benefit amount so as to accommodate their growing business.
Talk to an Agent!
Whether considering guarantee of insurability or guaranteed renewability or both, you should contact an agent. They’ll explain your options and walk you through the application process. Moreover, a good agent will be in contact with you yearly, making sure you don’t miss the window to increase your benefit amount.
Since insurance is oftentimes overwhelmingly confusing, we want to shed light on this industry by answering YOUR questions. So if you have any questions or concerns, comment below and your question may be the topic of our next video!
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