Disability Income 101 - Mental/Nervous

Trevor Tarpinian, CEPA®
Licensed Insurance Counselor
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trevor@tfi4insurance.com

Disability Income Insurance 101 - Mental/Nervous

The Council for Disability Awareness 2014 Claims Review reported $9.8B in disability claim payments made in 2013. Of these, just under 10% of claims were due to some form of mental or nervous illness. Depression is a growing cause of disability. Social Security Disability Administration reported mental/nervous disorders accounting for 10% of DI claims in 1981, increasing to 24% of workers in 2000, to 26.9% of workers as of Dec 2014. .

With mental and nervous claims producing a significant amount of work loss, it is important to understand what potential claims could fall under this category, how a company defines disability, and what coverage options exist for disability coverage.

What are Examples of "Mental/Nervous" Disabilities?

Not meant to be comprehensive, the following common conditions would fit the description of mental/nervous related disabilities:

- alcohol abuse
- substance/drug abuse
- depression
- anxiety
- bipolar
- schizophrenia

These aren't rare conditions. They're common and they pose a serious threat to earning income for a who a person who suffers them. This area is a significant factor in determining disability income insurance. 

How do Companies Deal with this in their Policies? 

Not all companies and policies treat disability coverage for mental and nervous conditions the same way. One can generally divide all plans into 3 categories with regard to how they cover mental/nervous claims: they either cover it, exclude it, or limit it.

Exclude It. I'm seeing a growing number of companies and policies explicitly exclude mental or nervous disability in the contract. They may cover everything else, but disability from depression, substance abuse, schizophrenia - forget it. You're on your own. 

Limit it. The vast majority of contracts I see limit mental/nervous coverage to 2 years of benefit. If you have a benefit period with to-age-65 benefits (And you're 40 years old), you may have 25 years of potential benefit from the policy, but any claim resulting from mental/nervous disability will be capped at 2 years of payments. If you work for an employer that offers long term disability as part of their benefits package, odds are that the group plan will have a 2 year limitation on mental/nervous claims.  Furthermore, as of the time of this writing, I'm seeing that most companies that offer individual (supplemental) disability are placing 2-year limits to mental/nervous claims for policies issued in California - regardless of how healthy you are. This seems to be a result of a recent rise in claims with mental/nervous nature in CA.

Cover It. A handful of companies will give full benefits for mental/nervous claims on their individual disability policies. They won't cap the benefits at 2 years. If you have to-age-67 benefits, they'll pay a claim resulting from mental/nervous disability to age 67 (or end of disability).

Want to know what companies cover mental/nervous claims? Do you know how your individual policy or group plan addresses it? 

On, your current policy, do you have a mental/nervous exclusion that was slapped on years ago that you've forgotten about? Have you been without treatment or symptoms for more than three years?

Send me a message and we can answer your questions and work to see if we can remove that exclusion and provide your policy with comprehensive coverage.