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Disability Insurance Case Study #1: Driving History

You most likely know that your health is a factor in determining whether or not you will be approved for disability insurance. Pre-existing health history could lead to modifications of your policy’s benefits including medical exclusions, removal of riders or a rating surcharge.

What you may not realize is that your driving record may affect the underwriting process of a disability insurance application. The insurance carrier will look at your motor vehicle report, or MVR, to assess your risk profile.

Case - Client's Driving Record

A physician, in a noninvasive specialty, reached out to us to apply for disability insurance. During the underwriting process, the insurance company reviewed the client’s motor vehicle report, which mentioned two driving violations within the past 5 years.

  1. The MVR noted the client at fault for the first car accident 2-3 years ago. There were no injuries to either driver. However, at the time of application, there was a pending lawsuit from this event. The pending lawsuit was resolved shortly after the carrier reviewed the MVR.
  2. The second violation was more recent to the date of applying for disability insurance coverage. This accident was deemed to be a double fault to both drivers. There were no injuries from either driver but there was a claim being filed from the other party at time of application.

One would think that these driving incidents would not affect the ability to obtain disability insurance considering there were no injuries in both events – but this was not the case.

Reason for Decline

The insurance company concluded to decline this client coverage due to two facts - there was a pending lawsuit and a pending claim. Although the lawsuit was resolved shortly after this decision was made, the carrier still could not consider the client for coverage until the pending claim is fully resolved.

Per discussion with the underwriter, the main concern within the Motor Vehicle Reports are the underlying complications stemming from any pending claims; which could trigger a lawsuit resulting in a multimillion-dollar judgment. The worry, insomnia, difficulty in concentration, decreased self-confidence, depression, anxiety, risk of bankruptcy, substance abuse and other psych disorders could alter your work ethic and ability to perform in your demanding specialty. The emotional burden and stress of a lawsuit could very likely result in a disability, especially for physicians, preventing you from performing your specialty.

The underwriters specifically stated that they would be willing to reconsider this client for disability insurance with proof that the claims were fully resolved.

Solution

We inquired with two of the top insurance carriers, "Company A" and "Company B".

"Company A" was willing to offer coverage for this client but the best-case scenario would be a modification to the benefits within the policy. Since the lawsuit was resolved, this would not have an adverse effect on the policy. The pending claim from the second car accident and the record of two driving violations within a 2 to 3-year span would result in an offer no better than a 50% rating (cost increase), a 5-year Benefit Period and no future increase riders.

"Company B" stated they would consider a regular approval for the driving history, subject to review of the MVR and full medical underwriting guidelines, as long as the lawsuit was fully resolved.

What You Can Do To Improve Your Driving Record

If you have a few driving violations and accidents you are worried about when looking for disability insurance, make sure to reach out to an Independent Insurance Broker so they could prescreen you with every company. If your driving record will make it hard to obtain coverage, the only way to improve the marks on your MVR is time. Some violations that will make it hard to obtain disability insurance includes DUIs, DWIs, reckless driving, multiple speeding tickets, accidents with information about who was at fault, any license suspensions, vehicular crimes (hit-and-runs), and other infractions.

Typically, if you have no major violations within the past 5 years you can be considered for coverage. However, more than two violations within the past 3 years may cause an insurance carrier to decline you or even modify your policy offer - such as our client’s case above.

 

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