Disability Contracts

Every disability contract has rules describing how the insured can continue the policy as long as the premiums are paid on time.  When a disability insurance policy is purchased on an individual basis, there are basically three types or renewability provisions available: non-cancellable, guaranteed renewable and conditionally renewable.

Non-Cancellable – is the most beneficial for the insured.  Under this provision, as long as the insured pays premium as they come due, the insurance company:

1. Cannot cancel the policy, regardless of changes in the insured’s occupation or health.  In essence, the insured owns the contract and has the unilateral right to cancel it.
2. Cannot change any provision or add any restriction to the policy.  If the company changes the provisions for its policy in the future, it cannot go back to existing policies and make any changes to policies in force without the agreement of the policy owner.
3. Cannot increase the premium or add any additional charge for the policy, without the agreement of the policy owner.

The non-cancellable will have a time limit and in most common cases is to age 65. 

Guaranteed Renewable – has the same first two provisions of a non-cancellable policy which is the company cannot cancel the policy and it cannot change any provisions or add and restrictions, but reserves the right to change the premium for the policy.

The company cannot normally single out an individual policyholder and raise only his/her premium.  The company can only change the premium for all insured of a specific class who own the specific contract that is being changed.

Conditionally Renewable - gives the insurance company the most flexibility in making changes to the policies in force.  The policy usually does not provide for any premium or policy provision guarantees and, in fact, does not guarantee the actual continuation of the policy.  Any changes or cancellation that the insurance company initiates would have to be done by class I most cases.   However, sometimes there are specific criteria outlined in the contract that would allow the cancellation or adjustment of a single individual.