The Insurance Buying Guide: How Insurance Companies Price Disability Coverage

In order to make good decisions as a consumer of disability income insurance, you should have some understanding of how insurance companies price the coverages they sell. We'll take a brief look at this pricing process -- and give you some tools for asking the right questions if an insurance company quotes you a premium that seems too expensive. The insurance company's sources of information include:

• the agent, also known as a field underwriter;
• the application -- including the agent's statement;
• inspection reports;
• medical information and attending physician's reports; and
• other information, such as occupational or avocational questionnaires.

The field underwriter is usually the only person who actually sees you. So, it's his or her job to deal with subjective or personal issues -- and to provide the insurance company with clear and accurate information about you.

In this process, one of the underwriter's most important responsibilities is the completion of the insurance application. It contains such information as:

• your age and sex;
• your occupational history;
• information about any unusual hobbies or avocations you may have;
• your past medical history, your family's medical history and current physical condition;
• your moral habits;
• information regarding other insurance that you own; and
• your net worth.