Do you know what an exclusion rider is? It is a provision in individual disability policies issued to certain people that will exclude benefit payments for disabilities caused by specific medical conditions. Exclusion riders are typically used by an insurance company in order to issue a policy to an otherwise healthy person who has one or more specific medical issues, such as back pain or depression, that increases the policyholder’s likelihood of becoming disabled. In that case, the policy would cover disabilities from other causes, but not from the excluded causes.

Different Responses to Exclusion Riders

Have you ever applied for a disability insurance policy and received a policy with an exclusion rider? If so, you may have been disappointed or even angry. It’s sometimes hard when we find out we can’t get the policy we want. We may feel singled out or treated unfairly about a medical condition we have. On the other hand, we may be so aware of the increased risks our medical condition presents that we may not be surprised at all. I’ve seen the full range of emotional and intellectual responses from clients who have received policies with exclusion riders.

What to Do?

What is the proper action to take when you receive a policy with an exclusion rider? Should you refuse to accept the policy because it will not pay benefits for your excluded condition? Or should you accept the policy because it will cover other conditions that could potentially disable you? In most cases, I believe it is better to accept a policy that excludes disabilities from one cause but still covers most other causes of disability than it is to refuse the policy altogether and not have any coverage at all. Every person must make this decision based on their specific situation, but consider the following story about one of my clients who was recently issued a policy with an exclusion rider.

Client Experience

My client is a physician who applied for a disability insurance policy within the past few years. About a month after he applied, a policy was issued with an exclusion rider, meaning that the policy would pay claims for most disabilities, but not for a disability caused by the excluded condition. My client would have preferred to have the excluded condition covered, but he understood that he had a prior history with that condition and gladly accepted the policy.

About eight months after delivering the policy to my client, I received an email from him that he had been diagnosed with an illness that could possibly disable him. The illness has indeed disabled my client to the point that he cannot perform the duties of his medical specialty. Fortunately, the disabling illness is not the condition that was excluded from coverage, so his disability is covered.

My client is receiving a monthly benefit check due to his disability and may continue to do so for the full duration of his policy’s benefit period. He could have refused to accept the policy because it was not a “normal” policy. He could have decided that if he could not have the “normal” policy he wanted, he would refuse it altogether. I’ve had clients do that. But he didn’t do that.  He realized that even though his policy was limited and would not cover disabilities caused by the excluded condition, it would cover most disabilities caused by most medical conditions.

Did he ever make a good decision! While he’s certainly not happy to be disabled, he is extremely happy that he accepted an imperfect policy that turned out to be a perfect solution to his current disability

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