Disability Insurance for Maternity and Pregnancy
Updated: Aug 18, 2020
Pregnancy accounts for a 22.6% of all short-term disability claims. The dollar amounts involved are small by insurance standards due to short recovery times but can be significant if there are complications or underlying medical conditions. Imagine bed rest with three months to go, followed by surgical complications due to C-section, followed by persistent pain caused by pressure on the spine. In that case, more than a year of earnings could be lost.
Although the absence period is usually short, the loss of income may continue if performance is not fully restored. For professionals, the hit to income and job instability that follows is the primary financial exposure because group disability insurance is an absence product.
Psychological hardships in general rise after becoming a parent. In the beginning, there is the possibility of postpartum depression. The next challenge is the work-life balance. The stress of juggling parental responsibilities with a mentally demanding career can lead to a breakdown, especially if there is instability on the home front. Going out on claim for psychological reasons is especially common in white collar occupations where disturbances in concentration, emotional disposition, or personality can make functioning at work impossible. Pregnancy therefore does not define the risk boundary. It marks a new chapter in life where financial and mental stability will be at a premium for years to come.
Anticipating the need for flexibility, many young parents venture into self-employment. Self-employment offers control over work hours, the option to do some work with the kids nearby, and possibly increase earnings per hour. But in leaving an employer, group disability insurance is lost just when it’s needed most. Unlike medical insurance, group disability insurance has no COBRA equivalent and cannot simply be re-acquired through a spouse’s employer. Group disability insurance is without a doubt the most challenging employee benefit to substitute individually due to qualifying requirements.
The ideal solution for prospective parents requires foresight. A well-informed young worker could load up on as much individual disability insurance as possible while employed full time and before becoming pregnant. This would make it easier to qualify for features that a self-employed person will need, making them impervious to career changes, hours, and income dips. The guarantees and features that come along with these types of policies allow a person to control their own destiny, and to do so at a favorable price.
Such foresight is unusual. Typically, a woman will begin researching disability insurance options after becoming pregnant, which creates predictable challenges. Foremost among them is qualifying. Unlike group insurance, individual disability insurance requires the applicant to answer a lot of questions, including whether she is currently pregnant. Some carriers will consider applications for disability insurance on pregnant women, but only within the first two trimesters and only with a medical exclusion rider for pregnancy.
Pregnant or not, most individual disability policies will contain a standard exclusion for normal pregnancy. Such exclusions will generally differentiate normal pregnancy from complications and explicitly state that complications are covered. It is possible to find coverage that doesn’t exclude for normal pregnancy either, but only with a waiting period of ninety days. That’s long enough to have the same effect as covering only complications but with better policy performance by providing one less out for the insurer and makes it easier to determine when the clock on the elimination period starts ticking.
To get around medical underwriting, group insurance may be an option for the self-employed or employees that can form a group of two or more. Group disability insurance bypasses the need for medical questions and usually does not even require members to do anything. This is made possible by a pre-existing condition exclusion and a relative absence of guarantees and features.
To explore disability insurance options, whether group or individual, the first step is to provide information insurers will need. Click here to get started.