Looking into long-term disability insurance? Along with life insurance, it’s among the most important components of a family's financial safety net. A lot of people underestimate their chances of disability, but the reality is that 1 in 4 workers will become disabled during their working years.¹ And, 1 in 8 experience long-term disabilities which last more than five years.² Long-term disability insurance (LTD for short) helps ensure that if you're unable to work due to an extended disability, your policy will replace a portion of your income that can cover medical bills, monthly expenses, and other obligations to help you and your family maintain your lifestyle.

Why you should look for a, non-cancellable and guaranteed renewable policy

An individual LTD policy is a contract between you and an insurance policy to pay benefits if you become disabled, according to the terms you both agree to in writing. Like any legal document, it’s important to ensure you understand what all those terms and provisions mean, but this article will focus on these two terms specifically: what they mean, why having both is beneficial, alternative options, and the implications of having – or not having –a non-cancellable and guaranteed renewable policy. And just in case you’re wondering, all Guardian’s Provider Choice individual long-term disability insurance policy is non-cancellable and guaranteed renewable.

What does "non-cancellable" mean?

This provision guarantees that the insurance company cannot cancel or modify the policy terms, for example, by raising premiums or reducing the payout, until a specific age (typically retirement age) or until you decide to terminate the policy voluntarily. You have the assurance of knowing that the terms of your policy cannot be altered unilaterally by the insurance company.

What does "guaranteed renewable" actually mean?

Simply put, a guaranteed renewable policy gives you the right to renew your long-term disability coverage each year (or multi-year term) without any additional medical exams, but the insurance company can increase your premiums due to changes in your health. As long as you pay your premiums on time, the insurance company is obligated to renew your guaranteed renewable policy, regardless of any changes in your health or disability status.

The benefits of having both

A non-cancellable and guaranteed renewable long-term disability insurance policy offers two significant benefits.

1. First, it ensures you can maintain your coverage no matter what changes occur in your health or when disability strikes. So, for example, if you’re diagnosed with cancer or heart disease that is treatable but may result in a disability, the insurer can’t cancel or change the policy even though your level of risk has increased.

2. Having both also protects you from premium increases due to changes in your health. As people get older, their risk of disability inherently increases. Without these provisions, an insurance company may raise your premiums.

With a non-cancellable and guaranteed renewable long-term disability insurance policy, your coverage and costs won't change until the expiration date of the policy You won't have to worry about premiums becoming suddenly unaffordable or that benefits being lowered due to a change in your health or previous claims history. You have a stable, reliable source of financial protection if disability strikes unexpectedly.

It’s important to note that some policies are only guaranteed renewable but not non-cancellable. With guaranteed renewable disability insurance, the insurer guarantees to renew the policy at the end of the term but has a limited right to change premiums, typically on a class basis. In other words, if you were assigned to a certain health category or "risk class," this insurance policy feature may allow the insurer to increase premiums by a certain amount for all members of that class.

The alternative: conditionally and optionally renewable policies

These policies provide fewer guarantees to the policyholder and may allow the insurance company to review your policy and make changes to the terms or premiums upon renewal.

A conditionally renewable policy provision allows you to renew your policy and continue coverage – but with conditions. The insurer can refuse to renew the policy or raise rates under certain conditions spelled out in the contract. For example, there could be a condition that states that you can't change your current occupation to a more hazardous one. However, as long as you meet the conditions of renewability and pay your premiums on time, the insurer guarantees not to cancel a conditionally renewable policy. These policies may cost less but offer much less protection from the unexpected.

Relatively few policies are “optionally renewable,” and for good reason: this type of insurance coverage provides few guarantees that your coverage will be there when needed, and most insurance companies have moved away from this type of coverage. With this provision, the insurer can increase premiums or lower benefits on a class basis or even cancel an individual disability insurance policy altogether when the term ends on a policy anniversary.

Cost considerations

Of course, these features can affect the cost of a long-term policy, but other factors such as your age, occupation, health status, benefit amount, and benefit period (how long disability payments last) generally have a much higher impact on premiums. Generally speaking, non-cancellable and guaranteed renewable policies may have slightly higher premiums than other types of policies. However, when you consider the security and reassurance offered by these provisions – and the devastating impact an unexpected disability could have on your family's financial well-being – you'll likely conclude that they are a worthwhile investment.

How to get the disability protection that best suits your needs 

While your employer may offer short-term disability insurance, it's a limited source of protection that typically only lasts for a maximum of 6 months or a year. Individual long-term disability insurance is a very different, lasting source of powerful financial protection that's highly customized to your needs. If you're looking to get a policy, you should speak with a financial professional who is familiar with the specifics of buying an individual disability insurance policy. If you don't know one, a Guardian financial professional can help you get a disability quote.

Tell your financial professional as much as you can about your financial situation and concerns so that they can start looking into the plans and options that meet your needs. Discuss different coverage scenarios: What happens if an illness takes you out of the workforce for a few years? What if you have a physical impairment that limits your productivity but still allows you to practice your profession? And don't shy away from asking questions, especially about any disability terms and phrases you’re unfamiliar with.