What You Should Be Aware of When Purchasing a Lloyd’s of London Disability Insurance Policy
Author: Attorney Cesar Gavidia
Lloyds of London disability insurance policies are often very restrictive and are different than most disability insurance policies available from just about every other company. When shopping for disability insurance one will discover that there are multiple insurance companies that can offer a variety of different disability insurance policies, and all can contain different definitions, language and coverage terms. Purchasing disability insurance through traditional disability insurance carriers such as, MetLife and Guardian Berkshire Life Insurance Company, who provide own occupation and higher quality disability insurance policies, can be a difficult process for anyone with a pre-existing medical condition, or with some other reason that makes qualifying problematic. Someone with a pre-existing medical condition will likely not qualify for underwriting, or will be issued a high premium disability insurance policy containing restrictive limitation and exclusion language and riders. Someone who has reached the maximum amount of disability insurance that they could financially qualify for would likely encounter the same problems. Under these scenarios it could be wise to consider purchasing disability insurance through Certain Underwriter’s at Lloyd’s of London.
However, unless one has attempted and failed to obtain disability insurance through a company such as, Northwestern Mutual Life Insurance Company, Guardian Berkshire Life Insurance Company or Metropolitan Life Insurance Company, or another traditional carrier, it would be advisable to contact one of these companies first before attempting to obtain disability insurance through Certain Underwriter’s at Lloyd’s of London.
As a surplus insurer Lloyd’s could underwrite an insurance policy for someone with a pre-existing condition, or underwrite someone who has reached the maximum in disability insurance coverage with their other disability insurance policies. However, the Lloyd’s policy will likely have language limiting the maximum benefit recovery period to approximately 5 years, and contain other limitations and drawbacks that are not found in other disability insurance policies. In addition, one can expect to pay a higher premium for the Lloyd’s disability insurance policy compared to a disability insurance policy from a traditional carrier.
“You only go to Lloyd’s if you have to. It’s really a last resort policy”, says Robert “Bob” Greenberg, CLTC, a disability insurance broker from Florida, with over 37 years of experience brokering own occupation disability insurance for professionals and group disability plans for employers. “My advice is to first look at all your traditional policies and plans first. If you have the maximum amount of insurance, or if because of a pre-existing medical reason you cannot obtain insurance from a traditional policy or plan, you would then go to Lloyds.”
How is Lloyd’s of London Structured?
Most people believe that Lloyd’s of London is an insurance company, when in actuality it is not. Lloyd’s was created in England, in 1774, as a non-incorporated association of subscribing members. It was incorporated by the Lloyd’s Act 1871, and it is currently governed under the Lloyd’s Acts of 1871 through to 1982.
Lloyd’s itself does not underwrite insurance business, its members do. Instead, Lloyd’s operates effectively as a market regulator, setting rules under which members operate an offering centralized administrative services to those members. For most of Lloyd’s existence wealthy individuals backed the policies written with their personal wealth. Since 1994, Lloyd’s has allowed corporations to become members in their market. In its 325 years, Certain Underwriter’s at Lloyd’s of London have issued diverse insurance products, insuring everything from Keith Richard’s fingers and a famous food critic’s taste buds, to policies specifically insuring occupations in the event of disability.
Lloyd’s Status to Sell Insurance in the United States
Since Lloyd’s is a British insurance and reinsurance market, it is not licensed to sell insurance in most U.S. states. Lloyd’s commonly sells insurance through its status as a surplus line insurer. Surplus line coverage is not available from the licensed market. Generally, unless specifically exempted by state law, the risk must be declined by at least 3 licensed or admitted insurers in the local market before it can be placed as surplus lines business at Lloyd’s.
However, there are a few places in the U.S. where Lloyd’s is licensed to sell insurance; Illinois, Kentucky and the U.S. Virgin Islands. Lloyd’s can write the same business in these jurisdictions as other U.S. licensed insurers. Typically, if one was interested in purchasing disability insurance through Lloyd’s they would contact their local broker, who would then contact a surplus lines broker. A lot of Lloyd’s disability policies are sold through Petersen Underwriters in California.
Weigh Other Options Before Purchasing Lloyd’s Disability Insurance
Since Lloyd’s is only admitted to sell insurance in a limited number of jurisdictions in the U.S., the likelihood is that the Lloyd’s policy will be underwritten as a surplus line disability insurance policy, which would contain a limited maximum pay period, as well as limitations and exclusions to coverage. Furthermore, unlike most disability insurance policies which will cover the insured in the event of a change in occupation, the Lloyd’s policy may not. In fact, most Lloyd’s policies require that the insured contact Lloyd’s if there is a change in the insured’s occupation, and charge an additional premium if the new occupation is considered more hazardous than the previous occupation. Disability insurance policies from traditional disability insurance companies do not contain such caveats, and will continue covering the insured without increasing the premiums despite any change in occupation.
We have represented numerous Lloyds of London disability insurance claimants and we are available to assist you in the event that you need to make a claim for benefits under your policy. It is always advisable to have an attorney represent you if you need to pursue a disability claim, as Lloyds uses a third party company to manage a disability claim and they will look for every possible reason to challenge the claim. Contact us for a free consultation.