How Pre-Existing Conditions Affect Disability Insurance & Retirement Planning
Disability and Healthcare Planning | by Jules Buxbaum | Saturday, February 22, 2025
Did you know that Pre-existing conditions can drastically shape your eligibility for disability insurance and even alter your retirement strategy? Many people discover barriers to coverage only after an injury or illness, which can put their long-term financial goals at risk. If you want an immediate sense of how different health circumstances might affect short-term or long-term disability policies, consider reviewing our comparison of disability coverage options.
The Significance of Pre-Existing Conditions
Pre-existing conditions are health issues that existed before the start date of an insurance policy. Diabetes, heart disease, and certain mental health disorders are common examples.
According to the Kaiser Family Foundation, 27% of nonelderly adults had a condition that could have made them uninsurable under older underwriting practices. These medical backgrounds often result in higher premiums or partial exclusions.
How Pre-Existing Conditions Affect Disability Insurance
Disability insurance aims to replace part of your income when you cannot work due to illness or injury. This coverage can be short-term or long-term, depending on the policy.
However, pre-existing conditions may trigger waiting periods or exclusions that reduce benefits if your disability stems from a known health issue. If you want more details on filing a claim in specific states, check out our guide on how to apply for disability benefits in NY, NC & FL.
Policy Exclusions and Waiting Periods
Many insurers look back across a certain period—often several months to a couple of years—to see if your medical history includes the condition in question. This look-back period can lead to immediate denial of claims if your disabling event clearly ties back to that condition.
In other scenarios, an insurer might grant coverage but add a rider that excludes benefits related to the pre-existing condition for a set time. These policy nuances can be crucial, especially since the Social Security Administration estimates that one in four 20-year-olds will become disabled before age 67.
Ways to Secure Coverage with Existing Health Issues
Some individuals hesitate to apply for disability insurance once they learn of pre-existing condition rules. Still, there are viable approaches to securing coverage.
Group disability plans from an employer typically have more lenient underwriting standards. Another route is to work with insurers who offer specialized policies or higher premiums in exchange for added coverage.
If you face a claim denial for any reason, consider exploring tools that explain what to do if your application hits a roadblock. For example, you can find pointers in our resource on what to do if your disability benefits are denied.
Considering Retirement Planning Challenges
Pre-existing conditions can ripple into your retirement plans in multiple ways. You may face higher healthcare expenses, a shorter working career, or greater uncertainty around your ability to remain employed.
A Fidelity study has shown that a 65-year-old couple could need an estimated $315,000 for healthcare in retirement. Chronic conditions can raise this number dramatically. It is also possible that you will need to retire earlier than planned, reducing time to contribute to your nest egg.
Higher Healthcare Costs and Early Retirement
Medical bills accumulate quickly if you have ongoing treatment, recurring prescription needs, or frequent physician visits. Some people are forced to retire sooner than anticipated, which can lower overall savings.
When you add in the reality that employer-sponsored health coverage may not extend into your retirement years, it becomes essential to plan well in advance. Determining the right retirement timeline involves both health and financial factors, as highlighted in our article on the best age to retire based on your savings & lifestyle.
The Role of Equity Exposure and 2Pi Financial’s Approach
Many people assume they must reduce portfolio risk simply because they are growing older. 2Pi Financial views it differently. Our philosophy emphasizes that equity allocation should often stay robust, particularly if you have more earning potential left or require higher returns to sustain a comfortable retirement.
Some planners advocate a “glide path” that shifts investments from stocks to bonds automatically with age. Yet economic theory and historical data do not firmly support this for everyone. Instead, what matters is how big your future earnings potential is relative to your existing assets.
An older individual with ongoing income streams may be better suited to handle risk, especially if they do not depend entirely on withdrawals. Meanwhile, a young worker with serious pre-existing conditions might have limited future earning power and thus might not want an aggressive equity position.
Leverage a Financial Planning Engine
Pre-existing conditions add a fresh layer of complexity to your long-term plans. You might need to account for extra healthcare expenses or an earlier retirement date. Having a robust tool that calculates different “what-if” scenarios can give you greater peace of mind.
Our 2Pi Financial Planner demonstrates how adjusting variables like retirement age, monthly contributions, and inflation assumptions can produce a more adaptable plan. It even suggests asset allocations that may yield higher returns compared to typical, conservative portfolios. This data-rich perspective helps you craft a strategy suited to your health profile and retirement goals.
Wrapping Up
Pre-existing conditions can influence every corner of your financial life, from the type of disability insurance you qualify for to the way you invest for retirement. Yet with thoughtful planning, it is possible to cover your medical risks and still pursue meaningful long-term growth.
If you want to see how disability payments and long-term savings align, check out our piece on how disability income affects retirement planning. In-depth conversations with a qualified advisor are valuable, especially when pre-existing conditions loom large.
References
1. Kaiser Family Foundation. (2018). “Pre-Existing Condition Prevalence for Individuals and Families.” Available at: https://www.kff.org/affordable-care-act/issue-brief/pre-existing-condition-prevalence-for-individuals-and-families/(https://www.kff.org/affordable-care-act/issue-brief/pre-existing-condition-prevalence-for-individuals-and-families/)
2. Social Security Administration. (2021). “Disability and Retirement Statistics.” Available at: https://www.ssa.gov/policy/docs/(https://www.ssa.gov/policy/docs/)
3. Fidelity Investments. (2022). “Healthcare Costs for Retirees.” Available at: https://www.fidelity.com/viewpoints/retirement/(https://www.fidelity.com/viewpoints/retirement/)
4. Bross Frankel. (2020). “Can a Long-Term Disability Claim Be Denied for a Pre-Existing Condition?” Available at: https://brossfrankel.com(https://brossfrankel.com)
5. Guardian Life. (n.d.). “Disability Insurance and Pre-Existing Conditions.” Available at: https://www.guardianlife.com/(https://www.guardianlife.com/)
