Introduction
Disabilities, injuries, and illnesses can strike when least expected. With disability income insurance, consumers are protected from the financial losses that could arise if an accident or illness prevents them from working and receiving regular income. Producers have an important role in helping consumers and businesses plan for the unexpected, and there is a wide variety of disability income products being offered.
Common Provisions and Requirements
When disability policies are issued, they contain terms and provisions common to most disability policies. Other terms and provisions are specific to the insurer or the profession/occupation of the insured. It is crucial for consumers to understand the terms commonly used by the majority of disability policies.
- Physician’s Care
- For disability benefits to be paid, the insured must be under the care of a physician who provided a diagnosis of disability and ordered a plan of treatment. Most disability contracts specify that medical treatment must be appropriate and in accordance with current medical standards for the illness or injury being treated.
- Most contracts will waive the requirement for the insured to be under a physician’s care during a claim period if it can be proven that continued care or treatment is not beneficial or is no longer needed.
- Earnings and Prior Earnings of the Consumer
- While earned income is used to determine how much coverage is available to an individual, how earnings is defined and calculated is a major component of determining benefit amounts at the time a claim is filed. The definition is especially important if a policy provides full benefits, partial benefits, residual benefits, or benefits based on a loss of earnings.
- Pre-Existing Conditions
- The purpose of defining and disclosing a pre-existing condition is to limit the carrier’s risk. It gives the insurer underwriting options based on the condition, treatment history, and how long ago the condition first manifested. In some cases, the insurer may issue coverage without premium or coverage modifications. In other cases, the insurer might not cover disabilities caused by, or related to, the condition for the first 1 or 2 years after the policy effective date.
- Pregnancy
- While many individual disability policies do not consider normal pregnancy an illness, and do not cover normal pregnancy or related maternity leave, some short-term group disability policies do cover normal pregnancies. If a disability is caused by complications of pregnancy or childbirth, most policies will provide coverage as they would for any other illness after the elimination period is satisfied.
- Total Disability Benefit
- If the insured becomes totally disabled (as defined in the policy) and the elimination period is satisfied, the policy pays a total disability benefit, usually on a monthly basis beginning within 31 days after the end of the elimination period. Payments continue until the end of the benefit period unless the insured is no longer totally disabled.
- A recurrent total disability will be considered a new disability only after a period of time stated in the policy transpires (such as 1 year). During that period, the insured must be working continuously and not collecting any type of disability benefits. Any new total disability will be subject to a new elimination period and a new benefit period.
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