Disability Terminology

Question 1

Expense Incurred Basis

Answer 1

(Reimbursement) Payment to the insured is based on the actual expenses incurred.

Question 2

Prepaid

Answer 2

(Service) Specific health benefits are provided to subscribers in return for a periodic prepayment. The provider is paid by the Service Organization (either as an employee or as a contractor).

Question 3

Valued Basis

Answer 3

(Indemnity) Payment to the insured is based on a predetermined, specified amount, not related to the actual expenses incurred.

Question 4

Individual Disability Income Policy

Answer 4

Provides coverage for lost income resulting from a disability. Disability income policies pay a percentage of an insured’s lost income. Disability is (generally) the inability to perform occupational functions (loss of time and function). Policies do not cover medical expenses or rehabilitation.

Question 5

Qualifying for disability income benefits

Answer 5

Inability to work at Any Job – These policies are the least likely to pay benefits (most restrictive)
Insured must be unable to perform any job in order to qualify.
Inability to work at Any Job to which Insured is suited by training, education, or experience –
Insured can receive benefits even when able to work at a job for which the insured is unsuited.
Inability to Perform Own Job (All the duties of insured’s job) –
Most likely to pay benefits (most liberal); insured cannot perform all the duties of the insured’s job.
Some policies will use combinations of these definitions. For example, the policy will pay if the insured is unable to do his/her own job for 2 years, then it will only pay if the insured is unable to do a job for which he/she is suited.

Question 6

Basic Disability Income Insurance Plan: Payment

Answer 6

Disability incomes policies usually pay a monthly income on a “valued basis” (fixed). However, payments can be made more frequently.

Question 7

Basic Disability Income Insurance Plans: Elimination Period (waiting period)

Answer 7

Policies can provide coverage for disabilities resulting from occupational or non-occupational causes.
The elimination period (waiting period): This is the period after the onset of a disability during which benefits are not paid (a time deductible).
Elimination periods are between 0 to 14 days for Short Term DI policies and 30 days to 1 year for Long Term DI policies. The longer the elimination period, the lower the premium.
The insured selects the elimination period at the time of application. The insured’s savings and other financial resources are used as a determining factor in choosing the elimination period.

Question 8

Basic Disability Income Insurance Plan: Benefit Period

Answer 8

Total time the insurer will pay benefits.

Short-term disability income policies typically pay benefits for up to 26 weeks. Some pay up to 2 years.

Long-term disability income policies pay benefits for as few as 2 years, to age 65 – 70. The longer the benefit period, the higher the premiums.

Question 9

Basic Disability Income Insurance Plan: Recurrent Disability

Answer 9

A disability that is manifested after the insured has been back to work for at least 6 months is considered a new disability.

A disability recurring within the 6 months would not be subject to a new elimination period.

Question 10

Basic Disability Income Insurance Plan: Probationary Period

Answer 10

First few days of a policy during which benefits are not payable. Probationary periods do not apply to accidents. (Reduces adverse selection.)

Question 11

Basic Disability Income Insurance Plan: Continuous disability

Answer 11

An insured with a continuous disability should report every 6 months to the insurer.

Question 12

Basic Disability Income Insurance Plan: Relation of earnings to insurance

Answer 12

Policy provision stating that insured cannot receive more in income benefits than he/she would receive by working.

  (This is a uniform optional provision.)

Question 13

Basic Disability Income Insurance Plan: Presumptive disability

Answer 13

Some specific disabilities (e.g., loss of sight) are presumed to be total and permanent. Benefits are payable even if the insured can work.

Question 14

Total Disability

Answer 14

The inability to perform occupational functions, by meeting one of the selected definitions (1,2, or 3) described above. A person must first be “totally disabled” (inability to perform occupational tasks) prior to receiving Partial or Residual (at work) benefits. At work, benefits are paid during the period of recovery from a total disability.

Question 15

At work benefits: Partial disability benefit

Answer 15

A benefit paid reflecting an insured’s inability to perform some – but not all – job tasks. Usually 50% of full benefit payable.

Question 16

At work benefits: Residual disability benefit

Answer 16

Residual benefits pay for losses suffered by the insured after the insured has recovered from his/her disability.
Usually, a portion of the full benefit reflecting the residual loss is paid (e.g., a 20% loss in income).
Examples include professionals who may suffer a loss of clientele and a subsequent residual loss because of a disability and individuals who can only work part-time.
(“residual loss of income, or time away from job”).

Question 17

Riders: Medical reimbursement benefit

Answer 17

This rider provides medical reimbursement in the event of a disabling injury.

Question 18

Riders: Waiver of Premium

Answer 18

Waive the premium in the event the insured becomes disabled

Question 19

Rider: Return of Premium Option

Answer 19

Allows for a percentage of paid premium to be refunded at the end of a predetermined period (ex. 5, 10 years) if no claims were filed.