UNIT 15 Flashcards
QUALIFYING FOR DISABILITY BENEFITS
Inability to perform work duties; Disability is defined as the inability to work. Work can be categorized as: - one's own occupation, or -any occupation
OWN OCCUPATION
disability is defined as an insured’s inability to perform any or all of the duties of their occupation at the time the disability begins.
Lee is a page layout specialist and loses 3 fingers on each hand in an accident. Under the own occupation definition, Lee is unable to use the keyboard– a primary duty of his occupation, and is disabled.
ANY OCCUPATION
an insured is disabled if they are unable to perform the duties of ANY occupation for which they are reasonably qualified by education, training, or experience.
Lee personally could not format pages but he could teach others that skill. Using the any occupation definition Lee would not qualify for disability benefits.
Some policies use both definitions—own occupation for a few years, then any occupation for the remainder of the disability period.
INCOME REPLACEMENT CONTRACT
Pays a benefit if the insured experiences a loss of income as a result of suffering a covered illness or injury. The benefit trigger is the amount of income the insured is receiving at the time of the claim.
Lee cannot work due to a disability and is not earning an income following his accident. He would receive the full benefit under an income replacement contract. Lee was able to use a stylus and voice activated software to proofread documents. The proofreading job did not pay as well as his formatting job. His income replacement contract would pay part of its benefit so that the combination of Lee’s earnings and the benefit would replace a specified percentage of his former earnings.
PRESUMPTIVE DISABILITY
Is a condition that automatically qualifies insureds for disability benefits whether or not they can work. Conditions generally considered to be presumptive disabilities include:
- loss of or loss of use of any 2 limbs
- total and permanent blindness in both eyes
- total loss of speech; and
- total loss of hearing in both ears
PHYSICIAN CARE REQUIREMENT
Some older policies required that the insured be confined to the house and under the treatment of a doctor. This is called a medically defined disability.
BASIC TOTAL DISABILITY PLANS
Benefits-
Monthly Indemnity- returns the insured to their original financial condition before the loss
Elimination period
A time deductible, may be 30,60,90, or 180 days or longer depending on the time period selected. A longer EP would reduce the premium.
Benefit Period
Typical benefit periods are 1 yr,2yr,5yr,and to age 65. The longer the benefit period , the higher the premium.
WAIVER OF PREMIUM
Eliminates the need to pay premiums during any period of disability. This feature becomes effective after the waiting period (usually 90 days) is satisfied. The waiver of premium is retroactively effective to the beginning of the waiting period and any premium paid during this period of time will be refunded once the payments begin.
COORDINATION WITH GOVERNMENT BENEFITS
Disabled insureds may also receive benefits from Workers’ Compensation or other government programs. During the planning process, the agent/ producer must account for the possibility of an insured receiving too many benefits because this can encourage malingering. The other possibility is receiving benefits that to not meet the individual’s income needs.
ADDITIONAL MONTHLY BENEFIT RIDER
Government programs have long waiting periods and take a long time to process disability claims. The AMB rider pays and additional benefit amount with a regular monthly benefit for a LIMITED period of time, usually 6 or 12 months. This additional benefit is paid even if the insured is getting government benefits during that period of time.
SOCIAL INSURANCE SUPPLEMENT RIDER
The SIS rider is a monthly benefit. For those receiving a benefit for TOTAL disability this rider pays for additional benefits, less any legislated benefits like Social Security or Workers’ Compensation for the same period of time. The payment is in addition to other benefits payable under the insurance policy.
SIS rider benefits continue only as long as regular policy benefits are payable:
- during the policy’s benefit period, and
- while the insured remains disabled.
NON-OCCUPATIONAL COVERAGE
covering disabilities that result from non-job-related illnesses or injuries
OCCUPATIONAL COVERAGE
Most disability income insurance covers BOTH job-related and non-job-related disabilities.
PARTIAL DISABILITY BENEFITS
Means the person can perform some, but not all of the essential duties of his or her occupation. The partial disability benefit is 50% if the total disability benefit. Partial disability benefits are paid for a relatively short period - commonly 3-6 months.
RESIDUAL DISABILITY BENEFITS
are another alternative for partial disability. These benefits are paid when the insured cannot perform some of the duties of his or her occupation and are based on the amount of income lost rather than 50% of the total disability benefit.
To receive residual disability disability benefits, the insured’s earnings must be reduced by a stated percentage due to the disability; example 20%. If the reduced income is less than the stated percentage, no benefit is payable.
For example if earnings are reduced by 40% due to the disability, and the monthly disability benefit is $1000, the insured would receive $400 each month in residual disability benefits.
