What is Meant by “Disability Insurance?”
Disability insurance typically comes in two forms: 1) a policy purchased by an individual directly from an insurance company or 2) a group policy, typically provided through work, that covers multiple employees. The first type is usually referred to as “disability insurance” or “individual disability insurance,” while the second type that covers a group is often referred to as long term disability, or “LTD” insurance. Our team helps with both types of insurance, and what follows provides some basic information about individual disability insurance and what our team can do to help someone who has been denied individual disability insurance benefits. For more information about group LTD benefits, see our Long Term Disability information page.
Common terms we deal with regularly include
Definition of Disability
Some policies pay when you cannot perform the duties of your normal occupation, but others pay only if you cannot work in any job at all. Some policies even protect your own specialty. Insurance companies often use the wrong definition or misinterpret the definition to deny valid claims.
Disability Waiting Period
(sometimes called a “payment trigger date”) Many policies require certain waiting periods until the benefits payments begin, but under some policies that waiting period can be satisfied while a person is only partially disabled. Insurance companies often interpret policies to pay benefits as late as possible; our disability team can help ensure you are paid all the benefits you are entitled to.
Some policies require that you be “totally disabled” before benefits payments begin, but some policies provide benefits if a person is only partially disabled and is suffering a partial loss of earnings. While policies vary, and you should look at your own policy, one example is that many policies with a partial disability provision provide for benefits as soon as a disability causes a 20% loss in earnings. We can help you understand your rights under your policy, and can help ensure your policy is interpreted correctly by the insurance company.
These benefits apply if you have been disabled, but are able to return to work but do not earn as much as you used to because of your disability. Some very good older policies even have provisions that allow for residual benefits for a person who has fully recovered from a disability but still suffers a loss of earnings because their business is not back to the level before the disability. But, again,
these provisions are not found in all policies, and vary from policy to policy.
If you have a loss of sight, speech, hearing, or use of limbs, it is sometimes possible for you to collect even if you are able to work.
Length of Coverage
Some policies pay benefits only for a limited period, often two to five years or until you turn 65. Recently, more policies pay until someone’s “normal retirement age” under social security’s rules, which is age 67 for people born in 1960 or later. Other policies provide lifetime benefits, but require the insured person to be totally disabled before a certain age, such as 60.
Cost of Living Benefits
To keep pace with inflation, a few very good policies offer cost-of-living allowance (“COLA”) benefits. If your policy contains a COLA or cost of living increase provision, the way those are calculated can vary from policy to policy. Some policies provide for COLA increases only based on the U.S. Department of Labor statistics and are capped at relatively low percentages. Some older “Cadillac” policies set a floor of a certain percentage with no cap, depending on actual government inflation statistics.
In most cases, LTD policies contain a waiver-of-premium provision so that you do not have to pay premiums if you are disabled for 90 days or longer, and this waiver continues while you are disabled. However, if your benefits are discontinued, you might have to continue paying premiums to keep your policy in place, at least until the insurance company begins paying your benefits again (or is told by a court to resume paying your benefits).