As experienced long term disability insurance policy lawyers, we have a lot of experience with what we call the “critical points” of a disability insurance policy – the provisions in the policies that tend to be the major points of contention and concern. These are the top ones to look for when considering the purchase of a private policy.
If you had to choose a disability policy instead of buying one through your business, what features should you look for?
Mental and Nervous Provisions – This is one of the most challenging provisions in disability insurance policies. Many policies limit any mental and nervous conditions (depression and anxiety related diagnoses) to a period of 24 months. Where possible, try to secure a policy that does not limit benefits for these types of conditions.
Own Occupation/Any Occupation - Own occupation, or “own occ” means that if you can no longer perform the specific tasks and duties of your own occupation, you are considered disabled. We see many cases where job descriptions are inaccurate and insurance companies rely on outdated occupational categories to assess one’s occupation.
“Any occupation” policy disputes often center around the issue of potentially comparable positions. An Ivy League MBA who previously ran a Fortune 500 company cannot be asked to flip hamburgers if he cannot perform the duties of the more complex position. The position must be comparable. However, we have represented claimants whose abilities to do their specific jobs also mean that they cannot perform the tasks required by a comparable position either. An “Own Occ” policy is a superior policy and usually worth the extra premiums.
Guaranteed Renewable - This type of policy cannot be cancelled, even if there is a change in your life that makes you a greater risk. The insurance company can’t change the provisions or add any restrictions. Note that this is not a guaranteed premium policy – premiums may increase.
Noncancellable – Premiums will not rise as long as you pay on a timely basis.
Best policies are those that are both noncancellable and guaranteed renewable.
Accident/Illness - make sure the policy covers disabilities that are caused by either accidents or illnesses. Many people assume that they will not become ill with a chronic disease. Statistically speaking, you are more likely to become disabled as the result of an illness than as result of an accident. You need to have disability insurance in place for both possibilities.
Cost of Living Adjustments (COLA) – a COLA provision ensures that inflation and increasing costs don’t consume benefits if you become disabled for an extended period of time. Thus, your base benefit will get increased on an annual basis. If this is not a feature of the policy, make sure it is added as a rider.
Residual Benefits - in many instances, claimants are not 100% disabled and can work on a reduced basis, but their income is reduced. A disability insurance policy with residual benefits will pay a percentage of the lost income. This allows the policyholder to maintain their standard of living, while working within the limitations of the disability.
Waiver of Premium - a waiver of premium provision means that if you are disabled, the insurance company will waive the premium to your policy. Usually there is a time limitation, strict requirements for notification and an age limit.
These are the most important features of a long term disability insurance policy, but they are by no means the only important features. Working with an experienced sales agent who is able and willing to take the time to explain all of these features and answer your questions is an important part of purchasing a disability insurance policy.
Our firm has reviewed policies for clients before they are purchased – the peace of mind that comes of knowing that the proper disability protection is in place is well worth the additional research.