Activities of Daily Living – also known as ADL’s
A term used in health care and insurance settings that refers to a person’s ability to perform six key activities: eating, bathing or showering, dressing, transferring (getting in or out of bed or chairs), using the toilet, and walking.
A provision in some insurance policies triggered by long-term, catastrophic or terminal illness that allows the policy holder to receive in part or in full, the face amount of the policy before death. Also called living benefits.
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Annualization of Waived Premium
If a policy anniversary falls during the period that premiums are being waived, an entire year’s premium will be waived regardless of the premium payment mode used by the insured.
Any Occupation – See “Occupation – Any“
Automatic Increase Rider
An optional benefit that provides automatic increases every year, regardless of any changes in health, income or occupation.
The longest possible period of time in which benefits will be paid to the insured for an ongoing disability.
A percentage of the insured’s pre-disability income, up to an overall maximum benefit amount.
The right of an owner of a policy to convert group long term disability insurance to an individual policy without requiring a physical examination to give proof of insurability.
Cost of Living Rider
An optional benefit that provides for increases in the cost of living during the period of disability. Typically this will be either a fixed amount, or will be tied to the CPI (Consumer Price Index).
The monthly benefit multiplied by the number of months the insured has been disabled after the elimination period. This is usually part of an overhead expense policy.
Definition of Disability
The inability of an individual to perform the major duties of his or her occupation because of a physical or mental illness or injury. Often, policies use the term "material and substantial duties" or "important duties" instead of major duties.
A form of health insurance that provides monthly payments when the insured is unable to perform the major duties of his or her occupation because of a physical or mental illness or injury.Ready To Talk?
Disability Buy Out Insurance
An insurance coverage for businesses that insures that if a partner or owner becomes disabled and can no longer perform his duties, his share in the company or firm is bought-out, thereby securing the profitability of the business.
The gross amount of income earned from salary, wages, commissions, and/or fees from active employment. This does not include income from investments, rental property, annuities or insurance policy payments.
Effective Date of Coverage
The date when the long term disability insurance policy becomes active.
The period of time between the date that the disability is determined to have begun and the start of the benefit payment period, sometimes referred to as the Qualifying Period. It is the equivalent of a deductible in the sense of it being the self-insured portion or period.
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that regulates the establishment, operation and funding of most non-governmental employee benefit plans, including long term disability plans. Originally designed to protect employees and their benefits from unscrupulous employers, ERISA is now used by insurance companies to control, delay and deny long term disability insurance benefits.
Evidence of Insurability
Usually group insurance plans are sold to employees as "guaranteed issue," meaning that no proof of insurability is required. In some circumstances, employees must provide medical or financial information as proof to the insurance company that they are insurable.Ready To Talk?
As with all insurance policies, there are provisions in group and private LTD plans that exclude coverage for certain situations. The most common are disabilities arising from war, acts of civil disobedience, self-inflicted injury or injury incurred during commission of a criminal act.
Family Care Expenses
Provision that allows credit or partial reimbursement for certain expenses incurred for family care.
Functional Capacity Evaluations (FCE)
Functional Capacity Evaluations (FCEs) are used by insurance companies to determine whether or not an insured is able to return to work. There are many concerns surrounding these tests: they are not standardized, many policies do not specifically require the insured to undergo the test and often patients are asked to perform tasks that exacerbate injuries.
Future Increase Options
An optional benefit that allows the insured to purchase additional coverage, usually up to a specific age, regardless of health, as long as the earned income warrants the increase.
Insurance that can never be cancelled or altered by the insurance company as long as premiums continue to be paid on time. Premiums can be increased.
Group Long Term Disability (LTD) Insurance Policy
A group LTD policy that is provided to employees by their employers, who often pay all or part of the premium. These policies are generally governed by ERISA (see definition above).Ready To Talk?
Independent Medical Examination (IME)
An Independent Medical Examination is defined as an examination that is conducted by an independent doctor who is not involved with the patient’s care. It is important to remember that the doctor performing the exam is being paid by the insurance company to conduct the exam. Often these exams are used as a means of denying long term disability payments.
Increasing the benefit amount to protect insured from the impact of inflation. Usually kicks in after one year of payments, and then increases by a certain percentage on an annual basis.
Lifetime Disability Benefit
Benefits that are payable for the lifetime of the insured as long as he/she is continuously and totally disabled before a specific age.
A provision that requires, where applicable, insureds to participate in rehabilitation. Failure to cooperate or participate in a responsible manner can result in termination of all benefits.
Maximum Benefit Period
The longest possible period of time in which the insured can receive benefits while remaining disabled.
Maximum Monthly Benefit
The highest amount that a disabled insured can receive on a monthly basis.Ready To Talk?
Mental Illness and Substance Abuse Limitations
Similar to health insurance, there are limitations on benefits paid when a disability is the result of a mental, psychological, behavioral or emotional disorder, alcoholism or the non-medical (i.e., recreational or self-medicating) use of narcotics, illegal drugs, sedatives and other substances. Unless the insured is confined to a hospital or other qualifying institution, benefits are usually limited to 12 or 24 months.
The amount that the insurance company will pay for each month of total disability.
Occupation – Any (also known as "Any Occ")
An insured is considered disabled only if she/he is unable to work in any occupation for which she/he is qualified by education, experience or formal training. This definition is often seen in group policies and typically after a period of Own Occupation.
Occupation – Own (also known as "Own Occ")
An insured is considered disabled only if he/she is not able to fulfill the important duties of his or her occupation.
An additional benefit offered by the insurance company that can be included in an individual’s policy for an additional premium.
Other Income Benefits (Benefit Integration)
When the insured is eligible for benefits from other sources, benefits to be paid by the LTD plan may be offset by other sources of income, including Social Security, Workers Compensation, or disability benefits received from other plans.Ready To Talk?
Own Occupation – See “Occupation – Own“
When the insured is able to return to work part-time or full-time with a loss of earnings, they may still be eligible for limited benefits under the terms of the plan.
Wages and/or salary in effect on the day before disability begins
Pre-Existing Conditions Limitation
A pre-existing physical or mental condition that exists before the date that insurance coverage begins. Most LTD insurance plans exclude or reduce disability benefits if an insured received medical treatment or even consultation within a certain time period before coverage began. This most often arises where an insured becomes disabled during the first 12 months of their coverage.
The presumption that the insured is totally disabled, even if he or she is still working, if sickness or injury has resulted in the total and complete loss of sight in both eyes, hearing in both ears, power of speech or the limited use of any two. In this scenario, the elimination period is waived from the date of the loss and disability benefits are paid while such loss continues until the end of the benefit period.
Private Disability Policy
A long term disability insurance policy that is purchased by an individual for their own protection.
Recovery Disability Rider
A rider in the policy that provides reduced benefits when the insured returns to work following a compensable period of total disability.
Recurrent Period of Disability
If an insured attempts to return to work but becomes disabled again from the same or a related cause within a specified period of time, the insured’s disability will be considered from the original disability and will not have to satisfy a new elimination period. This is to encourage people to return to work and lessen any concerns about losing benefits if they are unable to work.Ready To Talk?
A treatment of clinical or vocational services designed to return a disabled insured to an active, working life.
Return to Work Provision
A provision in some policies that gives up to 100% of pre-disability earnings based on a combination of disability benefits and earnings from working. This is designed to encourage insureds to return to work and a productive life.
A disability that causes an insured’s income to fall more than 20% below its pre-disability level. The percentage varies with the insurance policy, and some companies include a loss of time requirement or the inability to perform some duties.
Social Security Disability Insurance (SSDI)
Social Security disability Income is the largest of several Federal programs that provide assistance to people with disabilities. SSDI pays benefits to individuals and certain members of their family if the person worked long enough to qualify and paid Social Security taxes. Very often, in group policies, the insurance company will benefit from an insured’s receipt of SSDI, by reducing their obligation to the insured.Ready To Talk?
Summary Plan Description (SPD)
Under ERISA, an employer is required to give all employees at the time of their enrollment, and additionally upon request, a copy of the Summary Plan Description of their plan. That SPD will have virtually all the provisions of the coverage listed in it.
A one-time lump sum payment that provides benefits to the insured’s survivor.
The date upon which the buyout obligation becomes contractually effective under the terms of the buy-sell agreement.
An insured must satisfy a certain number of consecutive days of working as a full-time employee before they are considered qualified for coverage.
Waiver of Premium
When an insured is disabled and eligible for benefits, no further disability premiums are required while benefits are being paid.
A mandatory business insurance program that provides medical coverage and income replacement payment to workers involved in job-related injuries.
Workplace Modification or Accommodation
In an effort to encourage workers and their employers, this is a benefit that provides financial assistance to an employer when a disabled employee requires adaptive equipment or other modifications to the workplace in order to return to work.
Jason Newfield is a founding partner of the disability insurance law firm Frankel & Newfield. He has spent the majority of his legal career advocating for the rights of disabled workers. He has lectured other professionals, worked on a Federal Advisory committee, and published many articles in the field of disability insurance claims and litigation.
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