Disability Insurance Terms

COLA Rider

There is a premium charge for the "Cost of Living" option. The election must be made at the time of application rather than at the time of disability. If your disability exceeds 12 months the company will automatically increase the monthly benefit by 3%. The adjustments will be made each year through age 65 while you are disabled. It makes the most sense if you are purchasing a "til 65" policy. Although a $3,000/month benefit would become $3,375 in the 5th year of a 5 year policy.

Disability

The definition of a disability varies from company to company. The broadest definition would describe a disability as "loss of time or duties in YOUR occupation" The least attractive definition would be that you are not able to perform "any occupation". The Social Security administration uses an "any occupation" definition. After 24 months under a "your occupation" policy it reverts to the Reasonable Occupation Provision

Elimination Period

Your disability benefits will start to be paid after this waiting period, Usually 90, 120 or 180 days, but longer periods are available. The longer the wait, the lower the premium. The period that you pick would depend on how long you could manage with no income.

MNDA Limitation

All disability policies limit coverage to 24 months for Drug, Alcohol, Mental or Nervous disorders, unless you are confined as an inpatient in a hospital. (known as the "damn" limitation)

Non-Cancellable Provision

The company cannot cancel or change the policy or increase the premium as long as you continue to pay your premiums.

Reasonable Occupation

A reasonable occupation is any gainful occupation you can do 1) based on the medical restrictions and limitations resulting from the Injuries or Sickness for which claim is being made; 2) based on your education, training and experience; and 3) that could be expected to generate at least 50% of your Prior Earnings or $100,000 annually, if less. This provision applies after 24 months of disability. In other words a Nerosurgeon would not be expected to flip burgers, but if he could no longer perform his duties as a surgeon but could be a Pediatrician, he would no longer be eligible to collect under his disability policy. If he could not perform any job or only a job for which he earned less than 50% of his income, he would still collect under the policy for the entire benefit period.

SIS

This endorsement reduces your premium. It coordinates your disability benefit with the amount that you receive from either Social Security, Workers' Compensation, State Disability payments. The disability payment under your policy is reduced by the amount that you are able to collect from these other organizations. (note that only 35% of all those that apply for Social Security due to a disablement actually are approved) If you are not able to collect any money from any other social organizations your full monthly benefit is paid by your disability carrier.