One of the most important sections of the policy describes the benefits that will be provided to insure some level of financial protection if you become disabled and are no longer able to earn an income. This sample policy provides numerous benefits, including the disability benefit itself, a Social Security substitute benefit, a special death benefit, a presumptive disability benefit, a capital sum benefit, a rehabilitation benefit, a cosmetic or transplant surgery benefit, and a waiver of premium benefit. All are described below, with comments that explain precisely what the benefits mean and what you should expect.
DISABILITY BENEFIT SECTION
We will pay all or a proportion of this section’s maximum monthly benefit shown on the Data page for your Disability. Benefits start to accrue at the end of this section’s Elimination Period. Benefits will continue during your Disability but not beyond the Maximum Benefit Period.
The proportion of the maximum monthly benefit payable will be your Loss of Earnings divided by your Prior Earnings. For a time when this proportion exceeds 75% we will pay all of the maximum monthly benefit.
For the first six months of a Continuous Disability for which benefits are payable and during which you have Earnings, the proportion will not be less than 50%. This 50% minimum does not apply during Extended Disability.
We will continue to pay benefits for up to four months, but not beyond the remaining portion of the Maximum Benefit Period if:
- You return to work full time after a Continuous Disability for which benefits are payable; and
- Your Loss of Earnings continues to be at least 20%.
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COMMENT:
Under the provisions of this sample policy, your disability benefit is based upon a percentage of your income loss. Years ago the typical disability income policy provided benefits only if you were totally disabled and earning no income from your work. Over the years the approach has changed, and policies now may provide a partial benefit if you are partially disabled and can still earn some income. If, for example, you were earning $4,000 per month prior to disability and now earn $2,000, your monthly benefit would be 50% of your maximum monthly benefit. If your maximum monthly benefit is $3,200, your monthly benefit would be $1,600, or half of your maximum monthly benefit.
Under this sample policy, you are entitled to a maximum monthly benefit if you cannot perform any income-producing work because of your disability. This particular policy is even more generous, for it allows you to collect the maximum monthly benefit even if you can earn some income. If your Loss of Earnings exceeds 75% of your Prior Earnings, you are entitled to 100% of the maximum monthly benefit. That means, if you were earning $4,000 per month prior to disability and now earn $1,000 per month (25% of $4,000, which means a 75% loss of income), your monthly benefit would be 75% of your maximum monthly benefit. That means if your maximum monthly benefit is $3,200, then your actual monthly benefit would be $2,400 or 75% of your maximum monthly benefit. If, on the other hand, you now earn $900 per month, or 22.5% of $4,000 for a 77.5% Loss of Earnings, your monthly benefit would be $3,200, or 100% of your maximum monthly benefit.
This particular policy has another added feature: During the first 6 months in which you are receiving benefits and also have earnings, your benefit will not be less than 50% of your maximum monthly benefit. In other words, even if you are earning 70% of your Prior Earnings, you will receive 50 % of your Maximum Monthly Benefit for the first 6 months. Using the above example, if you are disabled but earning $2,800 (70% of $4,000), you will still be entitled to $1600, or 50% of your maximum monthly benefit for the first 6 months. This is a very generous provision because it provides you with more income ($2,800 + $1,600 = $4,400) than you had before you were disabled for the first 6 months of disability benefits.
This policy also pays benefits for up to 4 months after you return to work full time if your Loss of Earnings continues to be at least 20% of your pre-disability Prior Earnings.
Social Security Substitute Benefit Section
SOCIAL SECURITY SUBSTITUTE BENEFIT SECTION
The Social Security Substitute Benefit is provided only if amounts for it are shown on the Data page. To receive this benefit:
- You must meet all the requirements of this section and the Additional Proof of Loss for Social Security Substitute Benefit section; and
- Benefits must be payable under the Disability Benefit section.
We will pay all or a proportion of this section’s monthly benefit for your Disability. The proportion payable will be the same as the proportion in the Disability Benefit section. This section’s monthly benefit is:
- This section’s maximum monthly benefit shown on the Data Page when no Social Security is paid; or
- One third of this section’s maximum monthly benefit shown on the Data Page when the only Social Security paid is the PIA.
Benefits start to accrue:
- At the end of this section’s Elimination Period; or
- When Family Benefits for your Disability end, if later.
No benefits will be payable under this section for any period:
- During which both PIA and Family Benefits for your Disability are paid;
- After your Age 65 Policy anniversary;
- After you are eligible to receive full Social Security retirement Benefits; or
- For which you receive Social Security retirement benefits.
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COMMENT:
This Social Security Substitute Benefit (SSSB), in effect, provides “social insurance” by providing a “social security benefit” before you qualify for Social Security benefits. It is a monthly benefit, paid in addition to the policy’s monthly Disability Benefit. This benefit, payable only if the monthly Disability Benefit is payable, continues until you begin to receive Social Security benefits and is paid as if it were a regular Disability Benefit. Each benefit has its own Maximum Monthly Benefit (MMB) and the policy provides that the insurance company will pay the same proportional part of the MMB for each benefit. The only difference is that the SSSB is affected by payment of Social Security benefits. If you receive the Social Security Primary Insurance Amount (PIA), then you will only receive one-third of the SSSB Maximum Monthly Benefit (MMB) and if both PIA and Social Security Family Benefits are being paid, you will receive no SSSB.
When, and if, you and your family begin to receive Social Security benefits, this benefit will stop. This benefit is designed to offset the difficult and lengthy process for obtaining Social Security disability benefits.
ADDITIONAL PROOF OF LOSS FOR SOCIAL SECURITY SUBSTITUTE BENEFIT
As a requirement for receiving the Social Security Substitute Benefit we must be given written proof, satisfactory to us, about Social Security benefits paid during the period for which you are claiming a loss under this section. Such proof is required as part of your original proof of loss and as often after that as we will reasonably require.
If we think it is reasonable that you would be entitled to disability or full retirement benefits under Social Security, we will require that you:
- Apply for these benefits within 10 days after your receipts of written notice from us to do so;
- Give us satisfactory proof within 30 days after your receipts of our notice, that you have applied for these benefits within the 10 day period; and
- Request reconsideration of your application, if it is denied, and appeal any denial of reconsideration if an appeal appears reasonable to us.
We will stop payment of the Social Security Substitute Benefit at the end of the 10 day period if you do not comply with 1, 2 and 3, above. We will not resume payment until you have actually applied for Social Security.
If you have a spouse or any dependents who may be eligible for Family Benefits for your Disability, you must furnish us with the name, date of birth and relationship to you of these family members. |
COMMENT:
This section is quite specific about what the company requires before you can receive this benefit. The company wants satisfactory written proof about Social Security benefits paid because: a) the company does not want to overpay you if you are receiving benefits, and b) the company does not want to underpay you if you are not receiving benefits. If you are receiving benefits, the company needs to know exactly what you are being paid.
Note that with this benefit you agree to apply promptly for Social Security benefits if that is what the company requests. Similarly, you also agree to request reconsideration of your application if it is denied, and then to appeal any denial of reconsideration if the company thinks an appeal is reasonable. You may have to do all of this even though you are paying a premium for the benefit. If you don’t do as the insurance company requests, the company does not have to pay the Social Security Substitute Benefit. Note, too, that the insurance company wants the names and other information about family members who may be or become eligible for Social Security Family Benefits.
Special Death Benefit
OTHER BENEFITS
SPECIAL DEATH BENEFIT
After satisfaction of the Elimination Period, we will pay the Special Death Benefit shown on the Data Page if your:
- Death occurs as a result of an injury while benefits are being paid under the Disability Benefit section; or
- Death occurs while benefits are being paid under the Disability Benefit section because of a Disability which was caused by an injury.
This benefit is in addition to any other benefit of this policy. This benefit is payable to the Loss Payee. If you are the Loss Payee at the time of your death, this benefit will be paid to your surviving spouse, if any; otherwise, to your estate. |
COMMENT:
This benefit is payable in one of two ways: First, if the death results from an injury which occurs while Disability Benefits are being paid under the policy; and second, if the death occurs while benefits are being paid under the Disability Benefit section of the policy because of a Disability caused by an injury, not a sickness.
In the first case, the death must occur as a result of an injury. In the second case, death may result from the primary injury, another injury or a sickness. In the first case, death may occur after Disability Benefits have ceased. In the second case, the death must occur while benefits are being paid under the Disability Benefit section of the policy.
Presumptive Disability Benefit
PRESUMPTIVE DISABILITY BENEFIT
We will pay the benefits under the Disability Benefit section as if you have no Earnings if an Injury or Sickness results in the total and irrecoverable loss of:
- Power of speech;
- Hearing in both ears;
- Sight of both eyes; or
- The use of both hands, both feet, or one hand and one foot.
We will also pay the Social Security Substitute Benefit, if any, subject to that section’s requirements. The loss must occur while this policy is in force. You will not be required to be under the care of a Doctor. No Elimination Period will be required and the benefit will start to accrue on the date of loss. Monthly benefits will be paid as long as the loss continues, but no longer than the Maximum Benefit Period. If your Maximum Benefit Period shown on the Data Page is “to Age 65 Policy Anniversary” and your loss occurs prior to that Anniversary, the Maximum Benefit Period will be extended to “Lifetime” for benefits payable under the Disability Benefit section. Benefits will be paid for as long as the loss continues.
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COMMENT:
Under this benefit, the Maximum Monthly Disability Benefit AND the Maximum Monthly Social Security Substitute Benefit (SSSB) will be paid if you incur the total and irrecoverable loss of any of the four times listed. The SSSB is subject to all the requirements of the SSSB section. This benefit is payable only if you incur the loss while the policy is in force.
If you have paid for an age 65 Maximum Benefit Period and your loss occurs prior to the end of that period, your Disability Benefit, but not the SSSB, will be extended for life. Note that benefits will be paid only as long as the loss continues.
Capital Sum Benefit
CAPITAL SUM BENEFIT
We will pay the Capital Sum Benefit shown on the Data Page if an Injury or a Sickness results in a total loss without any possibility of recovery of:
- The use of a hand or foot; or
- The sight of an eye.
This benefit is in addition to any other benefit of this policy. It is payable for only one loss in your lifetime. In order for this benefit to be paid:
- You must survive the loss for 30 days; and
- The policy must be in force.
If not, the loss must occur within 90 days after the Injury which caused it and which occurred while the policy was in force. |
COMMENT:
This differs from the Presumptive Total Disability Benefit in several ways. First, this benefit does not cover exactly the same conditions. Loss of hearing and speech are not covered, for instance, and this benefit only requires the loss of use of one hand or the loss of sight in one eye. Second, this is a lump sum benefit, not a monthly benefit. And third, this benefit is payable in addition to the Presumptive Total Disability Benefit and any other benefits that are payable under the policy. This is a one-time benefit and you must survive the loss for 30 days. The policy must be in force or the loss must occur within 90 days of the injury causing the loss and that injury must have occurred while the policy was in force.
Rehabilitation Benefit
REHABILITATION BENEFIT
We will pay an extra benefit when you participate in a vocational rehabilitation program which is mutually agreed upon by the Owner and us in advance. This benefit may include the reasonable cost of rehabilitation services, training and education not otherwise covered under health care insurance, workers compensation, or any public fund or program. |
COMMENT:
You need to negotiate with the insurance company for this benefit, which is beneficial to both you and the company. Your rehabilitation helps you because you don’t want to be disabled. It helps the insurance company because it no longer will need to pay your benefits. If rehabilitation seems possible, the company is willing to invest in your recovery.
Cosmetic or Transplant Surgery Benefit
COSMETIC OR TRANSPLANT SURGERY BENEFIT
We will consider you Disabled due to Sickness if you become Disabled from:
- Cosmetic surgery performed at least 6 month after the Policy Date; or
- Surgery involving a transplant or a part of your body to another person.
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COMMENT:
Note the 6-month requirement for cosmetic surgery. The company wants you to pay some premium before you go under the knife for cosmetic surgery that is not medically necessary.
Waiver of Premium Benefit
WAIVER OF PREMIUM BENEFIT
In a period of Continuous Disability, if you are Disabled for the lesser of 90 days or the Elimination Period:
- We will refund the monthly pro rata portion of any premium paid for coverage after the date that a Continuous Disability began; and
- We will waive the payment of premiums which come due during your Continuous Disability.
When you are no longer receiving benefits, premium payments must begin on the next premium due date. We will not waive premiums beyond your Age 65 Policy Anniversary unless your policy is renewed subject to the Renewal After Age 65 provision and you are then eligible for the Waiver of Premium Benefit. |
COMMENT:
This is a standard benefit in most disability income insurance policies. The benefit applies to all premiums that have been paid or will become due once you have been disabled for 90 days, or for the length of your Elimination Period if that is less than 90 days. |
Disability Insurance Center
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