Disability Insurance Center
What To Know In A Disability Contract
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Article 4 of 6 in Understand Your Disability Insurance Benefits
The disability insurance policy is a contract between you and the insurance company that binds both parties to promises made. The contract provides you with disability benefits if you meet the requirements outlined in the policy. Once you receive your new disability insurance policy, review all information for accuracy, and make sure you are familiar with your obligations and the insurance company's duties should you become too injured to work.
Key Information in Your Disability Insurance Policy
Review the cover page for your disability insurance policy and get familiar with some of the key parts. The following information is important to understand when you purchase disability insurance:
- Elimination period-this is the time you must wait after becoming disabled until your disability benefits will start.
- Your monthly benefits-Know how much disability insurance you have elected to receive. Normally this is a percentage of your income.
- The benefit period- This is how long you will receive your benefits.
- Monthly or annual premium- This is the actual cost of your disability policy.
- Definition for Disability- This definition describes the way in which the insurance company will determine if you qualify for disability benefits. This is an extremely important definition and should be completely understood.
- The claim process - Filing a disability benefits claim can require a lot of work. See how the policy explains the process, and learn what you can expect the insurance company to ask for when you file a claim.
- The incontestability period - The disability insurance incontestability provision states that the company will not use misstatements in the application to void the policy or deny a claim after the policy has been in force for two years. This means that during the first two years, any misstatement, no matter how minor, can be used to deny a claim. If you are intentionally fraudulent on your application or your claim, misstatements can be used to cancel the policy any time.
All disability policies give policyholders a free look period. Most free look periods are 30 days. Make sure you review your entire policy during this free look period. If you find that your disability policy is incorrect, return the policy within the free look period to get a full refund of your premium.
When a Disability Insurance Policy is Canceled
If you do not make your disability insurance payments, the policy could be in jeopardy. The normal grace period excusing a missed disability insurance payment is 31 days. If you go beyond the grace period your coverage will lapse or stop. Be sure to review your grace period and keep your payments on time.
TIP: Do not fall behind on disability insurance payments! Ask the company if you can have premium payments automatically deducted from your checking account so you don't have to worry about missing any.
Most disability plans offer a right of reinstatement if your policy has been cancelled due to non payment. This right of reinstatement can be valuable if the lapsed policy contained more favorable provisions than the policy owner could obtain in a new disability policy. As a condition for reinstatement, the insurance company may require satisfactory evidence of insurability unless only a short time has passed since the policy lapsed. Read your policy and be familiar with the condition of reinstatement!
Cancellation or Changing Your Disability Policy
As a policy owner, you have the right to make changes to the disability policy. Keep in mind that any change to your disability insurance contract will affect your benefits, so don't make any adjustments unless you are sure of the decision. The following options are available:
- Assigning all of the benefits of policy ownership to someone must be in writing. Once done, the policy holder has effectively changed the owner to that other person or entity.
- Changing the owner or loss payee must be done in writing and requires approval by the insurance company. As the owner, either you are relinquishing control of the policy or you are changing the person or entity to which benefits will be paid. The best way to make absolutely clear to all parties involved that the change has been made is to have the change reflected as an addendum to the policy.
- Canceling the coverage or terms of your disability policy at any time is an option that must be done by writing. You are due back any unearned portion of any premium paid. The unearned premium will be computed on a pro rata basis. Cancellation will not affect any claim which originated prior to the effective date of cancellation.
If you would like to make any change to your disability insurance policy, contact your agent or company and have the process and consequences fully explained.
Renewing Your Disability Insurance Policy
Most disability plans are guaranteed renewable until age 65. This means the disability policy will stay in force until your Age 65 Policy Anniversary as long as premiums are paid when due. The insurance company cannot cancel it or change the premium before the age of 65 policy anniversary. This is important!
A disability plan that allows for guaranteed renewable after age 65 may require that certain conditions be met after age 65 in order to renew the disability plan. Some typical conditions that you may be required to meet are as follows:
- You are actively working outside your home full time at least 30 hours a week for at least 46 weeks a year; and
- The policy is in force with no premium in default.
The insurance company has the right to require proof that you are working, but no other evidence of insurability will be required. The insurance company can cancel a conditionally renewable policy on any policy anniversary, but only if it does so for reasons stated in the policy.
TIP: Choose a disability plan that is guaranteed renewable after age 65. This type of policy will usually also come with certain conditions. However, as long as those conditions are met, you will have disability coverage that cannot be canceled by the company.
The disability insurance policy is an important contract because it provides you with protection should you be unable to work. Find the right disability policy by shopping and comparing quotes before you purchase a plan. To get started with a free disability insurance quote, click here and visit the Free Advice quote center today.