Disability insurance has become an increasingly valuable part of a comprehensive employee benefits package. For employees, it fills the gaps in financial protection offered by programs like Social Security. It also helps employers provide a competitive benefits package to employees.
We recently wrote a blog discussing the difference between long-term and short-term disability insurance (read that here). That blog contained a number of terms familiar to insurance companies, the government, health plans, and healthcare providers. To help the average person better understand these terms, we put together this glossary of important disability insurance terms.
Here is a list of 26 disability insurance terms that you need to know:
Active, Full-Time Employee: A person who works for an employer on a regular basis in the usual course of the employer’s business is generally considered an active, full-time employee and is eligible for coverage under the employer’s disability insurance plan. Most plans specify a minimum number of hours of regular work.
Benefit Percentage: The percentage of the employee’s pre-disability income, up to an overall maximum benefit amount, that will be paid to the employee upon disability.
Benefit Period: The longest period for which benefits are payable for continuous disability.
Definition of Total Disability: The definition of disability is the most important provision in a disability insurance contract. It determines whether an employee is eligible for benefits.
Own Occupation: The term “own occupation” refers to the job that an employee was performing at the time the employee became disabled. If a plan provides coverage for “own occupation”, an employee may be eligible for benefits if they are unable to perform their regular job, even if they can do other types of jobs.
Any Occupation: The term “any occupation” refers to any job which an employee is able to perform by reason of education, training, or experience. If a plan provides coverage for “any occupation”, an employee may not be eligible for benefits if they are able to perform any suitable job, even if they are unable to perform their regular job.
Disability: An individual’s physical or mental inability to perform the major duties of his or her occupation because of sickness or injury.
Elimination or Waiting Period: The period between the date of the disability and the beginning of the benefit payment period. It is the period during which an employee must be disabled before payment of benefits begins.
Evidence of Insurability: The term “evidence of insurability” refers to proof that an employee qualifies for coverage under a disability insurance contract. However, group disability coverage is generally sold as a “guaranteed issue” policy. That means that evidence of insurability is not required. There are circumstances, such as late enrollment or a high benefit maximum, when an employee will be required to provide medical or financial information as evidence of insurability.
Exclusions: Certain conditions and causes that are not covered by the policy. These are listed in the policy. For example, a plan will typically exclude coverage for disabilities resulting from war, participation in a riot, commission of a felony or a self- inflicted injury.
Injury: Accidental bodily harm that occurs while a policy is in force.
Lifetime Disability Benefit: A benefit that is payable for the lifetime of the employee.
Limitations: Specific provisions included in the group disability policy that limit coverage in certain situations. For example, benefits may be limited for disabilities caused by mental illness and pre-existing conditions.
Maximum Benefit Period (Benefit Duration): The maximum length of time for which benefits are payable under the plan if the employee remains continuously disabled.
Maximum Monthly Benefit: The highest dollar amount a disabled employee can receive monthly under the long- term disability policy.
Minimum Monthly Benefit: The minimum amount paid as a monthly benefit after reductions for other income benefits (see below).
Other Income Benefits (Benefits Integration): A disabled employee may be eligible for benefits from other sources besides their employer’s disability plan. Benefits payable by the plan may be offset by other sources of disability income, such as Social Security, workers’ compensation, or other disability benefits.
Partial or Residual Disability: An employee’s physical inability to perform some, but not all, of the duties of his or her regular occupation due to sickness or injury.
Pre-Disability Earnings: The amount an employee earned in wages or salary on the day before the disability began.
Pre-Existing Condition Limitations: Any illness or injury for which an employee was receiving medical treatment or consultation within a specified time before becoming covered under the plan. Most plans exclude or reduce disability benefits for pre-existing conditions.
Presumptive Disability: The term “presumptive disability” refers to conditions, which are so severe, that a person is presumed to be totally disabled without having to provide proof of inability to work. Conditions that result in presumptive disability include blindness, loss of hearing in both ears, loss of speech or loss of limbs. The elimination period is waived for presumptive disability and benefits are paid from the date of disability and are generally paid for life.
Return-To-Work Provision: To encourage employees to return to work as soon as they become physically able, an additional incentive is provided for a certain period. Typically, the employee can receive up to 100% of pre-disability earnings based on a combination of disability benefits and return-to-work earnings.
Sickness: An illness or disease which is first diagnosed and treated while the policy is in force.
Total Disability: The physical or mental inability to perform the major duties of one’s occupation because of sickness or injury.
Waiting Period (For Plan Enrollment Eligibility): A specified number of continuous days of service as an active, full-time employee that an employee must work before becoming eligible for coverage under the group disability policy.
Waiver of Premium: The provision under the group disability policy that waives the individual’s premium payments for as long as benefits are being paid out.
RMC Group provides health insurance and employee benefit packages to employers. We work closely with business owners to understand their needs and desires for their business while creating packages that provide great coverage and are cost efficient. For a free review of your current employee benefit coverages or for questions about these disability insurance terms, contact our office at 239-298-8210 or [email protected].