Covala Group - Long Term Disability Insurance Terms

Disability Terms

Glossary of Everyday Vocabulary

Any-occupation Disability Insurance - Such a policy will pay benefits to an insured individual who is unable to work at any job suitable to his or her education and training. For example, an insured individual who can no longer act as CEO who travels frequently but can work as a CPA will not receive benefits.

Benefit Percentage - This represents the benefit payable by figuring a percentage of the insured's pre-disability income, up to the overall maximum benefit amount.

Benefit Period - This represents the length of time that an individual receives insurance benefits after the disability occurs. Such a time period can range from one year to payable until the individual reaches the age of 65.

Cost of Living Adjustment Rider (COLA) - Otherwise known as a COLA rider, this represents one of the most expensive riders available, but is considered critical for younger people due to inflation. If a young person purchases a disability plan for a set amount of monthly payments and then becomes disabled, that person will receive the set amount for the rest of the benefit period, regardless of inflation. A COLA rider ensures that the monthly benefit increases every year with inflation. Individuals are generally offered a 3% or 6% COLA rider.

Elimination Period - Also called the qualifying or waiting period, this period represents the time between the date a disability begins and the start of the benefit payment period.

Evidence of Insurability - Information provided by an insurance applicant, a medical institution, or financial establishment that serves as adequate proof to the insurance company that an employee is eligible for insurance.

Exclusions - Specific provisions of a disability policy where coverage is not provided due to certain circumstances, such as for disabilities as a result of the commission of a felony or self-inflicted injuries.

Guaranteed Renewable Disability Insurance - A policy that guarantees that the benefits cannot be canceled as long as the premiums are paid. The premiums for an individual policy holder may not change, but they may change for an entire class.

Maximum Benefit Period (Benefit Duration) - This period represents the maximum amount of time for which benefits are payable under the plan as long as the employee is continuously disabled.

Maximum Monthly Benefit - The highest dollar amount an individual can receive on a monthly basis under the long term disability plan.

Mental and Nervous Condition - Long term disability insurance policies often limit the coverage for any disability that is caused by or related to a mental or nervous disorder. The critical element in this decision is what is properly determined to be a mental or nervous disorder and whether this disorder meets the definition of disability in the contract.

Non-cancelable Disability Insurance - Under such a policy, the premiums are fixed such that as long as the premiums are paid, the insurer cannot raise the rates or cancel the policy.

Own-occupation Disability Insurance - This policy provides that benefits are paid to the individual when he or she cannot work in his or her chosen profession.

Partial or Residual Benefits - Such benefits are available when the insured individual suffers a severe injury and is restricted to working part time as opposed to full time, or in a lower-paying position. A residual coverage policy provides benefits to the individual to cover the loss in income, even though the individual is not totally disabled.

Pre-Disability Earnings - These earnings represent the amount of an employee's wages or salary that was in effect and covered by the plan on the day before the disability began.

Pre-existing Conditions - Most LTD plans provide that if, during a specific period of time - generally 3 months - immediately prior to coverage, an individual received medical treatment or consultation or took prescribed drugs or medicines either for or related to the claimed disability that begins within a specified period of time - generally 12 months - after the effective date of coverage, the disability will be excluded from coverage.

Some policies may go even further and exclude coverage under this provision even if the individual did not seek consultation or obtain treatment for the condition causing the disability, but just experienced symptoms that would have caused "a reasonable person to seek medical advice or treatment."

Social Security Benefit - This benefit is provided for individuals who qualify for Social Security disability benefits as the monthly disability insurance benefit payable by the insurance company is offset by the Social Security benefit under Group LTD plans. This benefit can also relate to the option where the insured is denied Social Security coverage and the insurer will pay benefits equal to the amount that the Social Security benefit would have been.

Social Security Offset Rider (SIS) - Because an individual must be "totally and completely disabled, with no hope of recovery, for a period of at least one full year," to be eligible for Social Security Disability Benefits, the first year of the claim will come from the long term disability insurance company. Once the year is complete, the individual must apply for Social Security Disability Benefits. If the individual is declined, the insurance company continues to may the monthly benefit. If Social Security does pay something, the insurance company will dollar for dollar offset up to a maximum amount under Group LTD plans. Individual disability policies do not offset for social security benefit.

Waiting Period - This period represents the total number of consecutive days that an individual must be disabled before the monthly benefit is payable. Waiting periods can range from 30 days to 365 days. Some disability policies will start the waiting period over each time the insured is able to go back to work, even on a part-time basis. Other disability policies accumulate days of total or partial disability due to different causes.