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Has Your Insurance Company Denied
Your Disability Claim?

Whether an insurance company, employer, union or other ERISA governed
plan has denied your insurance claim, we can help.

Glossary of Terms

The following terms are commonly found in disability policies. The precise definitions are not the same in all disability insurance policies or disability plans. This Glossary of Terms should prove helpful in deciphering some of the mysteries of disability coverage.

– A –

ACTIVE, FULL-TIME EMPLOYEE: An individual must work for the employer on a regular basis in the usual course of the employer’s business to be considered an active, full-time employee and eligible for coverage. Usually, a minimum number of hours of regular work is specified.
ATTENDING PHYSICIAN STATEMENT (APS): A report, completed by the proposed insured’s (or, in a claim situation, the insured’s) physician which documents current and prior health history used in the evaluation process of approving an application (or claim). Sometimes the APS form seeks comments from the physician regarding the insured’s restrictions and limitations that prevent the insured from working.
AUTOMATIC INCREASE BENEFIT: A policy provision that increases, annually, the policy monthly benefit by either a stated percentage or the latest Consumer Price Index measure, without the evidence of either medical or financial insurability.

– B –

BENEFIT PERCENTAGE: The benefit payable is usually determined as a percentage of the insured’s pre-disability income up to an overall maximum benefit amount.
BENEFIT PERIOD: The length of time for which disability income benefits will be payable under a policy. Examples: two years, to age 65, to normal social security retirement age.
BUSINESS OVERHEAD EXPENSE: A policy that reimburses the insured business owner, during a disability for covered business expenses that are incurred in the day-to-day operation of the business.
BUY-SELL (OR BUY-OUT): A policy that pays to a corporation or co-owner either a lump-sum or installment payments when a key owner is out of work due toto provide the necessary funds to buy-out the business interest of the disabled owner.

– C –

CARRY-OVER ACCOUNT: In a Business Overhead Expense policy, this is the fund that accumulates unused benefits to be paid out to the insured at a later date.
CASH SICKNESS BENEFITS: A state disability income program in New York, New Jersey, Rhode Island, California, and Hawaii that provides a small benefit on a short-term basis to help replace lost earnings for a worker’s “off the job” disability.
CASH VALUE RIDER: Also called Equity Builder, this form of a return of premium begins building values equal to an ever-increasing percentage of premiums paid for a disability policy. Initial values usually appear in the third policy year and build to 100 percent at age 65, which can be returned to the insured at that time, less any claims.
CONDITIONALLY RENEWABLE: Under this policy provision, an insurance company agrees to renewal of a disability income policy providing the insured meets certain qualifications, such as full-time employment.
CONVERSION PRIVILEGE: If included, this option allows employees who are terminating employment to continue some or all of their LTD coverage at their own expense without submitting evidence of insurability.
COST OF LIVING RIDER: An optional benefit that increases the disability benefit by a percentage or the latest Consumer Price Index measure or a fixed agreed upon increase each year, i.e. 4% per annum.
COVERED EXPENSES: In a Business Overhead Expense policy, a listing of typical business expenses that are eligible to be reimbursed during an insured’s disability. Examples: rent or mortgage payments, electricity, employee salaries.
CROSS-PURCHASE AGREEMENT: In a disability buy-sell situation, this arrangement has the owners themselves as owner and beneficiary of the policy proceeds. Generally used only where two owners are involved.

– D –

DEFINITION OF TOTAL DISABILITY: Probably the most important provision in a disability contract is the definition of disability that will be used to determine an employee’s eligibility for benefits.
OWN OCCUPATION (OWN OCC): Under this definition, an insured will be considered disabled only if he/she is unable to perform the material and substantial duties of his/her occupation.
ANY OCCUPATION (ANY OCC): Under this definition, an insured will be considered disabled only if he/she is unable to perform the material and substantial dues of any occupation for which he/she is qualified by education, training, or experience. This is not as hard to meet as the definition that the Social Security Administration uses in determining disability.
DEFINITION OF PARTIAL/RESIDUAL DISABILITY: This definition of disability applies when an insured is able to return to work part-time or even full-time (with a loss of earnings). If the employee is working in this limited capacity and is earning less than a certain level of income, he/she will still be eligible for limited benefits under the plan. Not all disability insurance carriers use this terminology to describe a “part-time” work situation, but most provide some type of benefit to encourage return to work.
DISABILITY INCOME: A monthly benefit paid to an individual in the event of an accident or sickness, to help replace earnings lost.

– E –

ELIMINATION PERIOD: This is the period of time between the date the disability commences and the beginning of the benefit payment period. It is the period during which an employee must be disabled before payment of benefits begins. It is sometimes referred to as the Qualifying Period.
EVIDENCE OF INSURABILITY: Group disability coverage is generally sold as “guaranteed issue” which means that evidence of insurability is not required. However, under certain circumstances (e.g., late enrollment or a high benefit maximum), an employee must provide medical or financial information as proof to the insurance company that he/she is insurable.
EMPLOYER-PAID LIMITS: A table used by an underwriter and agent to determine the maximum amount of monthly benefit the insured can purchase when the employer is paying the premium. This limit is higher than the ordinary issue limit because of the taxation on benefits when received due to the employer’s deducting the premium paid as an ordinary business expense.
ENTITY PURCHASE AGREEMENT: In a disability buy-sell situation, this arrangement has the corporation as owner and beneficiary of the policy proceeds. Generally used in situations where there are more than two owners.
EXCLUSIONS: There are specific provisions included in group disability plans which exclude coverage in certain situations. Typically, a plan will not pay benefits for disabilities arising from war, participation in a riot, commission of a felony, or self-inflicted injury.
EXCLUSION RIDER: Attached to and made a part of the policy, this document, which the insured generally must sign, indicates a condition(s) which is specifically not going to be covered under this insured’s policy. This arises when a proposed insured has had significant treatment for an illness or accident and the insurance company is unwilling to insure disability due to the particular riskExample: any disease or disorder of the lungs for someone who has been diagnosed with chronic respiratory illness. This rider is placed as a result of the individual evaluation of the insured’s history.
EXECUTIVE BONUS: A premium paying arrangement for which a deduction is allowable under Section 162 of the Internal Revenue Code for salary bonus to the insured with which to pay the disability policy premium.

– F –

FINANCIAL UNDERWRITING: A method of evaluating data relevant to earned income, unearned income, net worth, fringe benefits and other components of compensation to determine the proper amount of monthly benefit for which the insured qualifies.

– G –

GUARANTEE OF INSURABILITY: An optional benefit in a disability income policy that allows the insured future increases to the policy monthly benefit at specified dates, with a requirement of only financial (and not medical) insurability.
GUARANTEED RENEWABLE: Under this policy provision, insurance company agrees to renewal for as long as premiums are paid on a timely basis by the insured. Premiums may be increased with prior notification, but policy provisions can never be changed.

– I –

INDEXING: Indexing is designed to provide some protection against inflation. After the first year of disability, a disabled employee’s pre-disability earnings are usually increased (or indexed) by a certain percentage on an annual basis for purposes of determining any disability benefit payable.
INSPECTION REPORT: Information, ordered by the underwriter, that provides a summary description of the insured’s employment, health history, and habits as a result of a direct interview and interviews with business and personal associates.
INSTALLMENT OPTION: In a Disability Buy-Sell policy, this policy provision offers an alternative payout to a lump-sum settlement by having the insurance company pay out a level benefit in monthly installments for a specified period of time.

– K –

KEY PERSON POLICY: A product designed to reimburse the business for financial loss during the key person’s disability until recovery or a suitable replacement can be found.

– L –

LIMITATIONS: There may be specific provisions included in group disability plans that limit coverage in certain situations. Often only limited benefits are payable for specific conditions or under specific circumstances (e.g., mental illness and pre-existing conditions). See also Mental Illness Limitations and Pre-Existing Limitations below.
LUMP-SUM PAYMENT: In a Disability Buy-Sell policy, benefits are usually payable in a lump-sum at the trigger (or effective) date of the buy-sell. The trigger date is the day following expiration of the Elimination Period.

– M –

“MANDATORY” REHABILITATION: Based on the premise that most people want to work in order to lead active, productive lives, a “mandatory” rehabilitation provision encourages disabled employees to participate in rehabilitation efforts whenever appropriate. Such a provision allows for termination of benefits if the employee refuses to cooperate or participate with a rehabilitation plan.
MAXIMUM BENEFIT PERIOD (BENEFIT DURATION): This is the maximum length of time for which benefits are payable under the plan as long as the employee remains continuously disabled.
MAXIMUM MONTHLY BENEFIT: This is the highest dollar amount a disabled employee can receive on a monthly basis under the LTD plan.
MEDICAL UNDERWRITING: The process of evaluating a disability income application for approval by reviewing the potential insured’s individual health history.
MENTAL ILLNESS AND SUBSTANCE ABUSE LIMITATIONS: When a disability is caused by a psychological/behavioral/emotional disorder, or by alcoholism or the non-medical use of narcotics, sedatives, and so on, benefits provided under group disability policies are usually limited to a period of 12 or 24 months unless the employee is confined to a hospital. Individual disability policies generally do not contain this limitation.
MINIMUM MONTHLY BENEFIT. There is usually a minimum amount paid as a monthly benefit after reductions for Other Income Benefits. In some instances the Other Income Benefits could exceed the monthly payment by reducing it to zero, som most plans will pay a Minimum Monthly Benefit of $50 per month.
MEDICAL UNDERWRITING: The process of evaluating a disability income application for approval by reviewing the potential insured’s individual health history.

– N –

NET WORTH: The total non-business related assets of an insured used in the financial evaluation of the disability insurance application. For disability buy-sell policies, net worth is that of the business and is used in the calculation of the value of the owner’s interest.
NONCANCELABLE: The renewal provision of the policy which states that the insurance company cannot change any policy provisions or increase premiums after the policy has been issued as long as the insured makes timely payments of premium.

– O –

OCCUPATION CLASS: A category of insured based on specific job duties that dictates the premium and contractual grouping under which the insured would be placed.
OPTIONAL BENEFIT: Coverage in addition to the basic policy, this extra protection assists in the individual design of a disability income program to meet the insured’s need. Examples: Cost of Living Rider, Guarantee of Insurability benefit.
Other Income Benefits (Benefit Integration). While disabled, an insured may be eligible for benefits from other sources. Benefits payable under the group LTD plan may be offset (reduced) by other sources of disability income such as Social Security, workers compensation, or disability benefits received from other employer-sponsored plans.
OUTLINE OF COVERAGE: A simplified benefit summary of a disability policy provided by the insurance company and required by law in many states to be delivered to the individual insured either at the time of the sales presentation or policy delivery.
OVERHEAD MAXIMUM: The total possible benefit payout under the Business Overhead Expense policy, this amount is calculated by multiplying the monthly benefit by the number of months in the selected benefit period. Example: $3,000 monthly benefit, 18 month benefit period would provide an Overhead Maximum of $54,000 ($3,000 x 18).
OWN OCCUPATION: A term that defines the most liberal wording of the total disability contractual provision, it applies only one test, that of the ability to perform the duties of one’s own occupation, in determining disability for purposes of paying a policy benefit.

– P –

PARTIAL DISABILITY: A policy provision, which pays a specified percentage of the total disability benefit if the insured is unable to perform one or more of the duties of his own occupation and is working in the same as the insured’s own occupation or another occupaton.
PERSONNEL REPLACEMENT EXPENSE: An optional benefit that may be added to a Key Person Disability policy, this rider reimburses the business for the costs of searching for and hiring a replacement for the disabled key person.
PHYSICIAN CARE REQUIREMENT: This policy provision states one of the eligibility requirements for disability benefits, requiring that the insured be under the regular care and attendance of a physician. Many companies waive this requirement if it can be shown that future treatment would be of no benefit to the insured.
POLICY SCHEDULE PAGE: Found in the early pages of a disability income policy, this sheet details all the specific individual policy data such as name, policy number, monthly benefit, and premium.
PREDISABILITY EARNINGS: A policy provision under the Residual Disability Benefit, it defines what constitutes prior income for purposes of calculating the Residual Benefit. Example: the average monthly earnings for the 12 consecutive months immediately prior to disability.
PRE-EXISTING CONDITION LIMITATIONS: When an insured has a physical or mental condition that existed prior to the effective date of his or her insurance coverage, it is considered a pre-existing condition. Most plans exclude or reduce disability benefits for any illness or injury for which an employee received medical treatment or consultation within a specified time period before becoming covered under the plan.
PREMIUM MODE: The particular method of premium payment selected by the insured. The policy can be paid for annually, semi-annually, quarterly or monthly. The choice elected will be indicated in the policy schedule page.
PRESUMPTIVE TOTAL DISABILITY: A policy provision that waives the normal total disability eligibility requirements in the event of a catastrophic-type disability such as the loss of sight in both eyes, hearing in both ears, speech or use of two limbs.
PROGRAMMING: The process of determining how much disability income coverage an individual needs and the sources that will make up this coverage.

– Q –

QUALIFICATION PERIOD: Under the Residual Disability Benefit, the number of days at the start of a disability that the insured must be totally disabled before becoming eligible for policy benefits.

– R –

RATING: An underwriting decision to approve disability income coverage but at a higher than normal premium due to an increased risk which is usually associated with adverse medical history. An extra premium of anywhere from 15 to 100 percent or more can be applied.

RECURRENT DISABILITY: The recurrent disability provision is designed to protect an employee who tries to return to work but becomes disabled again from the same or a related cause. If this happens within a certain period of time, the employee will be considered disabled from the original disability, and will not be subject to a new elimination period. This encourages an employee to return to work without fear of losing benefits if he or she continues to be disabled.

REHABILITATION: Rehabilitation means the restoration of or improvement in an employee’s health and functionality. It usually involves a program of clinical and vocational services with the goal of returning a disabled employee to an active, productive life, and a meaningful occupation if possible.

RELATION OF EARNINGS TO INSURANCE: A policy provision stipulating that money received from all income sources, including insurance, will not be greater than 100% of the insured’s prior earnings.
RENEWABILITY: The policy provision that details the conditions upon which the insurance company agrees to continue to insure the disability income policy. Examples: Noncancelable, Guaranteed Renewable, Conditionally Renewable.
RESIDUAL DISABILITY BENEFIT: A policy provision or an optional benefit that promises to pay the insured a portion of the total disability benefit after a return to work based on the percentage of income loss suffered due to the disability. This benefit is usually effective until insured’s age 65.
RETURN OF PREMIUM: This optional benefit provides a refund of a specified percentage of the policy premium at specified dates less any claims that have been paid during the specified time period. Example: 80 percent return of premium less claims paid after the policy has been in force for 10 years.
RETURN TO WORK PROVISION: To encourage employees to return to work as soon as they become able, an additional incentive is usually provided for a certain period of time, and is called a return to work provision. Under this provision, the employee can receive up to 100 percent of pre-disability earnings based on a combination of disability benefits and return-to-work earnings.
RETURN TO WORK BENEFIT: A provision under the Disability benefit that waives some of the eligibility requirements for Residual Benefits and bases the claim upon earnings loss only. This provision operates for a short specific period of time, usually 3 to 6 months.

– S –

SALARY CONTINUATION PLAN: A program, also called a Section 105 plan, under which the employer makes deductible wage payments, in part or in full, to an individual unable to work due to illness or injury.
SHORT-TERM DISABILITY: Usually associated with group insurance, this program pays a monthly benefit for total disability after a minimum Elimination Period for up to 13, 26, 39, or 52 weeks.
SICKNESS: A policy provision defined as illness or disease which first makes itself known to the insured following the policy effective date. Sickness covers both physical and mental illness unless otherwise specified.
SIGNIFICANT EARNINGS LOSS: A provision under the Residual Disability Benefit that promises the full total disability benefit if the insured is back to work and suffers a substantial loss of income, usually 75 to 80 percent.
SOCIAL SECURITY: A federal program which provides benefits to all working Americans in the form of disability, retirement or survivor benefits. Disability is strictly and narrowly defined and benefits begin in the sixth month of a disability that has an expectation of lasting at least 12 months or will result in the individual’s death.
SOCIAL SECURITY OFFSET RIDER: An optional benefit that coordinates benefits with any benefits received through Social Security disability (and, often, other public programs) to avoid either underinsurance or overinsurance.
SUBSTITUTE SALARY EXPENSE: An optional benefit available under the Business Overhead Expense policy, it reimburses the insured for expenses incurred in paying a replacement during the insured’s disability.
SUPPLEMENTAL HEALTH STATEMENT: A form that is a direct communication from the underwriter to the proposed insured that asks for more details about a specified medical condition(s).
SURVIVOR BENEFIT: The survivor benefit is a lump sum payment that will provide benefits to the insured’s eligible survivors in the event the insured dies while receiving disability payments. This is an optional benefit in most policies.

– T –

TOTAL DISABILITY: Often the key policy provision in the disability income policy, this feature defines the eligibility requirements necessary for an individual to qualify for full monthly benefits. Usually, an inability to perform work is the major requirement in the definition.
TRANSPLANT DONOR BENEFIT: A policy provision that considers an insured to be disabled under the sickness provision if donating a body organ.

– U –

UNEARNED INCOME: Usually monies earned by the insured from passive sources of income, i.e., owning investments and not gained from labor.

– W –

WAITING PERIOD In order to become eligible for coverage under the policy, an individual must satisfy a certain number of continuous days of service as an active, full-time employee. This is known as the waiting period. (In addition, a waiting period can also be the time period between when a disability occurs and when payments from the disability insurance policy begin — what we have discussed as an “elimination period.”)
WAIVER OF PREMIUM: A policy provision that specifies the exemption of the insured from making premium payments following a specified number of days of disability, until the insured recovers. In many cases, any premium paid during the initial days following disability is refunded.
WORKERS COMPENSATION: A system administered by each individual state that provides benefits if a worker is hurt or contracts an illness on the job.
WORKPLACE MODIFICATION OR ACCOMMODATION: This benefit is designed to provide assistance to an employer when a disabled employee requires modification of the workplace or special adaptive equipment in order to return to work. The employer will usually be reimbursed up to a set amount for the cost of such modifications.

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