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Insurance companies are experts at writing confusing language, and disability insurance is certainly no exception. Due to the potential high dollar value of claims the interpretation of the disability insurance policy language is very important. Fine line distinctions and vague undefined terms often appear in disability policies that can give an insurer wriggle room when it is determining coverage.
Disability insurance is available in two types of coverage, “Own Occupation” and “Any Occupation.” Both are based on your occupational duties at the time of purchase. The exact definition of these types of insurance is often ambiguous, and is the basis of most disability insurance claim underpayments and denials.
Own occupation disability insurance pays benefits if you become “unable to perform the substantial and material duties of the specific occupation” you were performing at the time you become disabled.
Any occupation disability insurance pays benefits only if you become “unable to perform the substantial and material duties of any occupation you are qualified to perform” based on your education training and experience.
The exact meaning of these definitions is a key issue during the disability claim process. For example, to qualify for disability benefits, many LTD policies contain require insureds to be unable to perform “the important duties” of their occupation. Some carriers will argue that to qualify for Total Disability benefits an insured has to be unable to perform “all” of their important duties. Determining exactly what that means under the ambiguity leaves the consumer at risk based on the insurer’s interpretation.
Many policies also contain wording to the effect that an insured does not qualify for Total Disability benefits if they are gainfully employed. Gainfully employed is defined as ” engaged in any work for compensation.” We disagree on two grounds. One, that a gainful employment exclusion defeats the entire purpose of own occupation insurance. Two, if enforceable under some circumstances, a “gainful employment” limitation is not applicable unless it refers to a kind of work suitable to the insured’s background and status.
Any undefined terminology in a disability policy can be used by the insurer to underpay or deny a valid claim. An insured should never give in to a benefit denial based on such an argument. The interpretations of policy language can make the difference between an insurer paying a claim and denying it. If you have concerns about a disability insurance claim be sure to request a free consultation with an IC lawyer before you proceed!
Another closely-related bread and butter issue in LTD insurance is the difference between payments made under Total Disability versus payments made under Partial Disability. This distinction can be worth tens and hundreds of thousands of dollars in benefits over the life of the policy.
For one thing, a Total Disability claim is usually based on a flat figure stated in the policy. Partial Disability is a lesser benefit based on a formula that is only a portion of the Total Benefit. In addition, a “Total” Disability benefit is often payable for the insured’s lifetime whereas “Partial” disability is usually cut off at age 65. Distinctions such as these can make a very substantial difference in the total payout.
The Most Common Issues Involving Disability Insurance
- Whether the policy covers Own Occupation disabilities or Any Occupation disabilities, or a combination of both.
- Whether the impairment is permanent or temporary.
- Whether the disability is Total or Residual.
- Whether the treating physicians are in agreement as to the diagnosis and prognosis.
- Whether an insurance medical evaluation confirms the treating physicians’ opinions.
- Whether any objective medical testing or other testing confirms the insured’s medical condition.
- Whether the effect of prescription drugs exacerbates the insured’s condition.
- Whether the insured can perform all, or a portion of, their substantial and material duties.
- Whether policy benefits are owing and if so, under what portions of the coverage.
- If a buy-out is under consideration, how many years remain in the life of the policy; what the is the insureds mortality, and what discount rate should be applied.
Before purchasing disability insurance determine:
- What is the precise occupation for which you are trying to insure yourself? Is it highly specific such as musician, computer programmer, carpenter, surgeon? Or more general such as business administrator? An injury that may be disabling to one type of occupation may not be disabling to another.
- How large a monthly benefit are you seeking? Do you need a benefit large enough to make up the bulk of the actual income you would lose, or merely a supplement to your income or savings from other sources? This will have a big impact on your premiums.
- How soon do you need to have benefits kick in? Do you have any work benefits that would provide initial income, such as accumulated sick leave or other such arrangement? This will also effect premiums.
- What is your tax situation and how might that effect your analysis of what is needed? Generally, if you paid your premiums with before tax dollars, your benefits will be taxable. If you paid with after tax dollars your benefits will not be taxable.
- How long do you need your benefits to continue? For life? To age 65? Or just until you can be trained in some other occupation?
- What kind of work are you suited for – by reason of your education, training and experience – other than your current occupation?
- Do you want your policy to require that you enter another occupation should you become disabled from your current line of work?
- What disabilities do you expect to be covered for? Specific disabilities or for any illness or injury? Mental as well as physical?
- Do you want your benefits to include a COLA Cost of Living Adjustment formula? (Read the fine print.)
Cost of Living Adjustment (COLA)
Many Cost of Living Adjustments do not begin until after you become disabled. By the time you start receiving benefits the amount may already have been gutted by inflation.
Specific to Disability Insurance Claims
Fill out the claim form carefully and accurately. Do not provide answers that can be interpreted incorrectly. For example, if the form asks you to list your job duties, make sure you list all of the important ones, not just some of them.
You will be asked to provide physician statements. Before having any doctor submit such a statements make sure he or she understands the definition of disability in your policy. Some doctors assume that Total Disability means that a patient is incapable of doing any kind of productive work. Under an own-occupation policy it does not mean that. Be certain that your doctors know what your work duties are and why you cannot perform them.
Also, make sure your doctors are prepared to identify what the objective evidence of your disability is. Even though the subject of “objective evidence” is seldom mentioned in a disability policy, most insurance companies consider it to be important to their claims investigation process.
Objective evidence of a disability might include:
- X-rays, MRIs,
- blood tests,
- measurements indicating atrophy,
- visual confirmation, and
- other means that can be physically seen.
Pain for which there is no objective evidence, may be considered a “subjective” complaint. And even though equally disabling and equally qualifying for benefits, most insurers will require more than subjective complaints before being willing to pay. Provide all the facts that verify your complaints.
Independent Medical Exam(s) (IMEs)
The insurer may choose a physician or psychologist to examine the claimant and provide the company with a medical evaluation. This is called an “Independent Medical Exam.”
Some insurance companies hire these “experts” directly; others use outside consulting services specializing in insurance company defense work.
Always remember, an IME physician is not a treating doctor trying to help you. He or she is hired by the insurance company to provide information to benefit the company in its investigation of your claim. Document and record the details of this examination carefully as it will be compared with information provided by your own physician.
A psychologist IME may also be ordered by your insurance company. Such testing is appropriate when your claim is based on a mental or nervous disorder, or in some situations when the insurance company believes you may be malingering or exaggerating an injury or disease. Psychological IMEs can involve probing questions about your situation and personal details about your life and psychological testing such as the Minnesota Multiphasic Personality Inventory (MMPI).
Some psychologist questions may be valid in one type of situation but not in others. If you feel that questions are being asked that are inappropriate, you should politely decline to answer them until you can obtain expert advice as to whether the specific questions are proper or not.
Functional Capacity Evaluation(s) (FCEs)
A Functional Capacity Exam is an exam which attempts to test a claimant’s ability to perform the specific kinds of functions he or she would normally perform at work. Questionnaires and tests measure the subject’s ability to perform specific maneuvers for specific periods of time. These tests are usually lengthy. They are given by test administrators who are specially trained in this field. If you cannot perform a specific test without experiencing pain, you are not required to continue, and should politely decline to do so.
If you have the kind of injury or condition that is exacerbated or worsened by repetitive maneuvers in a work environment and you have not been in that environment, IME are FCE testing may not be able to provide accurate results. This information will be important to convey to the insurance company.
In the event of denial…
Most disability policies provide for an appeal process within the company. You may be required to follow a formal appeal process that proceeds to a higher level of authority. Again, these are situations where the assistance of a qualified insurance attorney could help you to avoid costly consequences.
With regard to your coverage if there is any issue concerning your medical condition, your occupation, Total vs Residual disability, the present value of your future benefits or anything else, do NOT try to negotiate on your own. There is simply too much at stake. Contact a lawyer immediately.