The Plus Group

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ACCUMULATION PERIOD: A period of time typically expressed in months which will begin on the first day of disability and during which the elimination period must be satisfied.

APPLICATION: A form(s) used by an insurance company to collect information on the prospective insured which the underwriter will use to assist in the process of deciding if coverage will be offered (underwriting).

ATTENDING PHYSICIAN STATEMENT (APS): A medical report, completed by the proposed insured’s physician, which documents current and prior health history. This is used in the evaluation process (underwriting) of an application for insurance.

ASSOCIATION PLAN: A disability plan offered through a membership or professional association. Typically this policy is a modified “Group LTD” contract.

AUTOMATIC INCREASE BENEFIT: Many carriers offer this provision but use different names to describe it. The AIB is a policy provision which increases the insured’s monthly benefit by either a stated percentage or the latest Consumer Price Index measure, without the evidence of either medical or financial insurability.

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BENEFIT PERIOD: The maximum length of time for which disability income benefits will be payable under a policy. This is typically expressed as an age 65, 67 or age 70. Some individual policies will offer a variation of lifetime benefits. Typically, longer benefit durations will require more premiums to be paid.

BENEFIT UPDATE RIDER: A provision similar to a Guarantee of Insurability Rider. This type of provision typically provides the opportunity to increase benefits in the future without demonstrating medical insurability. It is not limited to a stated specified maximum amount but instead is capped at the maximum benefit the carrier offers based on income or overall benefit maximums.

BUSINESS OVERHEAD EXPENSE: A policy which reimburses the insured business owner for covered business expenses incurred in the day to day operation of the business. Issued with stated maximum benefit level, the policy will typically roll over any unused benefits to extend the benefit period.

BUY-SELL (OR BUY-OUT): A disability policy providing a practice or co-owner either a lump-sum or installment payments upon a disability of an insured owner. Designed to provide the necessary funds to buy-out the business interest of the disabled owner.

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CATASTROPHIC BENEFIT: An additional benefit provision which is typically provided as an optional rider. These riders are designed to pay additional benefits upon the satisfaction of the definition of a “catastrophic” disability. The definitions of disability are usually similar to the terms of a Long Term Care Insurance policy, inability to perform 2 of 6 Activities of Daily Living or Severe Cognitive Impairment.

CONDITIONAL COVERAGE: Coverage provided under the terms of the conditional receipt. This coverage is provided up to stated limits and based on certain conditions during the underwriting process. This will vary by insurance carrier.

CONDITIONAL RECIEPT: A receipt provided to the prospective insured upon submission of the appropriate premium at time of application. The conditional receipt will detail the conditional coverage provided to the prospective insured when the application and all the required underwriting requirements are submitted.

CONDITIONALLY RENEWABLE: Under this policy provision, an insurance company agrees to the renewal of a disability income policy providing the insured meets certain qualifications, such as full-time employment or membership in an association.

CONSUMER PRICE INDEX (CPI): The Consumer Price Index for All Urban Consumers as published by the Federal Department of Labor. This is the index which is typically used to adjust terms and benefits is a policy to address cost of living changes.

COST OF LIVING RIDER: An optional rider which increases the disability benefit by a set percentage or the latest Consumer Price Index measure while the insured is on claim. The increases may be based upon simple or compound interest assumptions based on the terms of the rider.

COVERED EXPENSES: The definition in a Business Overhead Expense policy listing the typical business expenses which are eligible to be reimbursed during an insured's disability.

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DISABILITY INCOME BENEFIT: The monthly benefit paid to an individual based on the terms of the disability income policy in the event of an accident or sickness.

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EARNED INCOME: Part of the income which is used during the underwriting process to determine the amount of benefit an applicant may qualify for. Typically defined as gross salary, wages, commissions, bonus income, etc. which is derived from active employment. This will not include investment income, rents, royaties, etc.

ELIMINATION PERIOD: The policy deductible, usually the number of days from the onset of disability for which no benefits will accrue. These days may either be accumulated during a period of disability or may be required to be consecutive based on the terms of the provision.

EXCLUSIONS: The policy provision indicating certain conditions which will not be covered under the disability income policy. There will be exclusions which are included in the policy (for example – Act of War) and exclusions (see Waivers) which may be included based on the results of underwriting (for example – a cervical spine exclusion / waiver).

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

FUTURE PURCHASE OPTONS: See Guarantee of Insurability Provision

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GENDER BASED RATES: The typical rate structure available to buyers of individual disability insurance. Females will often be charged a significantly higher premium due to the statistically increased incidence and duration of disabilities.

GENDER NEUTRAL RATES: A pricing structure which charges the same rate to both females and males. Typically only available in an employer sponsored program.

GRADED PREMIUM: A disability policy structured with a scheduled increasing premium as opposed to a level premium.

GROUP LONG TERM DISABILITY: An employer provided disability income plan which covers certain types of income at a specified percentage, to a stated maximum benefit amount. For example, a plan which covers 60% of base salary (not bonus or overtime) to a maximum benefit of $5,000 a month.

GUARANTEE OF INSURABILITY PROVISION: A provision in a disability income policy providing the insured a right to increase the policy monthly benefit based on income qualification only. The increase opportunity typically occurs at specified dates or under specified circumstances. This provision will normally expire at a certain age which will be detailed in the policy language.

GUARANTEED RENEWABLE: This provision typically allows for the renewal of the contract for as long as premiums are paid on a timely basis by the insured until a stated age. Premiums may be increased with prior notification based upon approval of filings with the state of residence but policy provisions can never be changed.

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INDEXING OF PRIOR EARNINGS: A provision which will increase the insured’s pre-disability earnings (prior earnings) each year according to a formula which typically used the Consumer Price Index as the index. Used primarily in the residual benefit calculation, it is an important feature which will assist in minimizing the erosion of the buying power of the residual benefit.

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KEY PERSON DISABILITY: A disability income policy designed to compensate the business for financial loss during the key person's disability.

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LEVEL PREMIUM: A disability policy structured with a level premium which will not increase until a certain age as opposed to a graded premium.

LOAN PROTECTION RIDER/POLICY: A policy or provision which is designed to pay the costs associated with specified loan obligations of the insured. Issued as either a stand alone contract or a rider on an individual disability policy or a business overhead expense policy.

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MENTAL & NERVOUS LIMITATION: A provision in the policy which will limit the duration of claims related to specified mental and nervous conditions. Typically this provision will modify the duration of benefits to 24 months for these specific conditions.

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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.

NON-TOBACCO USER DISCOUNT: A premium discount provided by an insurance carrier based on an applicant not using certain types of tobacco products for a specified time.

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OCCUPATION CLASS: Categories of risk assessment and pricing used by an insurance company based on the specific job duties of the applicant. These classes will dictate the premium and contractual provisions the insured will be offered by that carrier.

OPTIONAL RIDER: Coverage offered in addition to the basic policy, these extra protection riders provide flexibility in the design of a disability income program to meet the applicants specific needs. Examples: Own Occupation Rider, Residual Rider, Cost of Living Rider, Guarantee of Insurability, Catastrophic Disability Riders, etc.

OWN OCCUPATION: A term in a disability insurance contract defining the definition of Total Disability. Typically it states that a covered disability is one which causes the inability to perform the substantial and material duties of the insured’s Own Occupation. This is the occupation which is being performed at the time of disability, not at the time of application. Variations of this provision will provide additional terms such as “regular” occupation, your own specialty occupation, etc.

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PARAMEDICAL EXAMINATION: A medical exam which may include the collection of bodily fluids or the administration of testing such as an EKG. Conducted by a trained medical professional or physician based on the requirements of the insurance carrier.

PARTIAL DISABILITY: Typically defined as a short-term version of the residual disability rider. This policy provision pays a specified percentage of the total disability benefit (usually 50 percent) for a short period of time (usually 6 months) if the insured is unable to perform one or more of the duties of his or her own occupation.

PERSONAL HISTORY INTERVIEW: A telephone interview conducted by the insurance carrier designed to confirm the information on the application and/or ask additional information to assess the applicant’s insurability.

PHYSICIAN CARE REQUIREMENT: A disability insurance contract will typically require the claimant to be under the care of a physician in order to collect disability benefits. Many contracts waive this requirement if it can be proven that future treatment would be of no benefit to the insured.

POLICY SCHEDULE PAGE / POLICY DECLARATION PAGE: This section of the disability income policy provides the details of all the specific individual policy data such as insured’s name, policy number, monthly benefit, optional rider provisions and premium.

PREDISABILITY EARNINGS: A policy provision found in the Residual Disability Rider or provision which defines what constitutes prior income for purposes of calculating the Residual Disability Benefit. For example: the average monthly earnings for the previous 24 calendar months immediately prior to the disability.

PRE-EXISTING CONDITION: This policy provision is intended to define certain illnesses or injuries that occurred or manifested themselves prior to the policy effective date for which benefits are limited or not payable. Generally, conditions disclosed on the application are not considered to be pre-existing but may result in a Waiver or Rating.

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 selection will be indicated in the policy schedule page. Fees are typically assessed for more frequent premium payment modes.

PRESUMPTIVE TOTAL DISABILITY: A policy provision which amends the normal total disability eligibility requirements in the event of specified disabilities such as the complete and permanent loss of sight, hearing, speech or the use of two limbs. This provision will typically allow for the full payment of the Total Disability benefit without requirement of physician care and without offset for any work earnings.

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QUALIFICATION PERIOD: A provision in some carriers Residual Disability Benefit, it stipulates the number of days at the start of a disability which the insured must be totally disabled before becoming eligible for Residual Benefits. Typically found in many plans offered through associations but most quality individual disability income contracts do not impose a qualification period.

QUALIFED SICK PAY PLAN: A formal plan (written and communicated) designed to continue the income of certain employees at disability. Terms of a plan are outlined by Section 105 of the Internal Revenue Code.

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RATING: An underwriting action which assesses additional premium in order to either cover a certain condition or to allow issuance of a policy in recognition of a perceived additional risk.

RECOVERY PROVISION: Either a built in provision or an optional rider, this policy language refers to continuation of the Residual Disability benefits in the circumstance of the claimant “recovering” from the disability but still suffering an income loss due to the prior disability. Payments in this scenario typically may continue for 12 months up to the end of the benefit duration.

RECURRENT DISABILITY: The policy provision defining when an injury or sickness will be considered continuous after a
period of recovery (typically 6 – 12 months) where a recurrence of the disability due to a same or related cause will not require the satisfaction of a new Elimination Period.

REGULAR OCCUPATION: Terminology used to define the occupation the insured is engaged in at time of a claim. Typically this language is interchangeable with Own Occupation definitions.

REHABILITATION: A policy provision under which the insurance carrier may agree to assist the claimant in the payment of expenses associated with a physical or occupational rehabilitation program the insured enters following a disability.

RELATION OF EARNINGS TO INSURANCE: A policy provision providing a maximum overall benefit level which considers income received while disabled from all sources, including insurance, which cannot exceed a specified percentage of the insured claimant's prior earnings.

RENEWABILITY: The policy provision detailing the conditions upon which the insurance company agrees to continue to insure the owner of the policy. Typical individual disability policies will be Noncancelable or Guaranteed Renewable.

RESIDUAL DISABILITY BENEFIT: A key policy provision which may be built into the contract or offered as an optional benefit. This provision will provide benefits when the claimant is not Totally Disabled under the terms of the contract and is working with a loss of earnings. Benefits are based on minimum and maximum earnings losses, typically requiring at least a 20% loss to qualify for benefits and paying a full benefit at a 75% - 80% loss of earnings.

RETIREMENT PROTECTION DISABILITY INSURANCE: A stand alone policy or optional provision which provides additional Total Disability benefits to offset the loss of retirement plan contributions.

RETURN OF PREMIUM RIDER: An optional benefit providing a refund of a specified percentage of the policy premium on specified dates. Typically this refund is less any claims paid during the specified time period. This provision was at one time prominent but is not often found in current contracts.

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SHORT-TERM DISABILITY: Typically provided under an employer sponsored group insurance plan. These programs typically pay benefits based on a weekly basis with a short elimination period and a benefit period lasting 13-26 weeks. The maximum benefit amounts are typically much lower than a group long term disability plan.

SOCIAL SECURITY: A federal program providing potential benefits to the majority of working Americans in the form of disability, retirement or survivor benefits. The qualification for disability benefits is based on a very strict and narrow definition and benefits are limited to a relatively low monthly maximum.

SOCIAL SECURITY OFFSET RIDER: An optional benefit which coordinates the policy benefits specified in the rider with any benefits received through Social Security and other public or private programs.

SPECIALTY OWN OCCUPATION: A definition of disability which contractually indicates that the insured’s occupation will be a recognized specialty if the insured at claim time has limited his/her practice to that area of practice. Typically limited to medical and legal professions where certified specialties are recognized by licensing boards or trade associations.

SUBSTITUTE SALARY EXPENSE: Either a built in provision or optional benefit available with many Business Overhead Expense policies. This provision reimburses the insured for expenses incurred in compensating a replacement during the insured's disability.

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TELE-APPLICATION: An underwriting program used by an insurance company to streamline the application process by allowing the applicant to complete the majority of the underwriting process by means of a telephone interview with a trained representative of the insurance carrier. Typically using this process will also minimize the need to collect other requirements (financial and/or medical) during the underwriting process.

TOTAL DISABILITY: The cornerstone definition in a disability income policy, this provision defines the eligibility requirements a claimant must meet to qualify for the full Total Disability monthly benefit. Typically, an inability to perform the material and substantial duties of the insured’s occupation is the primary requirement in the definition. The duration of this provision and the definition of Own Occupation become very important in examining the overall performance potential of a disability income policy.

TRANSITIONAL OWN OCCUPATION: A definition of disability which provides increased levels of coverage when the insured is unable to work in his/her own occupation but decides to work in a new occupation. Typically provides combined work and disability benefits of up to 100% of the prior income level.

TRANSPLANT DONOR BENEFIT: A policy provision which will stipulate coverage for an insured who is disabled during the process of donating a body organ.

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UNDERWRITING: The process of risk assessment an insurance company uses to determine the insurability of an applicant. Typically this includes assessment of current and prior medical history, bodily fluid testing, review of financial information, assessment of job duties, travel exposure, avocations and other information which may lead to an understanding of the risks and exposures related to protecting an applicants income.

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WAIVER: An underwriting action which limits or excludes coverage for certain conditions or parts of the body.

WAIVER OF PREMIUM: A policy provision which will alleviate the insured from having to pay the ongoing premium payments following a specified number of days of disability, until the insured recovers. In many cases, premium paid during the elimination period following the onset of a disability is refunded.

WORKERS COMPENSATION: A disability benefit system administered by each individual state which provides disability benefits if a worker is hurt or contracts an illness while on the job.

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YOUR OCCUPATION: Terminology used to define the occupation the insured is engaged in at time of a claim. Typically this language is interchangeable with Own Occupation definitions.

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