Glossary Of Terms
 


 

Accidental Death and Dismemberment

This benefit provides you with a lump sum payment, in addition to any other benefits payable under the policy. Where an accident causes loss of life, sight, or two limbs, or the total and irrevocable loss of use of two limbs, within a "SPECIFIED PERIOD AFTER THE ACCIDENT", the insurer will pay a lump sum of money to the insured or beneficiary if death occurred.

 

Accumulation of Days to Satisfy the Start Date

This provision identifies if separate periods of disability, which are caused by the same or related injury/sickness, may be combined to satisfy the waiting period. Some insurers only allow you 6 months to accumulate the total days of the waiting period, whereas others allow the accumulation as long as periods of disability are not separated by more than 1 year.

 

Application

A form on which the applicant provides personal, financial, and medical information to the insurance underwriter. The application is used by the underwriter as the initial source of information to determine whether or not to issue a policy. The application forms part of the policy contract and is used for claim adjudication.

 

Benefit Period

This is the length of time that the insured is able to collect benefits for each disability. Personal disability contracts offer: 2 Year, 5 Year, 10 Year, to age 65, and Lifetime Benefit periods.

 

Contestable Period

This is the period (normally 2 years) following the issuance of the policy during which the insurance company can contest statements made by the insured on the application. Should there be false or fraudulent information, the insurer has the right to cancel the contract.

 

Cost-of-Living Benefit

This is a rider which can be added to the basic disability coverage. This benefit ensures that while on claim, the purchasing power of your benefit dollar is increased at specific periods (every 6 or 12 months). There are two formulas which can generally be utilized when applying for coverage:

1. CPI index (with or without minimums and maximums)

2. Simple interest

 

Disability - Partial

You may be considered partially disabled if you are not Totally Disabled and are working at a reduced level. However, this differs from residual disability as there is no requirement to show a loss of income (as it's based on the loss of time and duties).Policies provide a schedule for the level of benefit that the insured would qualify to receive. This benefit is often included in the policy in addition to residual benefits and is extremely useful for the newly employed who have limited prior earnings (e.g. a new graduate).Like residual disability, it pays if you are unable to work full time, but is normally limited to a maximum 50% benefit for a limited benefit period such as 6, 12, or 24 months. Some plans also offer a continuing benefit (often 25%) till age 65. However, it does not contain any requirement to prove what your loss of income is during the claim and so is valuable if your claim is of a short term nature or you cannot prove a residual loss as you just entered full time practice.

 

Disability - Residual

This benefit comes into effect if the insured is not totally disabled, but is able to work on a limited or reduced basis only. With this benefit, if the insured returns to work on a reduced basis and/or suffers a loss of income sufficient to quality (usually 20-25%), she or he will still be entitled to a percentage of the total disability benefit in the policy. The level of payout is based on the proportion of your lost income to your benefit amount. This provision is vital since most disability claims are not from total disability, but from long term partial or residual disability. Look for a plan that doesn't require that you have received or been eligible to receive total benefits before you can claim for residual benefits since it could invalidate many types of injury or sickness claims (e.g. kidney stones, back problems, dialysis). Some plans also include a partial disability clause which provides a minimum guaranteed benefit. This is a good provision to have.

Disability - Total

This clause determines what constitutes a complete disability and therefore entitles you to receive full benefits. The better plans require that you be under the care of your physician and have a loss of income of at least 80% (or 75%).

Earned Income

All disability benefit amounts are purchased based on compensation such as wages, commissions, fees, salary, bonuses, or dividend income for the work performed by the insured.

Earned Income Limits

This limit determines the amount of disability benefit the proposed insured is eligible to acquire. This earned income limit also devises the level of payout at the time of claim. Each insurance carrier has their own established limits, which vary among insurers.

Elimination Period

The elimination period is also sometimes referred to as the "waiting Period" and is like the deductible on car insurance. This is the length of time that must elapse after the onset of the accident or sickness before the insured becomes eligible to receive disability benefits from the insurer. Look for plans that allow you to accumulate both total and residual days of disability, and over the longest period possible.

Exclusions

All plans exclude act of war and normal pregnancy. Some now also limit the types of claims or the duration of claims for specific disabilities such as mental disorders.

Fraud Provision

This is the policy language which allows the denial of a claim after the contestable period in the event of fraudulent misrepresentation at the application stage by the insured. It allows the company to cancel the insurance contract if fraud has been committed.

Grace Period

This is the period of time (usually 31 days) after the premium is due, during which the policy remains in force and the insured is fully protected. Once the grace period expires, full medical and financial underwriting is required in the same manner as when the insured obtained the initial policy.

Guaranteed Insurability

This is an optional benefit (also called FIO, FNR, GIO, AIR, and FEPO by different insurers) which can be obtained on the basic policy. This benefit allows the insured to purchase additional coverage in the future without the need to provide evidence of good health. Financial evidence is required to ensure that the applicant's earned income is sufficient to qualify for additional coverage. However, not all insurers guarantee that the quality of the additional coverage will be the same as your original policy (i.e. it may only be as good as they offer at that time). This is an extremely important distinction between the various carriers, especially if you have not yet reached your earnings cap or potential.

Guaranteed Renewable Contract

This type of policy guarantees that as long as the insured makes her or his premium payments, the insurance company cannot cancel the policy or add any provisions or restrictions. The insurance company is permitted to change the premiums which it charges to a class of insured (e.g. all doctors).

Health Care Rider

Contracting the HIV or Hepatitis B or C virus does not, by itself, prevent a medical practitioner from performing the important duties or her/his regular occupation. However, the law, a medical regulatory body or licensing body could, in the future, prevent you from working in your occupation or public opinion could destroy your practice. The insurers will generally waive the start date and pay benefits to you even if you are working in another job.

Hospital Confinement Benefit

This is an optional benefit which pays full total disability benefits while the insured is hospitalized during the elimination period (no waiting period needs to be satisfied).

Income Replacement Contract

Under the provisions of this type of policy, there is no definition of disability. A loss of earnings is required before a claim can be paid. If the insured is working on a limited basis and earning a reduced salary, they would qualify for a limited payment from the disability contract. However, under this type of plan it is possible to get cut off claim if your income rises simply as a result of inflation, or a better hourly rate.

Indemnity

This is the monthly benefit the insurance company will provide if you become disabled. Personal benefits are paid tax free, and you can insure yourself to a maximum of about 67% of your after expense and before tax income. Most companies will provide you with a guaranteed benefit level during residency and your first year of practice without any income justification.

Lifetime Benefits

This rider ensures that the insured will receive disability proceeds for lifetime or until there is a recovery. This benefit is payable if the insured becomes disabled before age 55, and remains disabled past 65. Total disabilities occurring after age 55 are paid on a reduced basis.

Loopholes

These are contractual wordings that may restrict or exclude your ability to make a claim under certain circumstances or causes. Some of the more common are:

1. "independent of other causes": limits liability, for example: if you are taking medication such as a sedative, and then fall down the stairs at home, it's likely you won't get paid since the accident was not caused independently. This clause is used by several Association plans.

2. "self inflicted injuries": often used to deny back injuries and similar problems

3. "criminal offense" (which describes drinking and driving).

4. "definition of earnings": a relation to earnings clause allows the insurer to use only your last 12 months of earnings to determine the benefit amount you are eligible for, which can be devastating if you've been on sabbatical or pregnancy leave

5. "loss of Time, Duty & Income": this restrictive clause indicates that the insurer will require all 3 to occur before you can be considered disabled. Many association plans require all of the above, but many disabilities (e.g. a heart attack) may not cause all 3 to occur (you still perform all the same duties as before but your income has dropped because you can't see as many patients as before).

As a general rule, the more requirements there are, the more difficult it is to claim.

Modifications

An insurance policy is sometimes issued with exclusions for certain conditions or illnesses. These are clearly specified and outlined in the policy.

Non-Cancelable Contract

Under the provisions of this contract, as long as the premiums are paid, the insurance carrier cannot:

a) Cancel the policy

b) Change any provisions or add restrictions

c) Increase the premiums or add any changes to the existing policies. This is not a provision of association plans.

Non-Medical Limits

A benefit maximum under which a policy may be obtained without the need for a medical examination.

Occupation Definitions

There are three (3) common clauses used to determine the length of time an insurance company is obliged to cover you in your occupation if you become disabled, and it determines whether you can be forced to work, even in some other field, and at a reduced level of income.

An "Any Occupation" clause states you must be unable to work in any occupation, regardless of the change in duties or income. Although this is not often seen in a professional's contract, a derivative of this (a 12 or 24 month regular occupation, thereafter any occupation) is often seen on the mandatory hospital resident's plans and on most group plans.

A "Regular Occupation" clause states you must be unable to perform the important duties of your occupation and not working in any other gainful occupation. If you are working outside of your specialty but still have an income loss, you could still be covered under the residual clause. This clause does not allow the insurer the right to force you back to work or into any other occupation. It's your choice. There is no extra fee.

An "Own Occupation" or specialty clause (also known as "true own occ. or own occ. plus). This provision may allow you to continue to receive full benefits if you are totally disabled out of your specialty, but choose to work in some other. What most clients need to consider is "how likely is it that I could be totally disabled out of my specialty and still able to work in some other."

Personal History Interview

This is a program where the applicant is contracted by an agency which provides a service to the insurance companies that underwrite disability and life policies. Questions are asked to obtain confirmation and additional information about the applicant and her or his lifestyle.

 

Policy

All written material which constitutes the contract of insurance as provided by the insurance company.

Policy Rated

This is a contract where the insured is asked to pay additional premium due to health impairment or hazardous avocation.

Portability

As a general rule, you want the plan to remain as unrestrictive as possible so that future changes in your status can be accommodated. With the recent advent of physicians moving out of province or even out of country, you should obtain a plan that you can take with you. Only private plans offer this feature without restriction.

Premium - Level

This policy design guarantees a level premium for the life of the policy, or at least for a specific period of time (e.g. to age 65).

Premium - Step Rated

This policy allows you to pay a lower initial premium which, at a predetermined date, increases to a new level. Future premium increases are guaranteed within contract provisions. Some contracts of this nature allow you to "lock-in" the future rates, but others will be unable to inform you what that rate will be.

Presumptive Total Disability

The total and permanent loss of sight in both eyes, hearing in both ears, speech, or the use of both hands, both feet, or one hand and a foot. Total disability is payable even if the insured is still able to work in their own occupation or any other occupation. Some plans require severance of the limb at or above certain joints in order to be payable.

Recovery Benefit

When the disabled individual returns to full-time work, after 3 months of total or partial disability, the insurance company will continue to provide the insured with a portion of the monthly benefit for an additional period (normally 2-4 months).

Recurrent Disability

This is a provision which protects the insured when she or he returns to work after a period of disability. If she or he becomes disabled again from the same or related cause within a specific period of time (6 or 12 months), then payments are resumed as the waiting period does not need to be satisfied again.

Retirement Protector

While you are disabled, your ability to accumulate funds for retirement would be next to impossible, as benefits received are lower than actual earnings have been, and personal expenses may increase at claim time. This benefit, offered by 3 insurers (only), will provide a designated monthly amount of funds, in addition to your basic benefit, which would be placed into a trust for you for retirement. These payments would continue to be paid for you until you recover, or until you reach age 65, at which time you would receive the full value of the fund.

Return of Premium

This rider (currently only offered by a few companies) provides refunds of up to 75% of premiums if claims have been minimal or non-existent. To add this benefit to the basic policy, the base premium will sometimes increase by 50%.

Survivorship Benefit

If you were to die before age 65 after receiving disability proceeds, the insurer would pay a lump sum death benefit to your estate of 3 to 4 times the monthly benefit.

Waiver of Premium

It is important to continue premium payments even after you become disabled. Many insurers will assume the obligation of paying future premiums while the insured is claiming a disability benefit (normally after 90 days). Some insurers will refund the premiums that the insured has paid while the waiting period was in effect.

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