Common Terms
Elimination Period - This is the period of time you need to be disabled before benefits become payable. Also referred to as the Waiting Period, it acts much like a deductible, but based on time not dollars. The most common periods are 90 and 180 days.
Benefit Period - This is the length of time for which benefits may be payable while you are disabled. Common periods to choose from range from 2 years to age 70.
Monthly Benefit - This is the stated amount of benefit you would receive each month if totally disabled. It is determined at the time of underwriting based on your income level and remains level unless changed by the insured.
Definition of Disability - The heart of any disability policy, this definition determines when the carrier will consider you eligible for benefits based on your ability to do your occupational duties. Examples of different definitions are as follows:
- "Any Occupation" which means you have to be unable to perform the duties of any occupation you might be reasonably suited for by training, education, experience or income level. Extremely restrictive wording.
- "Own Occupation not Working" which considers you to be disabled if you are unable to perform the duties of your occupation and are not engaged in another occupation.
- "True Own Occupation" bases your disability solely on your ability to perform the specific occupational duties of your recognized occupation, regardless of whether you are working in another occupation.
Residual or Partial Disability - This benefit pays a portion of your monthly benefit based on your loss of income while working part time due to a disability.
COLA - This adjusts your benefit during a claim period each year according to a calculation of the change in the Consumer Price Index, enabling your benefit to keep up with potential periods of inflation.
Catastrophic Benefit - This benefit pays an additional amount of benefit based on your inability to perform two of the activities of daily living (ADL's) or if you are cognitively impaired.
Future Purchase Options - Acts as a pool of guaranteed insurability from which you can increase your benefit level as your income increases during your working career without evidence of medical insurability.
Noncancelable (Noncan) versus Guaranteed Renewable (GR) - Industry terms which describe whether or not a policy's premium will be guaranteed to stay level for the duration of the policy or if the carrier has the ability to potentially increase premiums at a later date. GR policies are becoming increasingly popular, as the ability to increase premiums is very difficult for the carrier and in practice, very rare. Allows for additional cost savings for the insured.
