Glossary
A
Association Disability Insurance Coverage
Disability Insurance Provided through an association. Typically resembles group coverage that is issued to employees of a business or non-profit entity under a master contract.
Attending Physician Statement (APS)
A report written by the applicant’s physician documenting past and current medical history. This information is used by the insurance companies to evaluate an applicant.
Automatic Increase Benefit (APS)
This optional policy rider increases the policy benefit annually without evidence of medical or financial insurability.
B
Beneficiary
A person(s) or entity designated to receive proceeds from an insurance policy upon the death of the insured. Some disability policies have a small death benefit.
Benefit Amount
For disability insurance, the benefit amount is expressed as the maximum monthly dollar amount payable to the insured.
Benefit Period
The maximum time period an insured can receive benefits from a continuous disability. Typical benefit period options are 2 years, 5 years, ages 65, 67, 70 or lifetime.
Benefit Percentage
A percentage of the insured’s pre-disability income used to calculate the amount payable to the insured on disability.
Business Overhead Expense Insurance
A policy that reimburses a business owner for business-related expenses that are incurred during their disability. The insured can typically choose a one-to-two-year benefit period for this type of policy.
Buy-Sell Disability Insurance Policy
A policy that pays to the insured’s business partners an amount to buy out a disabled partner’s share or interest in the business. A buy-sell agreement between the partners would be used to define the terms and conditions of this transaction.
C
Conditionally Renewable
Policy option where the insurance company will renew the disability policy if the insured complies with certain conditions. For example, that insured is still actively working would be a condition.
Continuous Disability
A disability where the insured is continuously disabled or when recurrent periods of disability are from the same cause are separated by a limited period of time, usually 12 months.
Conversion Privilege
Allows an insured with a group policy to convert to an individual policy upon termination from employment or association.
Cost of Living Rider
An optional rider that increases the disability benefit each year during periods of disability based on a consumer price index.
D
Disability
An individual’s inability to perform the duties of their occupation due to sickness or injury.
Disability Insurance
An insurance policy that provides monthly payments when the insured is unable to perform the duties of their occupation due to sickness or injury.
E
Earned Income
Gross salary, wages, commissions, earnings from self-employment, fees, etc., derived from active working. This would not include interest and dividends, pensions, Social Security, and other types of unearned income.
Elimination Period
The consecutive number of days for which benefits are not payable at the start of a disability claim. An insured must be disabled all of those days before benefits begin. Elimination period options for long-term disability insurance are 30, 60, 90, 180, and 365 days. 90 days is the most common. Also known as the “waiting” period.
Exclusions
Certain conditions or causes that are not covered by disability insurance policy. Some exclusions are standard for all policyholders and some can be an exclusion rider specific to the insured due to health, lifestyle or other issues.
F
Financial Underwriting
A method the insurance companies use to evaluate the earned income and other financial data to determine the amount of monthly disability benefit an applicant qualifies for.
Future Increase Option
An optional rider on a disability insurance policy that allows the insured to purchase additional coverage in the future with a requirement of only financial ( but not medical) insurability.
G
Grace Period
A period of 31 days after the premium due date in which the premium must be paid in order to avoid policy termination.
Group Disability Insurance
A disability policy covering the employees of a business, union, or non-profit organization under a master contract.
Guaranteed Renewable
Disability insurance that cannot be canceled or altered by the insurance company as long as the premiums are paid on time. The only exception is that the company can increase the premiums for classes or policyholders.
I
Insurance Company Ratings
There are five major insurance industry ratings services: A.M. Best, Standard & Poor’s, Moody’s, Duff & Phelps, and Weiss. These ratings companies provide a ratings system based on an insurance company’s financial performance, stability claims paying ability and other factors. Each company uses different terms for each rating. For example, the top rating with A.M. Best is A++
Inspection Report
A report where a representative of the insurance company conducts a phone interview with the applicant to gather the applicant’s health history, employment and other information used in the underwriting process.
K
Key Employee
An owner or highly skilled and valuable employee whose efforts are very important to the success of the company.
L
Level Premium
A premium that remains the same throughout the duration of the contract
Loss of Income
The difference between an insured’s prior income and current income during a disability. This loss of income percentage is used to determine the benefit amount during a residual disability.
M
Monthly Indemnity
The amount an insurer will pay for each month of total disability.
Medical Underwriting
An insurance company’s evaluation of an applicant’s health and medical history to determine insurability. Attending Physician Statements (APS), Inspection Report, and a Paramedical Exam are the primary tools for medical underwriting.
N
Noncancelable Disability Policy
A policy that cannot be canceled, premiums cannot be increased, and policy provisions cannot be altered by the insurance company as long as the premiums are paid as due.
O
Occupation
An insured’s regular occupation or profession at the time of becoming disabled.
Occupation Class
An underwriting and policy category in which the insured are placed based on their specific occupational duties.
Optional Benefit
Additional optional policy benefits offered to applicants. These optional policy riders require additional premium.
Outline of Coverage
A summary of policy provisions and benefits offered by the insurance company.
Owner
The owner of the insurance policy has rights that might include, but are not limited to, the right to information on the policy, the right to renew the policy, and the right to request changes in the policy.
Own Occupation Definition of Disability
Under this definition, disability means the inability to perform the material and substantial duties of your occupation due to injury or illness.
Own-Specialty Definition of Disability
An own-occupation definition of disability that further defines your occupation to the specific medical specialty you practice.
P
Paramedical Exam
A short medical exam that includes an interview of your medical history, height, weight, blood pressure, pulse, blood, and urine sample and occasionally based on higher insurance amounts an EKG and X-ray.
Partial Disability
The inability to perform some, but not all, of the duties of an insured’s occupation due to sickness or injury.
Participation Limit
The total amount of monthly coverage that will be allowed by a company based on all insurance from other companies an applicant is insured with.
Policy
All documents that constitute the contract of insurance.
Pre-Disability Earnings
The earned income amount prior to the onset of disability.
Pre-Existing Condition
A mental or physical condition that existed prior to the issue of a disability policy.
Premium
The periodic payment required to keep an insurance policy in force.
Premium Mode
The premium payment frequency selected by the insured. Most policies offer annual, semi-annual, quarterly, or monthly bank draft options.
Presumptive Total Disability
A provision where an insurance company will consider an insured to be totally disabled if the insured sustains the complete loss of hearing in both ears, sigh in both eyes, speech, or the use of any two limbs. The elimination (waiting) period will be waived and benefits will be payable for as long as the presumptive disability continues, even if you are working in an occupation.
R
Recurrent Disability
Also known as successive periods of disability, where the insurance company will consider recurrent or successive periods of disability as one period if they are causes by the same or related conditions, they are separated by a defined maximum time period (usually 6 months or 365 days), and each begins while the policy is in force. This protects the insured in this circumstance by not restarting the elimination or benefit period.
Rehabilitation Benefit
This insurance company may, subject to mutual agreement pay for an occupational rehabilitation program that aids the insured in returning to work.
Residual Disability
A disability in which the insured is at work and not totally disabled, but due to an injury or illness, they suffer a loss of income.
Residual Disability Benefit
If the insured is residually disabled, this benefit would provide a benefit based on the percentage loss of income.
Return of Premium Disability Contract
This benefit refunds a portion of the total premiums paid to date less the amount of any paid claims at specified intervals during the life of policy.
Rider
A rider is an additional agreement on a policy that expands or limits the policy’s conditions coverage or benefits.
S
Social Security Disability Offset Rider
A rider that pays a benefit if the insured is disabled under the policy and not receiving Social Security disability benefits.
Surgical Transplant Benefit
A provision where the insured will be considered disabled as a result of a transplant or donor surgery if the disability was due to a sickness.
Survivor Benefit
If the insured dies while monthly disability benefits are being paid on a policy, this benefit would pay an amount to a designated beneficiary. This lump sum is typically around three months of disability benefit.
T
Total Disability
Due to sickness or injury, the insured is unable to perform the material and substantial duties of their occupation. Definitions of total disability vary greatly among disability insurance policies. Please refer to our Learn More section for the details on the differing contractual definitions.
U
Underwriter
The insurance company employee who assesses the risk of an applicant for coverage or a policy.
Underwriting
The process of assessing risks and classifying them according to their degree of risk of loss so that the appropriate rates may be assigned based on each applicant’s risk profile. This process includes complete rejection of risk (uninsurable).
Uninsurable
Someone who is not insurable due to an excessive risk of loss.
W
Waiting Period
The consecutive number of days for which benefits are not payable at the start of a disability claim. An insured must be disabled all of those days before benefits begin. Waiting period options for long-term disability insurance are 30, 60, 90, 180, and 365 days.
Waiver of Premium
After the waiting period and once a claim is approved, the insurance company will begin waiving premiums for as long as you are disabled. Some companies will also refund the premiums paid during the elimination period.
Workers Compensation
A state-administered program where benefits are paid to a worker for losses caused by work-related injuries or illnesses.
