Riders

Disability income policies do not cover losses arising out of:

-Military service -War -Specific aviation -Injuries while living overseas -Self-inflicted and intentional injuries -Attempted suicide -Injuries while committing a felony

Exclusions

All the things the insurer will not do, including the risks that are not covered.

Waiver of Premium Feature

If the insured becomes disabled, the waiver of premium rider waives premiums after the insured has been disabled for the requisite waiting period, which is usually 3 or 6 months. This means any premiums paid during the elimination period will be refunded. Insurers typically require that the disability be total and permanent. This rider typically falls off when the insured reaches age 60 or 65. In order to qualify for the waiver of premium, the insured must be under a physician's care and be certified as disabled by that physician.

Benefit Limits

Individual disability income policy benefits are based on a percentage of the insured's earned income. The portion can be anywhere from 60% to 80%, based on the policy.

All of the following are true regarding the AD&D rider for disability income policies, EXCEPT:

The AD&D rider will pay a principal sum for accidental death or loss of one limb.

Partial Disability

The inability to perform one or more work duties of a person's own occupation, or inability to work full-time.

Underwriters

They select, classify and rate risks.

Rehabilitation Benefit

A rehabilitation benefit provides coverage of job training services to a totally disabled insured, so the insured can resume working at their prior employment or begin a new occupation. The difference between a rehabilitation benefit and partial disability is that rehabilitation requires a period of total disability and usually provides a benefit for a specified time to transition back to work. The rehabilitation benefit is most frequently found in group disability income plans, but some individual plans may also contain this provision. After the insured feels he/she is able to return to work, a "bridge benefit" is provided for a specified period of time, for example two years. If the disabled employee is not successful in returning to work, there is generally no additional elimination period applied. The benefit payable will be a reduced benefit based on employer pay for the partial work. This benefit is not in every contract.

Evidence of Insurability

A standard provision for group life and health insurance where the insurer must stipulate what information individuals must provide as evidence of insurability.

Impairment Rider

An impairment rider is added to disability income policies in which the insured has an existing medical condition. The impairment rider excludes coverage for that particular condition. This rider allows insureds to obtain coverage in cases where they would otherwise be denied because of their health conditions.

Annual Renewable Term (ART) Rider

Annual renewable term (ART) rider would provide a level face amount with an annually, increasing premium. Annual renewable disability income policies are similar to term life insurance.

Policy Issue Alternatives

Applicants who pose high risks may be insured with impairment riders or other exclusions instead of being declined coverage. Underwriters may also rate the premium higher for applicants that carry more risk.

Term Life Insurance

Insurance provides pure death protection since it only pays a death benefit if the insured dies during the policy term. Term life insurance does not accrue cash value.

Disability Income Benefit

Life insurance rider in which periodic income payments are paid by the insurer in the event that the policyowner becomes totally and permanently disabled.

Return of Premium Rider

Life insurance rider that pays the total amount of premiums paid into the policy in addition to the policy face amount upon the insured's death. The return of premium rider refunds premiums in cases where premium payments far exceed claims paid. The insurer returns premiums after a designated number of years.

Elimination Period

Optional provision in health insurance policies which states the length of time between when sickness, accident, or disability begins and when benefits become payable. Often referred to as a "time deductible".

Accidental Death and Dismemberment (AD&D) Rider

Pays a lump-sum benefit for death, loss of limbs, or blindness. Identical to the standalone AD&D policy. A disability income policy may include an Accidental Death and Dismemberment (AD&D) rider that covers accidental injury. The rider functions just like a standalone AD&D policy, paying a principal sum for accidental death or loss of vision in both eyes, or loss of two or more limbs, and a capital sum for loss of one hand, one foot, or loss of vision in one eye. The loss of use is not payable under AD&D. If the individual does not lose an entire hand, only the loss of the thumb and index finger on the same hand is payable under AD&D.

Additional Monthly Benefit (AMB)

The additional monthly benefit (AMB) rider offered by disability income insurers provides up to one year of disability income coverage, equal to what Social Security would pay, but before Social Security benefits have begun. The AMB usually begins during the Social Security disability waiting period.

Guaranteed Insurability Rider

The guaranteed insurability or future increase option rider is similar to the provision found in life insurance. It allows the insured to buy additional disability income coverage without proving evidence of insurability. The insured is usually eligible to purchase additional coverages at certain ages specified in the policy, or upon life events, such as marriage or the birth of a child. The insured's earned income must be higher to justify the additional coverages.

Hospital Confinement Rider

The hospital confinement rider is an optional benefit that waives the elimination period if the insured requires inpatient hospitalization. The rider will pay the insured the total disability benefit while hospitalized during the policy's elimination period, and ceases once the insured is released from the hospital.

Occupational Considerations

The individual's occupation is the most important underwriting factor for disability income policies. Individuals with more hazardous occupations are charged higher premiums to account for the greater risk of disability.

Lifetime Benefits

The lifetime benefits provision prolongs the disability income policy benefit period beyond the age 65 cutoff to the insured's entire life. The provision usually requires that the insured is totally disabled prior to age 65. Some policies specify that the disability must be caused from accidental injury, while other policies include both accidental injury and sickness. Policies that pay lifetime benefits for sickness usually require that the disability occur prior to the insured reaching the age of 55.

Medical Reimbursement Benefit

The medical reimbursement benefit, also referred to as the nondisabling injury rider, pays medical expenses caused by an accidental injury that does not cause total disability. This benefit does not pay disability income benefits.

Underwriting

The process that insurers use to select, classify and rate risks so that they accurately reflect the amount of risk undertaken.

Relation of Earning to Insurance

The relation of earnings to insurance provision restricts the insured's disability income benefit to an amount based on earned income during the previous two years.

Declined

Underwriting classification in which the risk is uninsurable because the applicant poses too great a risk for the insurer to provide coverage.

Social Insurance Supplement (SIS)/Social Security Rider

Rider that supplements Social Security, Worker's Compensation or other social insurance which pays a benefit equivalent to Social Security disability benefits, but is reduced by the amount of social insurance benefits. The SIS pays benefits for the following scenarios: -During the 5-month Social Security disability income waiting period; -If the insured has been denied Social Security disability income benefits; or -If the amount of the Social Security disability income benefit is less than what the SIS rider would pay.

Starter Plans

Several individual disability plans have been created that are tailored to specific types of professionals such as blue and gray collar professions, physicians and surgeons, lawyers, brokers and traders, chiropractors, dentists, and business executives. These plans ensure that professionals are provided with a sufficient amount of disability income replacement.

Cash Surrender Value

The cash value surrender rider refunds 60% - 80% of the insured's premiums and interest in cases where premium payments far exceed claims paid. This benefit is only paid when the disability income policy is terminated.

Cost of Living Adjustment (COLA) Rider

The cost of living adjustment (COLA) rider automatically increases the insured's disability income benefits after the insured has been receiving benefits for at least 12 months. The COLA rider protects the insured from the decline of the dollar value caused by inflation. The minimum change is typically 4%. Any adjustment to the disability benefit is tied to the Consumer Price Index (CPI).