Let's take a closer look at the Disability Insurance policy, learn how to understand how to ensure we get what we're paying for, then how to use that knowledge in the event of a claim.

Disability Insurance: Purchasing a Policy

Disability can be even more complicated than other types of insurance. The policies are often filled with undefined terms, such as "the important duties" and "gainful employment."

Fine line distinctions are made between "total disability", "partial disability", and other types of "disability".

There are differences between policies regarding how long benefits must be paid.

Different requirements are used to qualify for coverage initially, then stay qualified over time.

Some policies contain benefit increases to keep up with inflation. Others provide no such adjustments; thus their value starts to evaporate the day the policy is purchased. Without a COLA, (Cost of Living Adjustment), the benefits can diminish in value by about half, every eight to ten years.

There are different standards applicable to the policyholder's obligation to continue paying premiums once he/she is no longer working normally.

Some contain mathematical formulas for computing benefits that are difficult to understand.

Some premiums can never be raised. Others can be increased without restriction.
The best way to approach disability, or any insurance purchasing analysis, is to organize yourself. (See Notebook)

The most important components in a disability policy are:

• The occupation(s) insured.
  
  
• The definitions of each type of disability covered (total, partial, etc.)
  
  
• The benefits to be paid for each type of disability.
  
  
• The duration of payments.
  
  
• The cost of living adjustment provisions (if any).
  
  
• The premium cost and whether premiums can be raised in the future.
  
  
• The cancellation provisions (if any).
  
  
• The dispute resolution provisions (if any).

Your Preparation before Meeting With an Agent

Open your Notebook to the preparation section. Ask yourself detailed questions about what you are really seeking:

What is the precise occupation for which you are trying to insure yourself? Is it highly specific such as musician, computer programmer, carpenter, surgeon? Or more general such as business administrator?  An injury that may be disabling to one type of occupation may not be disabling to another.

How large a monthly benefit are you seeking? Do you need a benefit large enough to make up the bulk of the actual income you would lose, or merely that amount necessary to supplement your income or savings from other sources? This will have a big impact on your premiums.

How soon do you need to have benefits kick in? Do you have any work benefits that would provide initial income, such as accumulated sick leave or other such arrangement? This will also effect premiums.

What is your tax situation and how might that effect your analysis of what is needed?

How long do you need your benefits to continue? For life? To age 65? Or just until you can be trained in some other occupation?

What kind of work are you suited for - by reason of your education, training and experience - other than your current occupation? Do you want your policy to require that you enter another of these occupations should you become disabled from your current line of work?

What disabilities do you expect to be covered for? Specific disabilities or for any illness or injury? Mental as well as physical?

Do you want your benefits to include a COLA formula?

What other issues are important to you and your family?

As always, take good notes on these issues and save them in your insurance Notebook.

What do you need to know about the claims handling track record of the company whose coverage you are considering?

 

Meeting with an Agent

Save any marketing brochures, pamphlets and ads presented by the insurance company. These may be beneficial should there be any inconsistency in policy coverages.

Question the Agent. Ask the questions you have prepared in the above section.

• With which company's policies is he or she familiar?

• How would the agent compare the different companies and policies?

• Does the agent feel that one is better than another?

• Is this based on specific questions you have raised?

• Does the agent have copies of each policy under consideration? If not, why not? How long will it take to obtain them?

• What does the agent know about the claims handling reputations of the different companies? On what is this knowledge based?

• How would the agent evaluate the amount of disability coverage you need?
  

The Application

The application submitted to the company is very important. Any errors or inaccuracies could result in big problems.

For this reason it is probably best for you to complete the application yourself and to provide complete and thorough answers to the questions.

Never sign an application - or any insurance paperwork - without reading and understanding what you are signing. If you do not understand anything, ask for an explanation and take down notes. Save these in your file. Again, these notes can make a big difference in benefits paid in the future. This is especially so for disability insurance.

There are some very basic rights that you must have as an insurance consumer, and that should be expected of any insurance company you deal with.

The Policy

1. Ask for a full and complete disclosure of all the key provisions in any policy you are thinking of buying. This should include an explanation of what is and is not covered by the policy. You need to know about all important coverage, exclusion, limitation and restriction provisions, as well as dollar deductions, waiting periods and limits. 

2. Based on the information you provide, you are entitled to receive an evaluation of the amount of coverage you need, and an explanation of the basis for the amounts that would be provided. This is in order to assure that the coverage under the policy is sufficient and in order to avoid underinsurance in the event of a loss.

3. You should be sure to read the insurance application yourself, before submitting. If there is any significant misstatement or omission in the application you could wind up paying premiums for years only to have the company rescind (refuse to honor) your coverage at the time of a claim.

4. You have the right to be shown a copy of the actual policy being purchased, not just a proposal or summary, before you purchase it.

5. Ask if your policy is governed by ERISA. ERISA policies eliminate important rights under state insurance laws. Always ask the agent whether there is an alternative, NON-ERISA policy available. This is very important (see our ERISA section, FAQs and Glossary for more information)

6. Ask the agent whether any recent, substantial fines, disciplinary actions, jury verdicts or appellate rulings have been rendered against the insurance company you are considering. Bear in mind that the larger the insurance company, the larger the number of its policyholders, and the greater the chance a company may have made mistakes in the past. There is a difference between making mistakes and patterns of fraudulant or unfair claims handling.

7. In many situations, if the company's insurance agent has misstated the coverage offered, the company can be held responsible and must make good on the agent's promises.

 The "What In the World Does This Mean" Test

Question specific policy phrases. For example, if the policy mentions inability to perform your "substantial and material duties", what does that mean? What are your substantial and material duties? Does this mean inability to perform all of your substantial and material duties? Most of them? Some of them?

Do the same thing with any other phrases you do not fully understand, such as any distinctions between total and partial disability; references to rehabilitation or retraining requirements; clauses about how to calculate the amounts of benefits you are entitled to receive; issues about how COLAs are calculated; how long benefits will be paid; whether or not there are any deductions that can be made from other benefits such as Social Security, pensions, retirement benefits, or any other monies are are entitled to receive.

Ask the agent to explain mathematical formulas used for the calculation of benefits.

As always, take notes on these things and save them in your Notebook.

Agents versus Brokers

You may be able to purchase a policy from an insurance agent, broker or directly through the insurance company.

Agents are representatives of the insurance company. Two types of agents are Captive agents and Independent agents. Captive agents work for one insurance company and sell only that insurance company's policies. Independent agents sell policies from several different insurance companies.

Brokers may be considered representatives of the insurance company if the broker is paid by the insurance company. However, if the broker is paid by you and they represent your interests, the insurance company may not be responsible for their representations to you.

Keep in mind that some agents and brokers do not fully understand the specific but important details of the policies they are selling. Therefore, before purchasing homeowners insurance, make sure you are dealing with a qualified, experienced agent or broker.

Filing Claims

Is My Claim Covered?

Before talking to any insurance company representative there are a number of things you should do.

First, do your best to analyze whether there are any arguments, pro or con, as to whether there is coverage for your situations. Take out your policy and the notes you kept from your discussions with the agent.

Read this material in the context of the TYPE of claim involved. 

Go to the "Definitions" page to see whether any of the words used in the sections you are reading have specific, detailed, meanings under the policy.

Once you have determined that a particular loss is generally covered, the next thing to do is to find out whether there are any specific limitations that may be applicable to your situation. For example, some policies limit benefit periods for mental disabilities such as clinical depression. If you have a mental or emotional disability is there also a physical disability involved? This can be important because even policies that limit benefits in mental disability situations can not do so if there is a physical disability as well. 

As you go through the process of doing your best to analyze the applicable coverage, remember the Rules of Construction discussed throughout this site. These are the rules (such as the one that any ambiguity must be construed in favor of the policyholder) that you can use to your advantage in the interpretation of your policy.

Second, calculate how much you are entitled to receive per month and for how long. Does your policy provide any "automatic' benefit increases? "Optional" increases? Cost of living adjustments? Are there any waiting periods involved?

Locate the sections in you policy that talk about these things and take out a pencil and do the calculations. Again, if any of these sections are subject to more than one interpretation, the ambiguities must be interpreted in your favor.

Third, develop a strategy that will result in a fair and prompt resolution.

Anticipate everything you think the insurer will say about every aspect of your claim. Think about what your responses will be to any questions raised. It is important to avoid being blind-sided by unexpected issues.

Fourth, evaluate your Substantial and Material Duties.

Make a list of all of the substantial and material duties you normally must perform in your work. For example a house painter may have to climb ladders, carry heavy objects, drive a car, be able to hold a paint brush steady for long periods of time and so on. List all of the duties you perform.

Under most policies, and under the laws of most states, you are considered disabled if you are unable to perform your duties in the "same or similar manner" that you have performed them in the past. In other words you are not required to start using special equipment which allows you to do things differently (such as painting while seated in a specially designed chair to take pressure off your back).

Make sure that your list is thorough and accurate. The point is for you to understand exactly why you qualify for benefits under the specific terms of your policy.

Presenting a Claim

The Insurance Adjuster: Once you file a disability insurance claim, an adjuster will be assigned to gather facts on your case - your medical records, information about your employment situation or business and so on.

The adjuster you will be dealing with is unlikely to have substantial authority to make final decisions on your claim. Instead he/she will probably be reporting to a claims supervisor or manager. That person will be making the important decisions.

You should obtain the adjuster's name, address, phone numbers, and email address and those of his or her immediate supervisor(s) or manager(s). Save these for your records.

You should, of course, cooperate fully with the claims adjuster. Since your goal is to move things long quickly, you should do whatever you can to accomplish this. Try to obtain all the information the company asks for and to provide it promptly. Otherwise unnecessary delays can occur. If you are asked for things you think may be unnecessarily intrusive, such as copies of income tax forms, you should seek advice as to whether or not the company is entitled to such things under the insurance regulations of your state and the facts of your particular claim. 

The Claim Form: Fill out the claim form carefully and accurately. Do not provide answers that can be interpreted incorrectly. For example, if the form asks you to list your job duties, make sure you list all of the important ones, not just some of them.

You will be asked to provide physician statements. Before having any doctor submit such a statements make sure he or she understands the definition of disability in your policy. Some doctors assume that Total Disability means that a patient is incapable of doing any kind of productive work. Under an own-occupation policy it does not mean that. Be certain that your doctors know what your work duties are and why you cannot perform them.

Also, make sure your doctors are prepared to identify what the objective evidence of your disability is. Even though the subject of "objective evidence" is seldom mentioned in a disability policy, most insurance companies consider it to be important to their claims investigation process.

Objective evidence of a disability might include such things as X-rays, MRIs, blood tests, biopsy's, measurements indicating atrophy, visual confirmation and other means that can be physically seen. Pain for which there is no objective evidence, may be considered a "subjective" complaint. And even though the latter are equally disabling and equally qualifying for benefits, most insurers will require something more than subjective complaints before being willing to pay. Find out all the facts that provide verification of your complaints. 

Independent Medical Exam(s) (IMEs): An "Independent Medical Exam" is a process whereby an insurer chooses a physician or psychologist (depending on the case) to examine the claimant and provide the company with a medical evaluation.

Some insurance companies maintain lists of such experts in their own files; others use outside services specializing in consulting with insurance companies to do defense work.

Generally, when you receive an IME notice you must attend at a mutually convenient time and place. You should be cooperative, polite, responsive to questions and forthcoming. But do not let the evaluator twist your words. Take careful notes during or after the session and ask the Doctor to provide with a copy of the report. Some doctors will do so, others will not. Store your notes in your insurance Notebook.

If a video or tape recorder is used (different states have different rules on this) ask to be able to use your own recorder as well. (Bring one to the session just in case you need it.) Having a recording of what transpired can be very beneficial.

Always remember, an IME physician is not a treating doctor trying to help you. He or she is hired by the insurance company to provide information to benefit the company in its investigation of your claim.

Psychologist IMEs: A psychologist IME, when appropriate, can also be ordered by your insurance company. Such testing is appropriate when your claim is based on a mental or nervous disorder, or in some situations when the insurance company believes you may be malingering or exaggerating an injury or disease. Psychological IMEs can involve probing questions about your situation and personal details about your life. Such exams may also involve psychological testing such as the Minnesota Multiphasic Personality Inventory (MMPI).

Some psychologist questions may be valid in one type of situation but not in others. If you feel that questions are being asked that are inappropriate, you should politely decline to answer them until you can obtain expert advice as to whether the specific questions are proper or not. 

Functional Capacity Evaluation(s) (FCEs): Functional Capacity Exam can also be ordered by insurers in disability claim situations. A FCE is an exam which attempts to test a claimant's ability to perform the specific kinds of functions he or she would normally perform at work. Questionnaires are filled out and tests are given to measure the subject's ability to perform specific maneuvers for specific periods of time. These tests are usually a lengthy. They are given by test administrators who are specially trained in this field. If you cannot perform a specific test without experiencing pain, you are not required to continue, and should politely decline to do so.

For any Independent Medical Exam, FCE or similar insurance company exam, it is important to remember to cooperate fully. Never exaggerate in anything you say or do in such exams. If you have the kind of injury or condition that is exacerbated or worsened by repetive maneuvers in a work environment and you have not been in that environment, IME are FCE testing may not be able to provide accurate results. 

Investigators: Disability insurance companies frequently hire investigators to do such things as take witness statements, conduct video or audio surveillance, and search court, hospital, employment and other records for information about a claimant. Be aware that this can happen. In most states it is legal.

Recorded Statements: In some cases insurers respond to claims disagreements by demanding to take a recorded statement from the claimant. If this happens you should prepare beforehand. 

Read your policy:

• Read your claims documentation.
  
  
• Read your notes.
  
  
• Read all correspondence.
  
  
• Review the list of your occupational duties.
  
  
• Anticipate every question you can think of being asked.
  
  
• If you do not fully understand a question, ask to have it repeated.
  
  
• If you do not know an answer, do not guess.
  
• Maintain a pleasant demeanor. 
  
  
• Respond to questions with brief answers. Do not volunteer information not specifically asked for.

If the person questioning you is harsh or abusive, or if you are asked questions that seem to be inappropriate, ask to suspend the proceedings until you can obtain professional advice on these matters. Don't make a passionate speeches. Don't become angry, rude or defensive. Just say, "I'm sorry, I would like to obtain professional advice on this. I'm not familiar with proceedings of this type," and leave without further comment.

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Negotiating: If your insurance company denies or terminates a disability claim it will send you a letter explaining why. The letter will quote the language in your policy, or the facts surrounding your claim that are the basis for the denial. If you disagree with your company's decision, you should take the matter up with a claims manager or supervisor. Think through the reasons for your disagreement carefully and talk to the manager or supervison about the situation. If that fails, put your thoughts in writing. It is often wise to obtain advice from an insurance expert before writing this letter.

In addition to the above, most disability policies provide for an appeal process within the company. This, more formal, process bumps the claim to a higher level within the company. 

Mediation: Mediation is a process whereby an independent third party, chosen by the agreement of both sides and experienced (in this case in insurance matters), steps in and tries to facilitate a resolution of the disagreement. Mediation, unlike certain types of arbitration, is not binding. No decisions are made by the mediator. Instead the mediator simply tries to bring the two opposing sides together in a joint effort to avoid litigation.

There are professional mediators available through organizations such as The Judicial Arbitration and Mediation Services (JAMS), and other organizations which promote mediation services.

Be sure your mediator is objective and does not have a built-in tendency to favor one side or the other.

Statutes of Limitations and Contractual Limitations: Statutes of limitations are laws setting time limits for the filing of civil lawsuits. The time limits differ according to the state you reside in and according to the type, or theory, of the lawsuit in question (negligence, breach of contract, intentional infliction of mental distress and bad faith can all have different statutes of limitations). Contractual limitations, on the other hand, are provisions in contracts which may alter or change a state's statutes of limitations. You should be aware of both your state's statutes of limitations and of any contractual limitations in your insurance policy. Both types of limitations restrict your ability to sue if you disagree with a decision your insurance company has made. If you do not file a lawsuit within the time period set forth, you may lose all of your rights to contest any adverse decision)(s) made regarding your claim.

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