Group Disability Insurance

Purpose of Disability Income Insurance

Protects an individual insured's earned income if injured and unable to work.

Short-Term vs. Long-Term Disability

Short-term quickly replaces income for temporary injuries; long-term provides longer benefit periods for serious conditions.

Total Disability Qualification Requirement

The insured must be under the care of a physician.

Material vs. Substantial Duties

Material duties are actual tasks performed; substantial duties refer to essential capabilities.

Any Occupation Definition

Inability to perform material and substantial duties of own or any suitably suited occupation.

Own Occupation Definition

Inability to perform the material and substantial duties of one's own occupation.

Loss of Earnings Test (Income Replacement)

Requires a minimum loss of 20% of income to qualify for benefits.

Partial Disability Benefit

Inability to perform key duties or work full-time; traditionally 50% benefit for six months.

Residual Disability

A proportional disability benefit based on the specific loss of income.

Recurrent Disability

A relapse within six months considered part of the original disability with no new waiting period.

Presumptive Disability

Conditions like blindness, deafness, speech loss, or dismemberment that automatically qualify for total benefits.

Non-Occupational vs. Occupational Coverage

Non-occupational excludes work injuries; occupational covers both work and non-work injuries.

Social Security Disability Waiting Period

A five-month waiting period is required before qualifying for benefits.

Social Security Definition of Disability

Inability to perform any substantial gainful work expected to last at least one year or result in death.

Workers' Compensation

Liability insurance guaranteeing benefits for work-related accidents or occupational diseases.

Benefit Period

The maximum length of time disability income benefits will be paid for a single claim.

Elimination Period

A time-based deductible immediately following the start of a disability when benefits are not payable.

Probationary Period

Days that must elapse after policy inception before illness-related claims are covered.

Morbidity

Measures the statistical likelihood that an individual will suffer a disability.

Change of Occupation Provision

Allows insurers to adjust premiums or benefits if unnotified occupational risk changes occur.

Non-Cancelable vs. Guaranteed Renewable

Non-cancelable locks rates and terms; guaranteed renewable allows rate increases on a class basis.

AD&D Principal vs. Capital Sum

Principal sum is the death benefit; capital sum is typically 50% for dismemberment.

Cost-of-Living Adjustment (COLA) Rider

Indexes active claim disability benefits to changes in the Consumer Price Index.

Future Increase Option (FIO) Rider

Allows buying extra coverage at specified dates without proof of insurability if income increases.

Group Long-Term Disability Definition Shift

Often uses 'own occupation' for two years, then switches to 'any occupation'.

Business Overhead Expense (BOE) Insurance

Covers business operational expenses and payroll if the owner is disabled, excluding owner's income.

Disability Buy-Out Policies

Funds buy-sell agreements to buy out a disabled partner or shareholder.

Key Person Disability Insurance

Indemnifies a business for the lost services of a key partner, stockholder, or employee.

Taxation of Individual Disability Policies

Premiums are not tax-deductible, and benefits are received tax-free.

Taxation of Employer-Paid Group Disability

Employer premiums are tax-deductible business expenses; resulting benefits are taxable.