CIC Life & Health Learning Guide - Sec.3: Health Insurance & Employee Benefits Concepts

CIC Life & Health Learning Guide - Section 3: Health Insurance & Employee Benefits Concepts

Disability Insurance (DI) Riders

Cost of Living Rider

  • Definition: A rider that increases coverage based on the Cost Of Living Adjustment (COLA) or another specified inflation rate once the disability begins.
  • Cost: Considered excellent but reasonably expensive.
  • Wait Period: There is typically a wait period of one or two years before the benefits start to increase after the disability has commenced.

Guaranteed Issue Rider (GIR)

  • Definition: A rider or policy provision allowing the insured to purchase additional coverage at certain specified ages.
  • Cost: Generally considered reasonably inexpensive.
  • Incremental Purchase: Available in one- to three-year increments; this option typically ceases at age 50.
  • Underwriting:
    • Medical Underwriting: None required.
    • Occupational Underwriting: Not applicable.
    • Financial Underwriting: A key point of distinction from life policies; the insurer typically insures only about 60% to 70% of coverage based on gross income, considering all forms of in-force individual and group coverage.

Social Insurance Substitute Rider

  • Definition: A rider that provides additional benefits to the insured when disabled and not receiving any social insurance benefits (e.g., workers' compensation, no-fault insurance, state disability insurance, or Social Security disability benefits).

Return of Premium Rider

  • Definition: A provision that returns all or a portion of the paid premium to the policy owner.
  • Conditions for Return: The amount returned depends on:
    • The number of years the policy has been in force.
    • The number of claims that have been paid during the policy duration.

Occupational Rehabilitation

  • Definition: A rider that assists in costs for vocational training after a disability has occurred.
  • Significance: Particularly beneficial if the insured holds an own-occupation policy, which allows for benefits collection while working in another job.

Catastrophic Disability Benefit

  • Definition: A supplemental benefit paid in cases of catastrophic disabilities.
  • Criteria for Payment: Typically defined as a scenario where the insured is unable to perform at least two Activities of Daily Living (ADLs).

Unemployment Premium Suspension

  • Definition: A provision that allows the suspension of premiums while the policyholder is unemployed.
  • Benefit: Enables the policyholder to maintain ownership of the policy without making premium payments during unemployment.
  • Coverage Impact: Coverage is suspended while the individual is unemployed; if the policyholder becomes disabled during this unemployment period, benefits will not be paid.

Underwriting Considerations

  • Non-Medical Factors: Other than medical underwriting, the following considerations are applied:
    • Age: The age of the applicant is taken into account.
    • Sex: Gender can influence risk factors and premiums.
    • Nicotine Use: Usage of nicotine products is considered.
    • Hobbies: Engagement in certain hobbies that may pose additional risks is evaluated.
    • Income: Both earned and passive income are reviewed.
    • Occupation: Careful consideration is given to the job duties as they may present more risk than the job title suggests; thus, a detailed job description is imperative.

Medical History Considerations

  • Underwriting Risks: A healthy individual who qualifies for standard life insurance may still face rejection when applying for disability due to preexisting conditions.
    • Options for Underwriting on Preexisting Conditions: The underwriter may choose to:
    • Endorse the application.
    • Rate up the premium (i.e., increase the premium).
    • Reject the application entirely.