If you have a disability claim, you’re already at a disadvantage trying to figure out what 90% of the language means that you’re now forced to read, understand and respond to.
Making sense of the terms of your long term disability policy requires nothing short of a glossary. Our list of disability insurance definitions will help. The glossary begins with the most important definition of all—the definition of “disability.” It is a key part of any disability policy.
Definition of Disability – The criteria used by the insurance provider to determine whether you are disabled and therefore eligible for disability payments.
There is no one legal definition of disability. Disability is defined differently and individually within each policy from each insurance company. The smallest of words can make a great difference in the entire meaning of your policy.
Your disability policy will also define types of disability coverage to include the following terms. Each term is defined in the glossary below:
- Any Occupation
- Own Occupation
- Split Definition Coverage
- Catastrophic Disability
- Residual, or Partial Disability
Glossary of Long Term Disability Insurance Terms
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A
Active Full-Time Employee – A person who works a normal workweek for an employer. Employees must work at least the number of hours shown in a plan’s Schedule of Benefits
Active Work Requirement – To be eligible for disability benefits, you must be working at least the minimum number of hours per week as described in your policy, for earnings that are paid regularly. Many policies require that you are performing the material and substantial duties of your regular occupation.
Activities of Daily Living (ADLs) – Routine activities that people tend do everyday without needing assistance. There are six basic ADLs: eating, bathing, dressing, toileting, walking and continence. An individual’s ability to perform ADLs is important for determining disability coverage under the terms of the insurance policy.
Actual Damages – The money award that the defendant pays to the injured plaintiff to cover the actual costs of the plaintiff’s loss or injury. Also called compensatory damages.
Adjuster – Someone who is employed or contracted by the insurance company to investigate insurance claims and determine how much the company must pay for a submitted claim.
Any Occupation – A definition of disability describing the type of job for which a person is qualified. “Any occupation” means an employee is considered disabled if he or she is unable to work in any occupation for which he or she is qualified by education, background and skills.
Attending Physician Statement – Medical report written by the insured’s doctor that documents his or her past and current health history. Insurance companies use this report to review applications for insurance and/or to evaluate benefit eligibility, in the event of a claim.
B
Bad Faith – Insurance companies are legally bound by a “covenant of good faith and fair dealing” in dealing with their policyholders. When an insurer breaches this covenant, by unreasonably delaying or denying payments, it is acting in bad faith.
Bad Faith Lawsuit – When an insurance carrier acts in bad faith, they can be sued for actual and consequential damages as well as punitive damages. If a satisfactory settlement with an insurance company cannot be achieved, bad faith insurance claim litigation becomes necessary to obtain punitive damages for the violated policy holder.
Beneficiary – A person or entity that is named to receive proceeds or benefits from an insurance policy.
Benefit Period – This is a maximum length of time during which benefits will be paid.
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C
Catastrophic Disability – A catastrophic disability policy is one that pays benefits only if a claimant is so severely impaired by accident or disease, the claimant cannot do even the most basic activities of daily living such as feeding, getting dressed or showering without assistance. The insurance company will often send a home health nurse to the claimant’s home to confirm that the claimant is disabled under this type of policy.
Claim – A request for payment under a disability insurance plan.
Contributory Plan – A group coverage plan in which costs are shared between an employer and its employees.
Cost of Living Adjustment (COLA) – This is an optional benefit with some long term disability plans. It raises the monthly benefit amount each year based on the cost of living.
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D
Declaration Page – The section of a disability insurance policy containing a summary of the coverage and limits of the disability insurance provided.
Deductible – A provision in a disability insurance policy that an initial amount of expenses shall be paid by the policyholder before the disability insurance coverage begins.
Denial Letter – After the claim is filed, if the claim is denied, the claimant will receive a “denial letter.” This letter is very important because it will list what evidence the insurance company reviewed when making its decision, and who reviewed the evidence. The denial letter should state the reasons the claim was denied and what medical evidence the carrier needs to prove disability. The denial letter also gives important information for an appeal, including where and when the appeal must be received.
Disability Appeal – The disability appeals process lets you ask for a review of a claim that has been denied by your insurer. If you file a claim and it is denied, it is your right to appeal and legally challenge in a court of law, the denial.
Disability Income – A monthly benefit paid to an individual for a disability covered in the policy provisions, in the event of an accident or sickness, to help replace earnings lost.
E
Effective Date – The day the insurance policy begins.
Elimination Period (also called Waiting Period) – Most long term disability policies have an elimination or waiting period. This means a claimant must first apply for and receive all of the STD benefits available under their policy —or— beginning with the first day of disability, a period of continuous disability up to six months must elapse before you are eligible to receive LTD benefits from your insurance provider.
ERISA – ERISA stands for the Employee Retirement Income Security Act of 1974. ERISA is a federal law that regulates the handling of Employee Benefit Plans. Most long-term disability plans offered by a private employer are governed by ERISA. If you challenge a disability denial under an ERISA governed plan or policy, you must bring the claim pursuant to ERISA regulations and procedures. State law remedies do not apply to an ERISA claim. ERISA does not apply to privately purchased insurance.
Exclusions – Disability policies include specific conditions in which a disability will not be covered. For example, many plans will not provide benefits for disabilities arising from committing a felony, or self-inflicting an injury.
F
Functional Capacity Exam (FCE) – A series of physical tests given to determine a claimant’s Residual Functional Capacity, to see if they can return to work. It typically tests how well a person can walk, sit, crawl, lift, bend, stand, climb or carry. It can also focus on a specific function, like use of the hands. The tests used show if the worker can resume normal job activities.
G
Gainful Employment – means the claimant could reasonably be expected to earn at least as much as the benefit amount (or some other defined percentage). This concept is typically found in the “any occupation” portion of the definition of disability.
Group Coverage – Group long-term disability coverage is offered to an individual through an employer, professional group or association. You may be responsible for no cost, a percentage of the cost or a set premium.
I
Individual Disability Insurance (IDI) – Individual disability coverage can be purchased directly from an insurance broker. The individual is responsible for all costs.
Insured – A person or organization covered by insurance.
L
Long Term Disability Insurance – Long term disability (LTD) insurance is purchased to provide monthly benefits (income replacement) if a person becomes ill or injured and is unable to work for a period extending beyond two years. You may buy it directly from the insurance provider, or it may be part of your employer-sponsored group disability plan. Each individual insurance policy defines the terms “long-term” and “disability.”
Lump-Sum Payment – In a Buy-Sell policy, disability benefits are typically paid in a lump-sum on the day following expiration of the Elimination Period.
M
Material Duty (or Duties) – the set of tasks or skills required in your specific occupation. These are duties that cannot be reasonably omitted or changed without hindering your ability to perform your occupation. Material duties are used to help the insurance adjuster determine whether you are disabled under the contract. Small differences, such as “a,” “the,” “some,” and “all” material duties, can greatly impact whether you qualify for disability benefits.
Maximum Capacity – The full use of the employee’s capabilities in any occupation that he or she is able to do.
Maximum Monthly Benefit – This is the highest dollar amount a disabled employee can receive on a monthly basis under the LTD plan.
Mental Health Limitation – Most policies have a 24-month mental health limitation. In other words, benefits for mental health conditions such as depression, anxiety or bipolar disorder will only be paid for 24 months.
Minimum benefit – The lowest monthly amount payable to the claimant after offsets; this provision ensures that the claimant will receive at least a minimum benefit from the carrier.
N
Non-contributory Plan – a group coverage plan in which the employer pays the entire premium and the employee does not contribute.
Non-Exertional Limitations – Non-exertional limitations are largely self-reported and therefore, ignored for the most part by the insurance company. Examples include fatigue, intellectual and cognitive limitations, headache, memory loss and medication side effects.
O
Offset – Specified payments or benefits received by the claimant from another source that reduces the amount of LTD benefit payable. Offsets typically include disability payments from sources such as Social Security Disability, Workers’ Compensation, certain retirement disability benefits, settlements from lawsuits, and certain state disability benefits.
Own occupation – This definition of disability will vary depending on the insurance provider. For the first 24 months or as defined in the policy, a claimant only has to be unable to perform their “own occupation” that they have been trained to perform.
P
Plaintiff – Someone who initiates a lawsuit in a court of law.
Policy (also, Contract) – This is a legal agreement between an individual or group and an insurance plan. It lists all details of the plan’s coverage.
Policyholder (also, Contract Holder) – an individual or group who buys an insurance plan from an insurer.
Portable Coverage – Some LTD policies have a portable option, meaning that you are able to retain benefits when switching employers.
Pre-existing Condition – a medical condition that exists prior to the effective date of the policy and for which a person has received medical care.
Pre-existing Condition Exclusionary Period – A period of time during which a person’s prior medical condition(s) will not be covered by the policy. However, after the pre-existing exclusionary period expires, the condition becomes covered under LTD coverage. Most policies have a pre-existing condition exclusion.
Pre-Disability Earnings – The amount of a policyholder’s wages or salary in effect on the day before the disability began.
Premium – The periodic payment you pay to keep your insurance policy active. Initial premiums are based on issue age, occupation, benefit period, elimination period, monthly benefit amount and any optional coverage you select.
Punitive Damages – A money award that the defendant pays to the injured plaintiff designed to punish a particularly bad-acting defendant. In cases involving disability claims, punitive damages are awarded when the insurance company has been found to engage in fraudulent, oppressive or malicious behavior.
R
Rate of Benefit – The percent of income the disability plan is intended to replace.
Recurrent Disability – A provision designed to protect the claimant who returns to work, but within a certain period of time becomes disabled again from the same or related cause. In these cases, some insurance policies consider the insured to still be disabled from the original disability and is not subject to a new elimination period.
Rehabilitation Benefits – Vocational or physical services the insurer agrees to provide or authorize as part of a rehabilitation plan to return the employee to gainful work.
Residual Disability (Partial Disability) – A definition of disability in which you are physically unable to perform some, but not all, of your regular job functions because of sickness or injury. This allows you to remain eligible for limited disability benefits while working in a limited capacity (working a lighter duty job or part time hours).
Residual Functional Capacity (RFC) – A claimant’s RFC is based on what physical level work a person can perform. The Dictionary of Occupational Titles and Social Security define work as
- Sedentary: such as an office job, where a claimant sits up to six hours a day, stands or walks up to two hours a day and lifts and carries up to 10 pounds
- Light: such as a cashier or security guard, requires that a person be able to stand or walk up to six hours per day and frequently lift and carry 10 pounds and occasionally lift and carry 20 pounds
- Medium: such as a nurse or commercial truck driver, requires the ability to lift 50 pounds
- Heavy: such as construction, requires the ability to lift 100 pounds
- Very heavy: requires the ability to lift more than 100 pounds.
Rescission – The insurance company retroactively canceling a disability insurance policy due to nondisclosure of a material fact or misrepresentation of a material fact on an application.
Rider – A supplemental agreement attached to and made a part of the policy, providing additional features to your coverage (usually for an additional premium.)
S
Salary Percentage Requirement – The “any occupation” standard usually includes a salary percentage requirement. In other words, the insurance company must find occupations that will pay the claimant usually at least 80% of their pre-disability income.
Schedule of Benefits and Exclusions – The part of the disability insurance policy that states what the policy does and does not cover.
Self-reported Symptoms Limitation – Unfortunately, some symptoms are self-reported by the claimant that are not easily validated by objective testing. Some policies have a provision limiting coverage (often two years) for disability benefits due to an illness or injury that is based on self-reported symptoms. Examples include Chronic Pain, Fibromyalgia, and Chronic Fatigue Syndrome.
Short Term Disability (STD) – Short Term Disability benefits are paid for a limited amount of time, anywhere from one week to six months, depending on your policy.
Split Definition Coverage – This definition can be within one’s own occupation for a specific time period or with any occupation after the maximum benefit period has passed.
Statute of Limitations – A legal provision setting a time limit during which a person can initiate legal proceedings. The specific period of time varies based on the type of claim and the state where a claim is filed.
U
Underwriter – The company that receives insurance premiums and has the responsibility for fulfilling the policy contract. Underwriter also is defined as a professional trained in evaluating risks and determining associated premium rates and benefit coverage.
V
Vocational Expert Opinions – Also called “jobs experts” or “VEs”, vocational experts have specific training in Vocational Rehabilitation or Vocational Counseling. The VE forms an expert opinion on what jobs a claimant may be able to perform. The VE may come to the conclusion that there are no jobs available. Their expert opinion takes into account the claimant’s RFC, all restrictions and limitations caused by the impairment, and their age, education, background, work experience and skills.
Vocational Review (by the Insurance Company) – If the insurance company finds a claimant “not disabled,” they will often perform a cursory “vocational review.” The vocational analyst will take the restrictions the insurance company decides the claimant has and the skills the vocational analyst derives from a claimant’s past work history and come up with a list of jobs that the claimant can perform. The vocational analyst will state that these jobs are available in the claimant’s home region and that the job will pay usually, at least 80 percent of the claimant’s pre-disability earnings. These reviews are often flawed and make unreasonable suggestions for occupations.
Voluntary (or employee-paid) – a group plan that employees choose to participate in and pay 100% of the premium.
W
Waiver of Premium – As long as benefits are being paid out, no further disability premium payments are required from individuals who become disabled and qualify for benefits.
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