Long-Term Disability Insurance Terms
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Active, Full-Time Employee: Only an active, full-time employee is eligible for most disability insurance coverage. An employee must work for an employer on a regular basis for a minimum number of hours.
Benefit Percentage: This percentage reflects what portion of the employee's income will be paid as disability benefits.
Conversion Privilege: Only included in some long-term disability (LTD) policies, a conversion clause allows employees who are quitting their job to continue their LTD coverage by paying for it themselves.
Definition of Total Disability: This is how disability is defined in the policy and is used to determine whether an employee is eligible for disability benefits.
Own Occupation: Most policies will pay disability benefits for a period of time if the employee can't do their job, even if he or she could do other work.
Any Occupation: After a period of coverage (often two years), a long-term disability policy may provide that employees will continue to be considered disabled only if they are unable to do any type of work (for which their education or training qualifies them).
Definition of Partial/Residual Disability: When an employee is able to return to work part-time, or if the employee if able to return to work full-time be at lower pay, he or she may be eligible for benefits under this definition, under some LTD policies.
Elimination Period: This is the waiting period between the date the employee becomes unable to work until the date benefits begin to be paid. A typical elimination period is six months.
Evidence of Insurability: For most types of life or heath insurance, an applicant must undergo a physical exam before getting insured, bu this "evidence of insurability" is not usually required for LTD group coverage through an employer.
Exclusions: Most LTD plans include exceptions to when benefits will be paid. Some typical exclusions are self-inflicted injury or injuries sustained during commission of a felony, participation in a riot, or acts of war.
Family Care Expenses: This type of benefit, optional under most LTD policies, gives an employee with children extra help when trying to return to work. This benefit provides partial reimbursement for certain child care expenses.
Indexing: This refers to how the employee's benefits are adjusted to keep up with inflation. An employee's pre-disability wages are usually increased by a certain percentage (like a cost of living adjustment) on an annual basis before the benefits percentage is calculated.
Limitations: LTD plans may limit payment of benefits for certain disabilities. For example, mental illnesses may not be covered, or may only be covered for two years. Another common limitation is that pre-existing illnesses may not be covered for an exclusionary time period, such as one year.
"Mandatory" Rehabilitation: Some policies require disabled employees to participate in a rehabilitation program to try to return to work.