|The following are terms that can be found in most Group Long Term Disability (LTD) and Short Term Disability (STD) policies.|
Employee. An individual must work for the employer on a regular
basis in the usual course of the employer's business to be considered
an active, full-time employee and eligible for coverage. Usually,
a minimum number of hours of regular work is specified.
The benefit payable is usually determined as a percentage of the
insured's pre-disability income up to an overall maximum benefit
If included, this option allows employees who are terminating employment
to continue some or all of their LTD coverage at their own expense
without submitting evidence of insurability. Generally STD plans
are not convertible.
Cost of Living
Adjustment (COLA): An optional provision in LTD plans (see Indexing
Total Disability. Probably the most important provision in a disability
contract is the definition of disability that will be used to determine
an employee's eligibility for benefits.
(Own Occ): Under this definition, an insured will be considered
disabled only if he or she is unable to perform the duties of his
or her occupation.
(Any Occ): Under this definition, an insured will be considered
disabled only if he/she is unable to work in any occupation for
which he/she is qualified by education, training, or experience.
This is closely related to the definition that the Social Security
Administration uses in determining disability.
Partial/Residual Disability. Generally a provision found in LTD
plans, as STD plans as a rule do not pay partial disability benefits.
This further definition of disability applies when an insured is
able to return to work part-time or even full-time (with a loss
of earnings). If the employee is working in this limited capacity
and is earning less than a certain level of income, he or she will
still be eligible for limited benefits under the plan. Not all disability
insurance carriers use this terminology to describe a "part-time"
work situation, but most provide some type of benefit to encourage
return to work.
Earnings: This provision defines the income covered by the plan. Generally
the employees 'Basic Income' is used for determining the benefit payable.
Therefore if an employees 'Basic Income' is substantially increased
by overtime and/or commissions, there could be a substantial gap in
covered earnings. Business owners have the same exposure if only their
salary or draw income is insured. To avoid this both the salary/draw
along with K-1 income (or business profit) earnings should be defined
as the 'Definition of Earnings'.
Period. This is the period of time between the date the disability
commences and the beginning of the benefit payment period. It is
the period during which an employee must be disabled before payment
of benefits begins. It is sometimes referred to as the Qualifying
Period. Most STD plans have a short (1-8 days) Elimination period,
while LTD plans generally have at least a 90 day Elimination period.
Insurability. Group disability coverage is generally sold as "guaranteed
issue" which means that evidence of insurability is not required.
However, most plans either limit or exclude 'preexisting conditions'
for a period of time under the policy (see 'preexisting conditions).
Also, under certain circumstances (e.g., late enrollment or a high
benefit maximum), an employee must provide medical or financial
information as proof to the insurance company that he or she is
There are specific provisions included in group disability plans
which exclude coverage in certain situations. Typically, a plan
will not pay benefits for disabilities arising from war, participation
in a riot, commission of a felony, or self-inflicted injury.
Expenses. A disabled employee who has family care responsibilities
may need extra help when trying to return to work. This type of
benefit provides an incentive to the employee who is taking part
in a rehabilitation program by allowing credit or partial reimbursement
for certain expenses incurred for family care. This is generally
an optional benefit under most long term disability policies.
is designed to provide some protection against inflation in LTD
plans. After the first year of disability, a disabled employee's
pre-disability earnings are usually increased (or indexed) by a
certain percentage on an annual basis.
There may be specific provisions included in group disability plans
that limit coverage in certain situations. Often only limited benefits
are payable for specific conditions or under specific circumstances
(e.g., mental illness and 'preexisting conditions). See also Mental
Illness Limitations and 'Preexisting Limitations below.
Stands for "long-term disability." But not just any long-term
disability: it's industry slang for group (as opposed to individual)
long-term disability coverage.
Rehabilitation. Based on the premise that most people want to work
in order to lead active, productive lives, a "mandatory"
rehabilitation provision encourages disabled employees to participate
in rehabilitation efforts whenever appropriate. Such a provision
allows for termination of benefits if the employee refuses to cooperate
or participate with a rehabilitation plan.
Period (Benefit Duration). This is the maximum length of time for
which benefits are payable under the plan as long as the employee
remains continuously disabled. Generally STD plans are payable for
a stated number of weeks in order to coordinate benefits with the
LTD plan's Elimination Period. For example a STD plan with 13 week
maximum benefit period would coincide with an LTD plan with a 90
day Elimination Period.
Benefit. This is the highest dollar amount a disabled employee can
receive on a weekly basis under a STD plan and a monthly basis under
an LTD plan.
and Substance Abuse Limitations. When a disability is caused by
a psychological/behavioral/emotional disorder, or by alcoholism
or the non-medical use of narcotics, sedatives, etc., benefits are
usually limited to a period of 12 or 24 months unless the employee
is confined to a hospital.
Benefit. There is usually a minimum amount paid as a monthly benefit
after reductions for Other Income Benefits.
Benefits (Benefit Integration). While disabled, an insured may be
eligible for benefits from other sources. Benefits payable under
a STD or LTD plan may be offset (reduced) by other sources of disability
income such as Social Security, workers compensation, or disability
benefits received from other employer-sponsored plans (including
Earnings. This is the amount of an employee's wages or salary that
was in effect and covered by the plan on the day before the disability
began. Some policies index Pre-Disability Earnings in order to compensate
Condition Limitations. When an insured has a physical or mental
condition that existed prior to the effective date of his or her
insurance coverage, it is considered a 'preexisting condition. Most
plans exclude or reduce disability benefits for any illness or injury
for which an employee received medical treatment (including but
not limited to prescription medications) or consultation within
a specified time period before becoming covered under the plan.
The recurrent disability provision is designed to protect an employee
who tries to return to work but becomes disabled again from the
same or a related cause. If this happens within a certain period
of time, the employee will be considered disabled from the original
disability, and will not be subject to a new elimination period.
This encourages an employee to return to work without fear of losing
Rehabilitation means the restoration of or improvement in an employee's
health and functionality. It usually involves a program of clinical
and vocational services with the goal of returning a disabled employee
to an active, productive life, and a meaningful occupation if possible.
Return to Work
Provision. To encourage employees to return to work as soon as they
become physically able, an additional incentive is usually provided
for a certain period of time, and is called a return to work provision.
Under this provision, the employee can receive close to 100 percent
of pre-disability earnings based on a combination of disability
benefits and return-to-work earnings.
Stands for "short-term disability." Industry slang for group
(as opposed to individual) short-term disability coverage.
The survivor benefit is a lump sum payment that will provide benefits
to the insured's eligible survivors in the event the insured dies
while receiving disability payments. This is an optional benefit
in most policies.
In order to become eligible for coverage under the policy, an individual
must satisfy a certain number of continuous days of service as an
active, full-time employee. This is known as the waiting period.
(In addition, a waiting period can also be the time period between
when a disability occurs and when payments from the disability insurance
Waiver of Premium.
When an individual becomes disabled and eligible for benefits, no
further disability premium payments are required as long as benefits
are being paid out.
or Accommodation. This benefit is designed to provide assistance
to an employer when a disabled employee requires modification of
the workplace or special adaptive equipment in order to return to
work. The employer will usually be reimbursed up to a set amount
for the cost of such modifications.