Although not as prominent as the main features of disability insurance policies, built-in benefits are nevertheless vital to these policies. They supplement the main features and help enhance the policy. Many built-in benefits form a part of every disability insurance policies, although the definitions may vary among insurance companies. Below is a list of commonly found built-in benefits of disability insurance policies.
Waiver of premium: Premiums are waived after disability has continued for 90 days or from the day benefits become payable, if earlier. Any premium paid during this period will also be refunded.
Accumulation of days to satisfy elimination period: The elimination period is the number of days that must elapse before disability benefits begin. If different periods of disability are interrupted by a return to work, the days can be added together to satisfy the elimination period as long as the disabilities are due to the same or related causes and are separated by less than 6, 12 or 24 months (number of months depends on the policy).
Recurrent disability: A recurrent disability is one that occurs within 6 or 12 months (number of months depends on the policy) of an earlier disability claim and results from the same or related causes. In this case, the second disability is considered to be a continuation of the first. The elimination period won’t have to be satisfied again, and the benefit will be payable until the end of the benefit period.
Rehabilitation benefits: Subject to approval of the insurance company, benefits will continue if you participate in approved vocational rehabilitation programs. Also, the insurance company may agree to pay for the costs of such programs, since it may result in your return to work sooner than anticipated.
Recovery benefits: The insurance company may continue to pay a decreased benefit after you have returned to work from a disability if you still experience a loss of income. The benefit helps you transition back to work and can last anywhere from 2-6 months, depending on the policy.
Catastrophic disability: The monthly benefit is increased by 25% and the elimination period is waived in the event of a catastrophic disability. A catastrophic disability is defined as:
- Total and permanent loss of one of the following: sight of both eyes, hearing of both ears, speech, or the use of both hands, feet, or a hand and a foot;
- The inability to perform two of the following six activities of daily living: feeding, bathing, dressing, transferring, toileting and continence;
- Requiring substantial supervision because of a cognitive impairment; or
- The diagnosis of a terminal illness with a life expectancy of less than one year.
If some of the definitions look familiar, it’s because that numbers 2 and 3 are derived directly from the definition of long-term care insurance.
Long-term care conversion: Available on certain policies, this option allows you to convert a portion or all of your disability insurance into long-term care insurance with no medical underwriting.
Survivorship benefit: If you die while on claim, the insurance company will pay a lump sum benefit equal to three times the monthly benefit to your estate. This helps surviving family members of the insured pay for final expenses such as funeral costs.
Transplant surgery benefit: If the policy has been in force for over six months, any disability due to cosmetic or donor transplant surgery will qualify as a disability for a claim.
These built-in benefits help flesh out disability insurance policies in Canada and come in handy when you really need them. Because of the shear number of built-in benefits in disability insurance policies compared to other types of insurance, it may be easy to forget they exist. But if a disability does occur, dig out the policy and go through it carefully and make sure there aren’t any benefits you’re leaving on the table.
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