A sampling of helpful terms
Understanding disability insurance can feel overwhelming, especially when you’re already dealing with an illness or injury, whether planned or unplanned. This quick guide breaks down the important terms you may see in your policy and during the claims process—so you can feel more confident, informed, and prepared along your journey.
A
Appeal
If your disability claim is denied by your insurance company or the Social Security Administration, you may appeal or contest, the decision.
B
Benefit
The maximum amount or percentage of costs your policy will pay on a weekly or monthly basis. (This is also known as your “weekly benefit” or “monthly benefit.”) Disability policies usually pay from 40 to 65 percent of your pre-disability earnings at the time you purchased insurance, for a specific period of time.
Benefit duration
The specified period of time during which a benefit is paid. Depending on your policy, this period may run from one to five years, until age 65, or, in some cases, for life.
C
COBRA
The Consolidated Omnibus Budget Reconciliation Act, or COBRA, is a federal law that allows you, if you work for an insured employer group of 20 or more employees, to continue to purchase health insurance for up to 18 months if you lose your job or your employer-sponsored insurance is terminated.
D
Denial
The refusal of an insurance company or carrier to honor a claim for services or coverage. See appeal.
Disability
Your policy will help clarify what’s defined as a disability for you. For example, some policies cover disabilities if you’re unable to perform the duties of your own occupation. Others may pay only if you can’t work at any occupation for which you’re reasonably qualified. Still others only cover disabilities arising from an accident. You or your employer may be asked for information to determine your abilities, restrictions and limitations. See occupation.
Disability insurance
Disability insurance can help you replace some or all of your income if you get injured or sick and are unable to work for a period of time. It can help you pay your bills at a time you really need it.
E
Elimination period
The period of time before benefits kick in. The elimination period begins with a disability and is the period of time for which no benefit is payable. These days have to be “eliminated” before a benefit can be paid. A typical elimination period may be 30 days, 90 days or six months after a disability occurs. You’ll find this information in the “Schedule of Benefits” section of your policy.
F
FMLA
The Family and Medical Leave Act (FMLA) entitles eligible employees of covered employers to take up to 12 weeks of unpaid, job-protected leave per year for certain conditions.
J
Job
he specific job, or role, you’ve been hired to perform by your employer. This is not the same thing as your occupation. See occupation.
L
Long-term disability
In the context of insurance, a long-term disability is defined by your policy. Whether a disability is short- or long-term is defined by the maximum benefit duration in your policy. You have a long-term disability if you are unable to do the work you did before a medical condition rendered you disabled for a long period of time. See benefit and disability.
Long-term disability insurance
A type of insurance that pays a percentage of your salary if you are not able to work for a long period of time due to sickness or injury. The period of time is defined by your policy and your employer.
M
Medicaid
A health care program funded by federal and state governments that assists low-income people in paying for medical care.
Medicare
A federal health insurance program for people 65 and older, certain younger people with disabilities and people with end-stage renal disease.
O
Occupation
Your disability may prevent you from completing the requirements of your “own” occupation or “any” occupation you may be qualified for.
- Own occupation: Your occupation is the activity that serves as your regular source of livelihood, or your vocation. It doesn’t refer to the specific job or tasks you were hired to perform by your employer. “Own occupation” policies define disability as the inability to complete the requirements of your specific and current occupation. To receive benefits, you have to prove that you can’t work in your current occupation. (Example: Welder)
- Any occupation: Any occupation you’re reasonably suited for based on your education, experience and other factors. “Any occupation” policies define disability as the inability to work in any occupation for which you’re reasonably trained and qualified. (Example: A former welder could teach welding)
- Gainful occupation: An occupation that can be expected to provide you, within 6–24 months of your return to work, with an income that is at least 60% of your indexed pre-disability earnings or an amount that exceeds your gross monthly benefit.
P
Pre-existing condition
Any physical or mental health issue for which you received medical advice, diagnosis, care or treatment before your policy became effective. Insurers can use a "look-back" period (e.g.,90 days to 1 year, but defined by your policy) to identify these conditions and may exclude coverage for them.
Portability
Portability refers to whether or not you can take coverage with you. If you own an individual disability policy or purchase disability coverage through your employer on a voluntary basis, it’s portable. That means you own it, and it follows you even if you change jobs. Traditional employer-sponsored group coverage is rarely portable.
R
Rehabilitation
A program or plan designed to help you get back to work as soon as you’re medically able. Services may begin while you’re still recuperating and include close consultation with your employer. You may plan to return to your old occupation or a new one.
Residual benefits
Depending on your policy and availability in your state, you may have residual benefits. If you’re unable to perform some aspects of your job, residual benefits allow partial disability payments based on your loss of income.
Return to work benefit
A situation that allows you to continue to receive a partial disability benefit after you return to work as long as your income does not exceed 100 percent of your pre-disability earnings.
S
Settlement
The payment of proceeds by an insurance company to the insured to settle an insurance claim within the guidelines stipulated in the insurance policy. A payment on an insurance claim to a policyholder is called an insurance settlement.
Short-term disability
In the context of insurance, a short-term disability is defined by your policy. Whether a disability is short- or long-term is defined by the maximum benefit duration in your policy. You have a short-term disability if you’re unable to do the work you did before a medical condition rendered you disabled for a short period of time. See benefit and disability.
Short-term disability insurance
A type of insurance that pays a percentage of your salary if you’re not able to work for a short period of time due to sickness or injury. The period of time is defined by your policy and your employer.
Social Security disability insurance (SSI)
A type of insurance that pays benefits to you and certain members of your family if you are deemed totally disabled from any occupation for 12 months or more, and you are “insured,” meaning that you worked long enough and paid Social Security taxes.
W
Waiting period
A waiting period is the period of time you must be actively at work, starting with the date of hire, before you are eligible for coverage.
Workers’ compensation
A publicly sponsored system that pays monetary benefits to workers who become injured or disabled in the course of their employment. It’s a type of insurance that offers employees compensation for injuries or disabilities sustained as a result of their employment.