June 2007
Options to consider
Getting your claims paid
Claims denials and delays are common complaints against insurance companies, according to the National Association of Insurance Commissioners. If your disability claim is delayed or denied, here's what you should do:
Denied claims. "The most common complaint we see is where an insurer deems an insured able to work and the insured's doctors state that the insured is unable to work," reports a representative of the New York State Insurance Department. If you encounter such a difference of opinion, ask your insurer to allow an independent medical exam. The company might accept the verdict from a qualified, unbiased physician.
As a last resort, call your state insurance department to ask for help in persuading the insurer to pay. In New York, for example, an insured visiting nurse was unable to physically help patients but the company denied the claim, asserting the nurse could work as a claims reviewer, say, or a school nurse. The state insurance department reviewed the language in the policy and case law, and determined that the nurse was entitled to collect on the policy.
Delayed claims. Keep careful records as your claim moves through the insurance company's procedures. Take notes indicating whom you've spoken with at the insurance company and the issues discussed. Keep copies of all documents that you send to or receive from the insurer regarding the claim. During the claim process, the insurance company may ask for copies of medical records from you or your physician. Work with your doctor's office to see that requests are handled appropriately and quickly. The sooner the insurer receives the necessary medical records, the less chance your claim will be delayed.
Residual disability benefits. Some policies will pay the full amount of the coverage only if you are not at work and are under the care of a licensed physician. But what if you’re able to work some but not at full capacity? A “residual” disability benefit can provide a percentage of the coverage amount based on the percentage of predisability income you are no longer earning. Say your income was $8,000 a month and you had a disability policy that would pay you $5,000 a month. You were injured, but you’re now working part-time as you gradually recover. If your income has declined by 35 percent, to $5,200 per month, you would receive $1,750 a month--35 percent of the coverage amount--from a residual disability benefit.
Cost-of-living adjustment. This feature increases your policy’s benefit in step with inflation, but it can be expensive.
Future purchase rider. Such a rider gives policyholders the right to increase their coverage--and, of course, pay a higher premium--without having to take a physical exam.
One way to economize is by choosing an extended “elimination,” or waiting period, which is the amount of time you must be totally disabled before receiving benefits. Your choices can be anywhere from the 31st day of a month to 12 months (even 2 years, in some states) after the onset of a covered total disability. You will pay less in premiums by selecting a longer elimination period, but you’ll have no income from the policy in the meantime.
What not to do
When buying individual coverage, you’ll probably need to undergo a medical examination, and any pre-existing conditions may be excluded from coverage.
Don’t be tempted to cut costs by fudging the facts, either about your medical history or your occupation. Giving false information on your application for coverage might lower your premiums, but it could cost you benefits when you need them.
Although classifications differ from one insurer to another (a construction worker might be a 1A or 2A, for example, while an office worker might be a 5A), they reflect the likelihood you will become disabled. The less risk-prone your occupation, the lower the policy’s cost and the more generous its definition of disability.
Daroff describes the case of a prospective client who owned a contracting company. His insurance agent told him to state on his disability policy application that he spent all his time on white-collar activities in the office--estimating, supervising, designing, etc.--to get lower premiums. He was still a contractor, though, and he got hurt on a job site when a pallet of bricks fell on him. An investigation determined that he spent most of his time on job sites and not in the office. His claim was denied.
That’s not to say, though, that every claim denial is justified. Daroff tells of a “classic type A” executive who suffered a heart attack. As soon as he was released from the hospital, he insisted on stopping at the office to show everyone he was on the mend. In fact, he called the office every day. His disability claim was denied because he was “at work,” according to the insurance company.
His insurance agent took up the man’s cause, pointing out that he was under strong medication and may have been there physically, but not mentally. The denial was reversed. So if you have disability insurance and you’re unable to work, you shouldn’t take the first no for the final word.
