How to Insure Your Income: Key Concepts and Definitions: N - P
NET WORTH
Net worth refers to your total economic or financial value after deducting all liabilities from your total assets or estate.
An individual with a net worth of several million dollars, consisting of businesses, real estate, stock investments, etc., probably doesn't need disability income insurance. In essence, this person is selfinsured. If a disability strikes, this individual can take care of himself.
Thus, an extremely net worth (usually in the millions of dollars) will reduce the amount of disability benefit that an insurance company will offer.
NOTICE OF CLAIM
You have 20 days (or another, reasonable amount of time) to notify the insurance company of a claim. Notification of a claim may take the form of a written communication or a telephone call to the insurance company or agent. Notifying the agent is considered notification to the company.
If you were seriously injured and unable to notify the insurance company within 20 days (due to being in a coma, for example), then notification of the claim may occur later than the 20-day period.
OCCUPATIONAL COVERAGE
Occupational coverage refers to 24-hour-a-day disability income protection. The insured person is covered under the terms of the policy whether the sickness or injury occurs on the job or off the job. Some policies may be identified as non-occupational. A non-occupational contract provides benefits only for disabilities that are not work-related.
Policies make these distinctions because occupational disabilities normally are covered through workers' compensation or similar statutory plans.
Most often, group disability income contracts will specify occupational or non-occupational coverage.
Usually, individual policies combine some occupational coverage with workers' comp benefits.
PARTIAL DISABILITY
Contracts sometimes provide partial disability benefits. Partial disability is often defined as the inability to perform one or more of the regular duties of your occupation. The partial disability benefit usually pays up to 50 percent of the payment for total disability for a period of three to six months.
PAYMENT OF CLAIMS
The claims payment provision identifies to whom benefits will be paid. This, of course, is the insured person -- who also may be identified as the loss payee. It is possible that policy benefits may be paid to a third party if the insured person executes a proper assignment form, which authorizes the insurance to pay benefits directly to another party, such as a doctor or hospital.
In credit income insurance, the creditor is the third-party payee. Typically, however, a disability income claim will be paid directly to the insured person.
PERMANENT DISABILITY
A disability usually is classified as permanent or temporary, in addition to total or partial. A permanent disability is one that reduces or eliminates your ability to work for the rest of your life. Permanent disability results from injury to a limb or organ that is not expected to recover, such as loss of -- or loss of use of -- an eye, hand or foot.
PHYSICAL EXAM
This provision permits the insurer to request a physical exam of a claimant as continued proof of a disability. The exam is conducted by an insurance company's doctor at the company's expense. This provision may be invoked if the company has reason to believe that the claimant is not disabled or is malingering.
Example: You're involved in an automobile accident and suffer a whiplash neck injury. After you have been receiving disability benefits for several months, your insurance company feels that the average claimant with this injury should be sufficiently recovered and able to return to work. At this point, it may request that you be examined by its doctor to determine eligibility for continued disability payments.
POLICY CHANGES
The only changes that can take place in an insurance policy must be initiated by the insurance company or the policyholder. Any such changes must be in writing, signed by a company official (and usually the policyholder), and they must be attached to the policy. Adding benefits to an existing policy is usually accomplished by means of an amendment or rider, which becomes part of the policy.
Any attempt to change a policy provision must be approved by your state's insurance commissioner. Any changes to contract provisions usually must be beneficial to the insured or policyholder in order to obtain approval from the insurance commissioner.
PRESUMPTIVE DISABILITY
Disability is presumed to be total and permanent in cases involving the loss of sight, hearing, speech or the loss of any two limbs. Under these circumstances, the insurance company does not require you to submit to periodic examinations to prove continuing disability.
PROBATIONARY PERIOD
A probationary period is a waiting period that frequently applies to group insurance coverage. It is the number of days or months that an individual joining a group has to wait before becoming eligible for coverage.
Example: A new employee may have to work continuously for at least 30 days before becoming eligible for coverage under the employer's group disability insurance plan.
PROOF OF LOSS
Upon receipt of the claim forms, you have 90 days to file proof of loss. Proof of loss consists of completing the claim forms, which will include the following types of information: the time, date and nature of the accident or sickness; and the names and addresses of doctors or hospitals providing treatment. In addition, a statement from the attending physician usually is required, which will indicate the anticipated duration of the disability.
For disability income claims, subsequent claim forms may have to be submitted to the insurance company at regular intervals (every two or three months). This requirement is necessary so that the insurer can determine that you are continuously totally disabled and still eligible for benefits.
