Definition of Terms

Non-Cancellable – By definition, a Non-Cancellable policy cannot be cancelled by the company. The premiums are also “CAST IN CONCRETE” – guaranteed not to increase – usually to age 65.

Guaranteed Renewable – A Guaranteed Renewable policy also cannot be canceled by the company, however premiums are subject to increase on a class-only basis. “If premiums can be increased, it’s not a question of If, only when.”

Cancellable – Today, few individual policies are cancellable. Group policies are all cancellable.

Level Premium – Premiums are level, not scheduled to increase.

Step-Rate – Premiums are scheduled to increase, typically every five years.

Definition of Disability

How sick to do you have to be to collect?

“True” Own Occupation – Pays your benefit if you are unable to perform the material and substantial duties of YOUR REGULAR OCCUPATION for: 24 months, 60 months, to age 65, etc.

Disability – This is the finest definition of disability available. It means that as long as the insured is unable to perform the duties of his regular occupation, he will collect full disability benefits, even if working in some other occupation and earning income.

With surgeons or other highly skilled professionals, insist upon a letter narrowing the definition of Regular Occupation to his “Specialty”.

Own Occupation and not engaged in any similar occupation for which reasonably fitted by education, training, or prior economic status. The key word here is “AND”. This definition is not as good as “True Own Occupation,” but depending upon the occupation may be the best that is available.

Own Occupation and not engaged in any occupation for wage or profit. Not gainfully employed in any occupation for wage or profit. If you are working in “any occupation” and earning anything you will not collect benefits.

Not gainfully employed in any occupation for wage or profit and confined to bed or house. Rarely seen today, and that’s a good thing.

Residual Disability – Pays a benefit in proportion to your Loss of Earnings, even though you are working full time at your regular or another occupation. Typically continues to pay until your earnings increase to at least 60, 70, or 80% of prior earnings. Do not confuse with Partial Disability which is a short term benefit.

Caution: Residual Disability is appropriate for many professionals. It may not be appropriate for a wage earner. It also gives the Insurer the tempting opportunity to pay less than a total disability income claim.

Loss of Earnings Contracts – Income Replacement polices pay a benefit in proportion to your loss of income.

Example: If you cannot work at your former occupation and, after rehabilitation or training, you elect to work in another field, but your income is less than 60% of your former income, your will be paid your full disability benefit. Should you be earning 60% or more than 60% of your former income, and/or should you return to your former occupation, you will be paid a residual benefit in proportion to your loss of earnings.

Why would you buy a Loss of Earnings contract if you can get an “Own Occupation” contract?
Because the Insurance Company wants to limits its liability and to pay out less in claims.

If your concern is that you want to know that you will collect the benefit you are entitled to at time of claim avoid “Loss of Earnings Only”. These contracts frequently disappoint, lead to litigation instead of prompt claim payment, and often result in a compromise settlement for far less than you should have received.