1. What is a Non-Cancelable, Guaranteed Renewable disability income insurance policy?
ANSWER: The insured owns and controls the contract. Premiums cannot be changed prior to age 65. Policy provisions cannot be changed prior to age 65. The insurance company cannot terminate policy as long as premiums are paid when due.
2. What is the definition of total disability?
ANSWER: The insured is considered totally disabled if he or she is not working at any other occupation. The insured must be under a doctor's care, which, under prevailing medical standards, is appropriate for the condition causing the disability unless further doctor's care is no longer of the benefit to the insured. Definition of total disability may vary state to state.
3. Why is it important to have a non-cancelable, guaranteed renewable disability insurance policy?
ANSWER: Your definitions and premiums will not change prior to age 65 a non-cancellable and guaranteed renewable policy. This guarantees your provisions and premiums will not change until you are 65 years old. Many policies are conditionally renewable or guaranteed renewable. These types of contracts either do not guarantee rates, provisions or both.
4. What does an "Own Occupation" definition mean?
ANSWER: The insurance industry generally refers to an "Own Occupation" definition of disability as "The occurrence of a condition caused by a sickness or injury, in which the insured cannot perform the main duties of his/her occupation and is not working at any other occupation. The insured must be under a doctors care." However, there are variation of this definition when the insured returns to another occupation. Some carriers will pay full benefits regardless of the income from another occupation, others pay 100% of prior income when taking into account income from another occupation and all disability benefits. Probably the most common is paying a benefit that is proportionate to the insured's loss of income. For example, if the insured suffers a 50% loss of income they will receive 50% of their monthly benefit. Your contract will dictate how benefits are paid and it is important to understand the variations.
5. How does an "Own Occupation" rider change the definition of total disability?
ANSWER: Some companies offer an Own Occupation rider which liberalizes the definition of total disability by removing the stipulation "and not work in another occupation" from the base definition.
6. Under what circumstances does the Own Occupation Rider provide benefits?
ANSWER: After satisfaction of the applicable Waiting Period, the Own Occupation Rider provides benefits when the insured (1) cannot perform the main duties of his/her Occupation due to Sickness or Injury; (2) is working in another occupation; (3) is under a Doctor's Care; and (3) has a disability that begins while the Own Occupation Rider is in force
7. How is the coverage under my Own Occupation Rider altered if I change occupations when I am not disabled?
ANSWER: The coverage from your Policy and Riders including the Own Occupation Rider, is portable from one job or occupation to the next. The benefit coverage under your Own Occupation Rider does not change because of a switch to a new job or occupation. However, it is important to remember that your Occupation at claim time is based on the main activities of your work immediately prior to the start of your disability. If you have an occupational change, it is always a good idea to review your insurance coverage with your agent to make certain that your income protection matches your current needs.
8. What is Business Overhead Expense Insurance (BOE)?
ANSWER: BOE is a disability income insurance policy designed to cover your covered fixed business expenses in the event of a totaldisability. Very often this coverage is confused with Business Owners Policy (BOP) policy. BOP is designed to protect against office hazards and general liability. BOE is never part of a BOP policy.
9. How long are benefits provided with BOE coverage?
ANSWER: Most policies offer a 12, 18 or 24 month benefit period. Most professionals choose a 12 month benefit period on the assumption that they will have returned to work or they are not returning to work, and 12 months will help with the transition. To cover long term expense obligations it may be prudent to have a longer benefit period.
10. What expenses are covered?
ANSWER: Business Overhead Expense insurance is typically designed to cover your fixed normal and customary business expenses. These would include but are not limited to: rent, utilities, phone, business loans, professional fees, etc.
11. What is Long Term Care Insurance?
ANSWER: Long Term Care Insurance helps pay for services that are needed by a person who is chronically ill; i.e. one who needs assistance with at least two of the activities of daily living (eating, bathing, dressing, toileting, continence and transferring) for a period of at least 90 days or severe cognitive impairment. Long Term Care insurance can help not only the person who needs care, but also their caregiver.
12. Why should I carry Long Term Care Insurance?
ANSWER: After retirement most of your living expenses can be controlled within your budget. However, an unforeseen expense may be the need for long term care. Today’s facilities can cost upwards of $100,000 a year. These costs have been rising by an average of 7% a year1. If you were to extrapolate these figures at a 5% inflationary rate, the cost will be over $400,000 in 30 years. This would be a prohibitive expense even for a very large estate.
1The MetLife Market Survey of Nursing Home & Home Care Costs, Sept 2004
13. How much Long Term Care coverage should I carry?
ANSWER: This is very dependant upon the region of the country you live. In the southeast most qualified facilities for Long Tem Care insurance will range from $130 to $250 a day. In the northeast most quality facilities are $200 or more a day2.
2MetLife Market Survey on Nursing Home and Home Care Costs, Sept 2004
14. What features on a Long Term Care Insurance policy should I choose?
ANSWER: A financial service representative can review the various features of a long term care policy and can help you design a policy that is appropriate for you.
15. What are Activities of Daily Living (ADL’s) ?
ANSWER: One of the requirements to qualify for benefits under along term care insurance policy is the inability to perform at least two of the ADL’s without substantial assistance or a severe cognitive impairment. The typical ADL’s are: eating, bathing, dressing, toileting, continence and transferring.
16. What are tax-qualified Long Term Care Insurance plans?
ANSWER: Qualified long-term care insurance plans may allow for preferential tax treatment. We recommend that you consult with your own attorney, accountant or tax advisor to discuss any of these tax advantages that may be available to you.
17. What is the difference between claims-made and occurrence?
ANSWER: Occurrence coverage provides protection for professional services rendered while the policy is in effect, regardless of when the patient files a claim. Even after you stop practicing, your occurrence policy will still provide you and your estate with coverage for the professional services you provided during the policy term. There is no need to purchase “tail” coverage. Claims-Made coverage is based on when the act is reported (when the claim is actually made). Claims-made policies provide coverage for claims, which are reported to the insurer while the policy is in force. The policy covers professional services rendered on or after (1) the policy inception date or (2) an earlier retroactive date. Due to cancellation or non-renewal, an additional premium to purchase an Extended Reporting Endorsement, commonly called “tail coverage”, may be required to provide protection for claims reported after the final claims-made policy’s termination date.
18. How important is the A.M. Best Rating of an insurance company?
ANSWER: The A.M. Best Rating is a very important rating as it is based on the financial stability of an insurance company and it’s ability to pay claims.
19. What is the “Consent to Settle” clause?
ANSWER: The consent to settle clause provides that the company will not settle any claim without the written consent of the doctor, unless prohibited by law*. Not every company provides a pure consent to settle. Some companies may have an arbitration clause.
*Medical Protective can offer physicians and dentists the right to written consent before settling a claim. Contact Treloar & Heisel to see if you are eligible to receive this important provision at your location.
20. When do I need a business owners policy?
ANSWER: At the time that you are purchasing your own practice, you will need a business owners policy. This policy provides coverage for your business and operatory equipment, furniture, fixtures, build-out, etc. The policy includes general liability coverage for incidents such as “trip and fall”.
21. What is the appropriate time to apply for professional liability and business owners policies?
ANSWER: It is usually best to have your application completed with a 30-day advance. As for the business owners coverage, one to two weeks notice is sufficient.
