Protecting Your Retirement Income – Part 3

Retirement Protection Insurance

In our last two posts we discussed two different disability insurance policy riders that may help mitigate the problems that a disabling condition can create for your retirement planning. A graded lifetime benefits rider and a lump sum benefit rider offer two alternative solutions to the same problem, with one providing a reliable, steady income stream and the other providing a greater degree of financial flexibility. If neither of those options are particularly appealing, some disability insurance companies have created another product that, unlike lifetime benefits or a lump sum, is specifically tailored toward the retirement planning challenges posed by a total and permanent disability.

What Is Retirement Protection Insurance?

Retirement protection insurance was created by some insurers precisely to deal with these concerns. Depending on the insurer, this product may be offered as a standalone policy or as a rider to your existing disability insurance policy. The idea behind retirement protection insurance is to create an investment product that functions similarly to the qualified 401(k) you contribute to in your current occupation, allowing you to take advantage of both the market returns and employer contributions that you currently enjoy.

How does this work? If you become totally disabled and your claim is approved, your insurer will establish a trust for your benefit. Each month, benefits are deposited into the trust and invested in index funds and other investment portfolios similar to the options you have with your employer-sponsored 401(k). This product can cover up to 100% of your retirement contributions and 100% of employer contributions at a maximum of $50,000 per year. Under the terms of the trust, you will be able to access these funds after age 65.

Potential Problems

At first glance, this product appears to solve the problems that a disability can create for retirement savings. Specifically, it appears tailor made as a substitute for your employer-sponsored 401(k), which you can no longer contribute to once you stop working due to a disability. However, there are some issues with this particular product that you will want to clarify with your insurer before purchasing it as a rider or as a standalone policy.

First, some insurers are using a different definition of disability for this product than for your standard individual disability insurance policy. In many cases, the definition of total disability for this specific product is narrower and more stringent (i.e. you must be unable to perform work in any occupation) than the specialty-specific own-occupation definition in most disability insurance policies purchased by doctors and dentists.

For example, assume you have an own occupation policy with this rider and due to your medical condition you are unable to perform your duties as an orthopedic surgeon. For three years you collect monthly benefits through your policy and also enjoy three years’ worth of contributions to the trust account established for your benefit by your insurer. After three years, you go back to work as a primary care physician. Because you are still disabled under the terms of your own occupation policy, you continue receiving monthly benefits. However, the retirement contributions to your trust cease because the definition of total disability is “any occupation.” Under this scenario, even though you are totally disabled for the purposes of your policy, you are no longer receiving the benefit of the rider you paid good money for because it measures your disability by a different standard.

Second, because the investment account is held in trust, somebody has to manage it. As a result, there may be fees associated with both the management of the trust and the investment account. Also, 401(k) accounts receive special tax treatment – as long as the money stays in your account it is allowed to grow tax-free without any capital gains tax levied against your investment returns. It may very well be that any investment account held in trust by your insurer through this insurance product will be fully taxed.

Before you purchase retirement protection insurance either as a rider or as a standalone policy, you will want to clarify the issues addressed above. Make sure you fully understand the terms (including the definition of total disability), the fees, and the tax implications of this product before you purchase it. Though initially it may look like an attractive option, the costs may outweigh the benefits, and other options to protect your retirement income may be a better solution for your particular circumstances and objectives.


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Protecting Your Retirement Income – Part 2

Lump Sum Rider

In our last post we discussed some of the ways a disability can impact your retirement planning and how a graded lifetime benefits rider can help mitigate some of those problems. A lifetime benefits rider certainly has its advantages, but it is not the only solution to the retirement income problems created by a disabling condition. A lump sum rider offers an alternative solution to the same problem.

A lump sum rider offers a different approach to the retirement income issue. Unlike the lifetime benefits rider, which simply pays a set monthly amount for the remainder of your lifetime after you reach your policy expiration age (generally 65 or 67), the lump sum rider provides a one-time payment once you reach policy expiration age. With this rider, in order to be eligible for the lump sum payment, you must receive benefits equal to twelve times the monthly benefit amount during your policy term. Generally speaking, this just means you have to receive benefits for at least one year.

The amount of your lump sum payment is typically a percentage of the aggregate sum of benefits you received during your policy term, in many cases between thirty percent and forty percent of total benefits received. For example, assume you have a policy that pays $10,000 per month in benefits and you become disabled at age 50. By the time you reach age 65, your policy will have paid you a total of $1,800,000 in benefits. With this rider, when your regular monthly benefits terminated, you would receive an additional one-time lump sum payment of $630,000.

This rider has its advantages and disadvantages over a graded lifetime benefits rider. Receiving a lump sum, especially one as large as the example above, can provide you with a degree of immediate financial flexibility that is not available with a set monthly amount like what you would receive with a lifetime benefits rider. For example, you can take your lump sum and turn it over to an investment manager, who will in turn be able to put your money to work for you and create passive income. Or, alternatively, a lump sum can provide you with capital necessary to pay off your mortgage, auto loans, and any existing debt, and use the remainder to supplement any retirement savings you amassed prior to your disability. A lump sum payment also provides a measure of security that lifetime benefits do not: with lifetime benefits the insurance company still controls your monthly payments, and there is no guarantee that your benefits will never be terminated.

The disadvantage to a lump sum rider is self-evident: it is a one-time payment. Unlike the lifetime benefits rider, which provides the security and certainty of a steady monthly income, once the lump sum is gone, it’s gone. The degree to which this is a negative characteristic of the lump sum rider largely depends on the type of person it applies to. For individuals more likely to save, invest, and exercise financial restraint, the lump sum rider may offer a greater degree of financial freedom and flexibility. For those more likely to splurge and spend the money they have, a lump sum rider may not have the structure and stability to ensure a reliable stream of income throughout their retirement years. For those individuals, a lifetime benefits rider may be a better solution.

However, if neither the lifetime benefits rider nor the lump sum benefit rider seem to suit your retirement needs, there is a third option. In our next post, we will discuss retirement protection insurance – a product that is specifically tailored to the problems that a disability can create for retirement planning.

 

 


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Protecting Your Retirement Income – Part 1

Graded Lifetime Benefits Rider

In previous posts we’ve talked about the importance of protecting your investment in your education and your career with an individual disability insurance policy. A vast majority of doctors and dentists purchase individual disability insurance policies to protect their financial security and standard of living in the event they become disabled and can no longer practice. However, one factor that many healthcare professionals may not take into account is the effect that a disability may have on their retirement. Most standard disability insurance policies pay benefits until the policyholder reaches retirement age – often age 65. However, that is where the financial protection of a standard individual disability insurance policy ends.

As long as you have an adequate individual disability insurance policy, your income will be sufficiently replaced during your employable years. However, many people overlook the fact that even with adequate income protection during the term of your policy, a disabling condition can still seriously derail your efforts to financially prepare for your retirement years. If you had the foresight to obtain an individual disability insurance policy early in your career, you’ve likely been planning for your retirement as well by contributing to a qualified 401(k) plan or similar retirement vehicle.

However, you may not have considered the following scenario: at 50 years old you are suddenly no longer able to continue practicing dentistry due to debilitating back and neck pain. You’ve been contributing to your 401(k) for the last 20 years with employer-matched contributions. Your claim is approved by your disability insurer, but because you had to quit your job, not only is your employer no longer matching your contributions, but you can no longer contribute either because IRS rules prohibit contributions to a qualified 401(k) plan if you are not working. Your 401(k) is 15 years short of where it needs to be for retirement, and your disability insurance benefits stop at age 65. How do you continue planning for your “retirement” years?

Fortunately, there are several options available to you. First, many disability insurance companies offer a graded lifetime benefits rider. In exchange for an increased monthly premium, this rider extends your benefits from the standard policy term of age 65 or 67 to lifetime. With this rider, if you become disabled, you will receive your full policy benefits until age 65 or 67 (depending on your policy). After that, you will receive a certain percentage of your full benefits for the remainder of your lifetime, based upon the age at which you became disabled.

With many policies, the baseline age for graded lifetime benefits is 45 years old. Meaning, if you become disabled at or before age 45, your monthly benefits after age 65 will still be 100% of the monthly benefits you received before age 65. If, however, you become disabled after age 45, you will still receive 100% of your monthly benefit until age 65, but your monthly benefit amount after age 65 will be reduced by 5% for each 5-year period after age 45 that the disability began.

Using the example above, if you had a policy that pays $10,000 in monthly benefits and became disabled at age 50, you would receive $10,000 a month from age 50 until age 65, and $9,500.00 a month for the remainder of your lifetime. If you became disabled at age 55, you would receive $10,000 per month until age 65, and then $9,000 per month for the remainder of your lifetime.

This rider is one solution for the difficulties that a disabling condition can pose to your retirement planning. It offers a secure source of income to supplement any retirement savings you’ve already amassed. However, it is not the only solution to the retirement income issue created by a disability. In the next few posts, we will evaluate two additional options: the lump sum rider and retirement protection insurance.


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Disabilities Insurance and Student Loans: How Can I Protect Myself?

Picture this scenario: you’ve just graduated dental school.  You have well over $100,000 in student loan debt.  You recently started working in a dental practice.  But then, unexpectedly, you become disabled and are unable to work.  All of a sudden you have no income and no way to make your student loan payments.  What would you do?

This scenario may seem far fetched, but one in four people will become disabled at some point before retirement.  Medical and dental students routinely graduate with hundreds of thousands of dollars in debt, and student loan debt in the United States has surpassed $1.3 trillion.  If you are carrying a heavy student debt burden, a disabling condition can have a magnifying effect on your financial security.  An inability to pay your student loans puts you at risk for default and a slew of financially-damaging penalties.

You might also be surprised to learn that student loan debt cannot be discharged in bankruptcy.  In fact, the only individuals who are eligible to have their federal student loans discharged are those who meet the federal government’s stringent standard of “total and permanent disability.” Keep in mind that this discharge provision only applies to federal loans.  Private lenders may or may not have similar provisions in their loan agreements.

In the event of a disabling condition – even if you have a disability insurance policy – your monthly benefits may not be enough to cover both their living expenses and your student loan payments.  One potential solution is purchasing a disability insurance policy with a student loan protection rider.  Disability insurers have started to offer student loan protection riders that typically allow individuals to secure monthly benefits in addition to their standard policy benefits for the purpose of covering their student loan payments.  Usually, no loan documentation is required until a claim is filed.  Additionally, students can receive discounted rates, including no cost while in school, on group disability insurance policies through either the American Dental Association or local dental associations.  Whichever policy you choose, your insurance company must still determine that you are totally disabled before you are eligible to collect the benefits associated with this rider.

An alternative solution is to simply purchase additional coverage to ensure that both your monthly living expenses and student loan payments are accounted for in the event of a disability.  One advantage to this approach is that you have greater flexibility to allocate your monthly benefits where you see fit.  Before you purchase a student loan protection rider or additional coverage on your individual disability insurance policy, check with your insurance provider to see how much both options cost in comparison to the additional benefits you receive.  Depending on your carrier, one option may be more financially beneficial than the other.


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fMRI Brain Scanning: The Future of Proving Pain?

Many disability claimants suffering from chronic, intense pain are surprised and disheartened when their reported pain levels are received with skepticism by their insurance company.  Since pain is a subjective feeling, treating doctors typically ask patients to self-report their pain on a scale of 0-10, so that they can diagnose and treat the pain.  Unfortunately, most insurance companies are unwilling to accept self-reported pain levels and will often try to downplay the severity of the claimant’s pain, citing a lack of objective evidence.

Recently, researchers have developed a technology called functional MRI scans, or fMRIs, for short, which may provide a new way to objectively verify the existence of pain.  In this post, we will examine this technology and discuss how it might be used in the context of disability claims.

I.  What is an fMRI?

fMRI scanning is a noninvasive technique used by doctors to map and measure brain activity.  More specifically, fMRIs are used to measure and observe increases in MR signal caused by neural activity in the brain.  The fMRI data is then analyzed to determine which parts of the brain were active during the scan.  The data is then compared to known neurological signatures, or “biomarkers,” to determine if there are any correlations between the neural activity in the brain and the symptoms reported by the patient (such as chronic pain).

II. The Use of fMRI Scans to Prove Pain

Recently, a number of companies and researchers are focusing on using fMRI scans to produce objective evidence of pain.  For instance, Dr. Joy Hirsch, a professor at the Yale School of Medicine, claims to have developed a test that is capable of distinguishing real, chronic pain from imagined pain.

fMRI scans are also now being used to support the cases of claimants in disability cases. For example, a woman in New York recently used an fMRI scan to convince her insurer, after two years of litigation, that her disability claim never should have been denied.  An fMRI scan was also recently used in the case of Carl Koch, a truck driver from Arizona who suffered severe burns when the hose of his tanker broke loose and sprayed him with molten tar.  Mr. Koch visited Dr. Hirsch, who used functional brain mapping to conclude that Mr. Koch’s pain was real.  When the judge ruled that Dr. Hirsch’s testimony would be admissible at trial, the case settled for $800,000 – an amount ten times higher than the company’s original offer.

III. What the Skeptics Say

The use of fMRI scans to prove pain remains controversial. Some critics argue that the techniques being used in litigation have little support in existing publications.  Others, such as Tor Wager, a professor of psychology and neuroscience at UC Boulder, contend that the sample size in available studies is too small.  Proponents of fMRI refute both of these claims, arguing that a number of credible studies support the validity of their methods.

IV. The Future of fMRI Scans in Disability Cases

It’s easy to see how fMRI scans could prove useful in a disability claim.  For example, many dentists suffer from musculoskeletal disorders, particularly in their spines, that cause chronic, debilitating pain.  However, as noted above, these types of claims can be particularly difficult, because many insurance companies refuse to accept a claimant’s self-reported pain levels and limitations.  Co-workers, family, and friends can provide statements describing how the dentist’s pain is affecting his performance at work and his quality of life, but once again, insurance companies will typically similarly claim that such statements are “objectively verifiable” evidence of the pain.  Sometimes a cervical or lumbar MRI can identify potential causes for the pain, and/or a functional capacity exam (FCE) can help document the limitations the pain is causing—but these types of reports are also commonly challenged by insurance companies intent on denying benefits.

In such a case, an fMRI scan illustrating the doctor’s pain might serve as an additional, objectively verifiable method of establishing the existence of chronic pain.  Whether or not insurance companies are willing to accept fMRIs as reliable evidence of pain remains to be seen, and will likely depend, in large part, on how willing courts are to accept fMRIs as admissible evidence of pain.  If, in the future, this technology continues to develop and become more precise, and courts and juries demonstrate a willingness to accept fMRIs as proof of pain, fMRIs may eventually be enough to convince insurance companies to accept legitimate disability claims without ever setting foot in a courtroom.

REFERENCES:

  1. UC San Diego Sch. of Med., What is fMRI?, available at http://fmri.ucsd.edu/Research/whatisfmri.html.
  1. Sushrut Jangi, Measuring Pain Using Functional MRI, The New England Journal of Medicine, available at http://blogs.nejm.org/now/index.php/9863/2013/04/10/.
  1. Steven Levy, Brain Imaging of Pain Brings Success to Disability Claim, EIN Presswire (June 29, 2016), available at http://www.einpresswire.com/article/333249721/brain-imaging-of-pain-brings-success-to-disability-claim.
  1. Kevin Davis, Personal Injury Lawyers Turn to Neuroscience to Back Claims of Chronic Pain, ABA Journal (Mar. 1, 2016), available at http://www.abajournal.com/magazine/article/personal_injury_lawyers_turn_to_neuroscience_to_back_claims_of_chronic_pain.

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Disability Insurance for the Professional Athlete: Can It Protect Your Value?

After an unprecedented overtime win by the New England Patriots, Super Bowl LI is in the books. Now that the 2016-2017 NFL season is officially over, all eyes are turning to the upcoming 2017 NFL Draft in late April. The most elite players in college football will be vying for the 253 open slots on 32 NFL teams. Of the 253 picks, only the select few at the top of the first round will receive contracts in the millions of dollars. Most of the players in these coveted top spots already know who they are – in the months leading up to the draft, they’ve been communicating with potential teams through their agents and meeting with their potential new coaches. These athletes, who spend most days pushing their bodies to the limit in one of the most dangerous professional sports in the United States, quickly realize how much they have to lose if they get hurt before the draft. A serious injury before the draft can mean millions of dollars in lost income. In recent years, disability insurance underwriters have started to market disability a insurance product to NFL, NBA, and MLB prospects who stand to lose everything if they suffer a catastrophic injury.

Permanent Total Disability

The traditional disability insurance policy for a professional athlete isn’t that different from an own occupation policy that a doctor or dentist might obtain at the beginning of their career. Many high profile college athletes seek out these policies to protect their financial future in the event of a career-ending injury. Some athletes, like former University of Kentucky basketball power forward Nerlens Noel, who was ultimately drafted number six overall in the NBA draft, pay large sums of money for high-value policies through private underwriters. However, many top prospects are also able to obtain policies through the NCAA’s Exceptional Student-Athlete Disability Insurance (ESDI) – a program specifically reserved for athletes predicted to be high draft picks. Former Stanford University quarterback Andrew Luck, for example, obtained a $5 million policy through ESDI before being drafted by the Indianapolis Colts.

However, the difficulty with these policies is that under the definition of permanent total disability, the policyholder must be unable to ever return to their sport in a professional capacity – an injury that merely reduces the policyholder’s earning potential does not make the policyholder eligible to collect benefits. So, the policyholder is still able to earn money in his or her sport’s minor league, they are likely ineligible for benefits. As medical technology, surgical techniques, and rehabilitation therapies improve, the total permanent disability standard becomes even more difficult to reach. College superstars like Willis McGahee, Marcus Lattimore, and Kevin Ware have suffered horrific on-field and on-court injuries and gone on to play professionally. NFL superstars like Rob Gronkowski and Adrian Peterson have sustained multiple injuries that would have ended their careers a decade ago.  Because of the advances in sports medicine, total disability claims by professional athletes are rare. Consequently, the focus of the professional sports disability insurance industry has turned to a new product: loss-of-value insurance.

Loss-of-Value

Loss-of-value insurance is typically a rider on a total permanent disability policy, and is specifically marketed to top college prospects who are expected to be selected in the top tier of their respective drafts, largely football and basketball. For an eligible athlete, the underwriter establishes a baseline projected rookie contract. If the athlete is undrafted or receives a contract significantly less valuable than their projected baseline due to injury or illness, the policy will pay out a benefit.

Take, for example, University of Michigan tight end Jake Butt, who tore his ACL during the first quarter of this year’s Orange Bowl. The injury prevented Butt from participating in the NFL draft process due to surgery and recovery, and the potential first round pick will likely fall in the draft rankings as a result. Prior to this season, Butt obtained a $4 million total disability insurance policy with a $2 million loss-of-value rider for which he is eligible for benefits if drafted after the second round. This year’s NFL draft may test insurers’ willingness to pay up on one of these high-value claims if Butt is not drafted in the first two rounds.

Can You Collect on Your Loss-of-Value Policy?

Loss-of-value insurance is a relatively new phenomenon. So far, only a select few loss-of-value policies have ever actually paid out. In previous posts, we have talked about the incentives that disability insurance companies have to delay and deny benefits for high-earning individuals with legitimate disabilities. In the same way that dentists are often targeted for denial in their disability insurance claims, professional athletes with loss-of-value disability insurance are targeted because of the enormous financial incentive to deny benefits. So, not surprisingly, Lloyd’s of London, the most prominent underwriter in the loss-of-value insurance market, has been sued by several NFL prospects whose claims were denied. A lot of money is at stake in these policies, and to the insurance companies it may be worthwhile to spend years litigating a claim that could cost the insurance company millions of dollars. The importance of an experienced advocate in such a scenario cannot be understated.

To this day, only two professional football players have successfully collected on loss-of-value disability insurance: Silas Redd and Ifo Ekpre-Olomu. Redd, a highly sought-after running back from the University of Southern California, went undrafted in the 2014 NFL Draft after suffering a season-ending knee injury. Ekpre-Olomu, a cornerback for the University of Oregon, collected $3 million from his loss-of-value rider after the projected first-round pick fell to the seventh round in the 2015 NFL Draft due to an ACL tear suffered at the end of his senior season.

If Jake Butt’s draft position drops below the second round, it will provide another interesting test case for how disability insurers handle these high-value claims. Given the large amount of money at stake, it is certainly possible that insurers will keep denying claims until they are forced, through litigation, to settle or pay out.


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New Genetic Testing Predicts Most Effective Medications

In today’s pharmaceutical market there are countless prescription drugs marketed to people suffering from disabling conditions, and many of these drugs promise breakthrough relief not offered by their competitors. Individuals suffering from chronic pain and mental health disorders such as anxiety, PTSD, depression and bipolar must often take potent drugs for prolonged periods of time to get relief from their symptoms. But the search for relief can be incredibly frustrating – every person responds differently to the same drugs, and oftentimes powerful side effects can overshadow any relief.

For an individual suffering from the chronic and disabling pain brought on by severe spinal stenosis, there are several forms of treatment available – many of which are non-invasive. If other non-invasive treatments are unsuccessful, suffering through the side effects of several drugs in search of relief can be demoralizing. Powerful opioids can cause severe nausea, vomiting, dizziness, and/or constipation in certain individuals. The compounding effects of trying several different drugs can have a significant effect on one’s physical and mental health.

Recently, however, a genetic testing company has developed a simple test that will help countless individuals avoid dealing with unwanted side effects while cycling through different medications in their quest for relief.

Genesight has developed breakthrough genetic tests for both narcotic analgesics (pain medications) and psychotropic medications (treating mental health disorders). By taking a simple cheek swab, the company is able to analyze your DNA and determine which medications are match for your specific genetic profile. A clinical study of Gensight’s testing and analysis showed that patients were twice as likely to respond to the recommended medication.

This testing will likely be welcome news among those for whom relief is elusive. For many individuals suffering from disabling conditions, medications are very rarely the magic bullet that brings complete relief.  Symptoms may be so severe that no drug will ever be one hundred percent effective. More often, relief means alleviation of one’s symptoms just enough to get through the day without interminable pain or crippling anxiety while suffering only the more mild side effects. Genesight’s testing may offer hope for these individuals – people who will likely never be able to return to their previous career or their own occupation, but are in search of just enough relief from their symptoms to lead and enjoy a normal life.


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Am I Under Surveillance?

In previous posts we’ve looked at when disability insurance companies are most likely to conduct surveillance of claimants and new technologies that they’re deploying to do so.  Surveillance is a common tool used by disability insurance companies in the claims process.  Insurers claim that surveillance is merely used as a fraud prevention tool to ensure that claimants’ disabilities are legitimate.

Unfortunately, more often it is used to distort the true nature of the claimant’s disability and deny legitimate claims through photos, videos, and observations by investigators that are intentionally taken out of context.  Even if your limited activity is consistent with your disability, a photo or five-second video clip can paint a misleading picture.  Insurers can use this information to terminate benefits, shifting the burden to you to prove that the surveillance is not representative of your disability.  This process can drag on for long periods of time – during which you are not receiving your monthly benefits.

An insurance company’s investigators may employ a number of different tactics during surveillance of claimants.  In this post we’re going to take a look at several of these tactics and discuss some of the signs that may indicate you are under surveillance.

Social Media

Social media monitoring has become one of the most prominent methods of surveillance used by disability insurers during the claims process.  Disability insurance companies hire tech-savvy millenials to comb the Internet and social media websites for photos, videos, and posts they can use against you.  They will also look for patterns in your photos, check-ins, and posts to better predict where you are at any given time for in-person surveillance.

As a general rule of thumb for social media, you should adjust your privacy settings on Facebook, Instagram, Twitter, and other sites to allow only approved people to view your profile, your posts, and your photos/videos.  Some social media sites have separate privacy settings for your profile and your photos/videos – be sure to take a careful look at how the privacy settings on each site are organized so you’re covering all your bases.

If you receive a friend request from somebody you don’t recognize, it is better to err on the side of caution and reject the request.

 “Interview” by Investigator

One of the most obvious and most common signs that you are under surveillance is an investigator sent to your house by the insurance company to “interview” you.  During this interview, they may ask you what you do every hour of the day under the pretense that the insurer needs a better idea of how your disability affects your daily activities.  They may also ask to take a picture of you or take a photocopy of your driver’s license for “the file.”

These requests may seem harmless, but they have an ulterior motive.  The purpose asking what you do every hour of the day isn’t to get a better understanding of your disability, it’s to help the investigator get an idea of where you are at any given time so they can conduct more effective surveillance.  The purpose of taking your photo or asking for a copy of your driver’s license isn’t simply for the file – it’s to help investigators more readily identify you when you are out in public.

Unusual Telephone Calls

If you or your family members begin receiving telephone calls from unusual phone numbers, you might be under surveillance.  Investigators will sometimes call a number associated with you, your residence, or your family members, ask for you, and hang up after they get a response.  This tactic is used to determine whether or not you are home, and if not, to get an idea of where you are so they can conduct surveillance.  If you are able to, keep track of any phone numbers from which you receive multiple suspicious calls, and create a list of Do-Not-Answer phone numbers.

Unusual Vehicles Outside Your House

Investigators are known for sitting outside claimants’ houses for hours at a time to get photos and videos of claimants doing activities around the house and in the front yard.  If you see an unfamiliar car parked on the street near your house for long periods of time, it may be an investigator hired by your disability insurance company.  Occasionally they will put up “blackout” shades in their windows when they park so you cannot identify them, and in some cases will actually go as far as removing their license plates while parked.  If you see a vehicle like this parked near your house, we suggest closing your blinds and avoiding any activity in the front yard.

Unusual Driving Behavior

Another common surveillance tactic used by investigators is “tailing” claimants.  An investigator may follow a claimant for hours at a time as he or she drives around going about their daily activities.  Like home surveillance, tailing creates many opportunities for an investigator to snap a quick video or photo that the insurer can use to misrepresent your disability.  If you see a suspicious vehicle following you too closely, changing lanes when you change lanes, or exhibiting other unsafe driving behavior, it may be an investigator from your disability insurance company.

The safest way to determine whether or not you are being followed is to make three consecutive right turns.  If the suspicious vehicle follows you through all three turns, you are likely being followed.  If you are being followed, do not engage in unsafe driving behavior or attempt to confront the other driver.  It is better to simply return to your home.  If their driving behavior is unsafe or makes you uncomfortable, don’t hesitate to call the police.

Strangers at Your Door

Investigators are known to come to claimants’ doors posing as door to door salesmen or community members gathering signatures for petitions.  Like many of the other tactics, this is intended to give the investigator a closer look at your body movements, your posture, and your behavior.  If you see somebody unfamiliar at your door, ask a few questions through the door about the purpose of his or her visit before you open the door.  If the answers do not satisfy you, simply ask them to leave.

Rule Number One

With any of these surveillance tactics, the most important thing to remember is that if you feel uncomfortable or unsafe, you have every right to call the police.  Your disability insurance company has the right to conduct surveillance as long as they obey the law.  However, they do not have the right to trespass, endanger your safety or your family’s safety, or harass you.  If you think you may be under surveillance or have any questions about the tactics being used by your insurer, contact an experienced disability insurance attorney.


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Understanding Your Policy: Examination Provisions

Disability insurance companies are constantly searching for new ways to expand the power and control they have over their policyholders through the use of restrictive policy provisions.  In previous posts we’ve discussed how disability insurers are expanding their control over their policyholders’ medical treatment by implementing more stringent care provisions.  However, care provisions are not the only avenue for disability insurers to exert a greater degree of influence in the claims process.  Over the years, insurers have also expanded the scope of their authority under examination provisions.

The most basic examination provisions simply notify the policyholder that he or she may be examined by the insurer’s doctor or interviewed by a representative of the insurer, like this policy from Northwestern Mutual:

  • Medical Examination. The Company may have the Insured examined by a health care practitioner.
  • Personal Interview. The Company may conduct a personal interview of the Insured.
  • Financial Examination. The Company may have the financial records of the Insured or the Owner examined.

Taken alone, this does not seem to onerous.  However, you need to watch out for additional requirements buried at the end of the provision:

Any examination or interview will be performed:

  • At the Company’s expense;
  • By a health care practitioner, interviewer or financial examiner of the Company’s choice; and
  • As often as is reasonably necessary in connection with a claim.

The final sentence of this provision leaves the open the possibility of multiple interviews throughout the claim, and may be overlooked by a claimant who does not carefully review his or her policy.

Other provisions, like this medical examination provision from a Standard Insurance Company individual disability insurance policy, expressly condition the payment of benefits on your cooperation with the exam:

MEDICAL EXAM – We can have Physicians or vocational specialists examine You, at Our expense, as often as reasonably necessary while You claim to be Disabled.  Any such examination will be conducted by one or more Physicians or vocational specialists We choose.  We may defer or suspend payment of benefits if you fail to attend an examination or fail to cooperate with the person conducting the examination.  Benefits may be resumed, provided that the required examination occurs within a reasonable time and benefits are otherwise payable.

In newer policies the language used by the disability insurance companies has become ever more burdensome.  For instance, some modern provisions for examinations and interviews create far more specific duties for the policyholder and condition the payment of benefits on the claimant’s satisfaction of these duties.  Take this Guardian policy, for example, which outlines the policyholder’s duties and obligations to comply with examinations and interviews in very specific language:

We have the right to have You examined at Our expense and as often as We may reasonably require to determine Your eligibility for benefits under the Policy as part of Proof of Loss. We reserve the right to select the examiner. The examiner will be a specialist appropriate to the assessment of Your claim.

The examinations may include but are not limited to medical examinations, functional capacity examinations, psychiatric examinations, vocational evaluations, rehabilitation evaluations, and occupational analyses. Such examinations may include any related tests that are reasonably necessary to the performance of the examination. We will pay for the examination. We may deny or suspend benefits under the Policy if You fail to attend an examination or fail to cooperate with the examiner.

You must meet with Our representative for a personal interview or review of records at such time and place, and as frequently as We reasonably require. Upon Our request, You must provide appropriate documentation.

Examination provisions containing language this specific and this restrictive significantly limit your rights.  The most significant change in the evolution of the examination provision is the number of obligations upon which your benefits are conditioned.  This policy language allows disability insurers to use your benefits as leverage to compel your compliance with medical exams, interviews, and a litany of other examinations.

Review your disability insurance policy, and particularly your examination provisions in the “Claims” section, to determine what your rights, duties, and obligations are under your policy.  Unfortunately, if your policy requires to participate in examinations, a refusal will likely lead to a denial of benefits.  However, you do not have to attend alone.  No matter how restrictive the language in your disability insurance policy, you always have the right to have an attorney present for any examination or interview.  If you have any questions about your duties or obligations under your policy, contact an experienced disability insurance attorney.


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Understanding Your Policy: Maximum Benefit Period

Your maximum benefit period is one of the most important provisions in your disability insurance policy.  Its terms control the period of time during which you are eligible to receive benefits under your policy.  Many disability insurance policies pay benefits until age 65 or 67, while others pay lifetime benefits.  Others still pay benefits only for a limited amount of time even if the claim  is filed decades before the policy terminates.

It is crucial that you read your policy carefully to fully understand how your maximum benefit period affects your ability to file a claim and collect benefits.  Many people, especially doctors and dentists, work through their pain without realizing that it may affect their maximum benefit period.  As you will see in some of the policy examples we look at in this post, oftentimes the maximum benefit period is more complicated than you may expect.

To begin, some policies have straightforward maximum benefit periods, like this policy from Central Life:

            Maximum Benefit Period for Injury or Sickness

            For Total Disability Starting:

    1. Before Age 63                                                  To Age 65
    2. At or After Age 63                                           24 Months

As you might expect, if you have a policy with this provision and file a claim before age 63, you will receive benefits until age 65.  However, if you file a claim at or after age 63, you will receive only 24 months of benefits.

Most modern policies contain a benefit schedule that details the length of your benefit period more precisely, based upon your age at the time the claim is filed.  This policy from MetLife contains a maximum benefit period schedule similar to those found in many disability insurance policies:

Table A.         Maximum Benefit Period Varies By Age When Disability Begins

Age When Disability Begins                         Maximum Benefit Period

Before Age 61                                               To Age 65

At Age 61, before Age 62                               48 Months

At Age 62, before Age 63                               42 Months

At Age 63, before Age 64                               36 Months

At Age 64, before Age 65                               30 Months

At Age 65, before Age 75                               24 Months

At or after Age 75                                          12 Months

Though on the surface this provision may seem more complicated that the Central Life provision, the principle is the same: date of disability at X age, you are eligible for benefits until 65 or for X months.  The date of your disability determines whether you receive benefits to age 65 or only for a few years or months.  The older you are, the fewer months of benefits you will receive.  The only difference is the more precise breakdown of the maximum benefit period after you reach age 61.

When looking for your maximum benefit period, keep in mind that it may be defined in one place, and then clarified elsewhere in the policy.  This can be confusing to the policyholder – for example, take a look at this Paul Revere policy:

   Commencement Date            Maximum                   Maximum

          Monthly Amount        Benefit Period*

From Injury:        91st Day of Disability              $2,600.00                    To Age 65

From Sickness:     91st Day of Disability              $2,600.00                    To Age 65

*The Maximum Benefit Period may change due to your age at total disability.  Please see Policy Schedule II.

At first glance, it may appear to the policyholder that they are eligible for benefits until age 65, regardless of when his or her disability starts.  However, when you turn to Policy Schedule II, you find a benefit schedule identical to the MetLife policy discussed above.  If you had this policy and did not read it carefully, you might assume that you are not eligible for benefits if you become disabled at age 65 – ultimately depriving yourself of the 24 months of benefits you would still be eligible to receive.

Some policies require a bit more calculation.  For example, policies like this one from Mutual of Omaha take your Social Security Normal Retirement Age into account:

Age at Disability Maximum Benefit Period
61 or less to Age 65 or to Your Social Security Normal Retirement Age, or 3 years and 6 months, whichever is longer
62 to Your Social Security Normal Retirement Age or 3 years and 6 months, whichever is longer
63 to Your Social Security Normal Retirement Age or 3 years, whichever is longer
64 to your Social Security Normal Retirement Age or 2 years and 6 months, whichever is longer
65 2 years
66 1 year and 9 months
67 1 year and 6 months
68 1 year and 3 months
69 or older 1 year

This provision is ultimately designed to work out to your benefit by providing you with the longest period of time, but its multiple parameters require a bit of calculation to determine your actual maximum benefit period. If your policy contains a provision like this, you can use this calculator to determine your Normal Retirement Age.

Finally, it is important to note that many policies have specific, limited benefit periods for certain conditions such as mental illness and substance abuse.  It is extremely important that you read your policy carefully to understand these exceptions, like the provision found in this MetLife policy:

Limited Monthly Benefit for Mental Disorders and/or Substance Use Disorders

The Maximum Benefit Period is limited to 24 months for all periods of Disability during your lifetime if:

    1. Such Disability is due to a Mental Disorder and/or Substance Use Disorder;
    2. You otherwise qualify for Disability benefits; and
    3. You are not confined in a Hospital.

However, any time during which you are confined in a Hospital does not count towards this 24-month limit.

As you can see from just these five examples, the maximum benefit provision can take many different forms in a disability insurance policy.  It is critical that you read your policy carefully and have a firm grasp on how your maximum benefit period provision affects your eligibility for benefits.  If you have any questions about your policy, contact an experienced disability insurance attorney.

 

 


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