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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