In earlier posts we’ve discussed how agents don’t have the authority to change, delete, or add provisions to a policy. We’ve also discussed how most policy applications now contain language stating that you cannot rely upon representations made by agents regarding the scope of coverage, or eligibility for coverage. Thus, while agents can provide helpful advice and help to point you in the direction of a policy that may fit your needs, it is ultimately up to you, the purchaser, to review your policy, become familiar with the provisions of the policy, and confirm that you are in fact purchasing the coverage that you expected to receive.
If you don’t take the time to do this, and blindly pay premiums without reviewing your policy first, you could end up paying for coverage that provides less protection than you thought you were getting when you applied for the policy. For example, most physicians and dentists know that their disability insurance policies should be “own occupation”, meaning a policyholder is considered totally disabled (and eligible to collect benefits) when he or she can no longer work in his or her profession, versus being unable to work at all, in any profession. In some policies, own occupation is further defined as being unable to practice in a particular medical or dental specialty (i.e. anesthesiologist, periodontist, etc.).
Quite often physicians and dentists decide to buy another policy, either because they let a previous one lapse, or because they want to purchase additional coverage as their income increases and they can afford higher premiums, and they ask their agent for a new policy with the “same coverage”. This can be incredibly difficult or impossible to achieve, because over time policies have evolved to become more restrictive, and each company has variations on what they deem an “own occupation” policy. Consequently, while your agent may present you with a policy that contains the phrase “own occupation”, it may not be a true own occupation policy at all.
For example, some policies are actually conversion policies, which mean they start out as “own occupation” policies, but after a certain time frame (e.g 2 years, or 5 years), they change to an “any occupation” policy, which means that, in order to continue receiving benefits, you would have to show that you can’t work at all. This can be very difficult to prove, particularly if you worked in another capacity for all or some of the prior “own occupation” period.
Even if your agent does locate an own occupation plan with similar premiums and benefit amounts to an older policy, there may also be provisions that cancel each other out in the new and old policies. One scenario we’ve seen is a policy containing the provision that a claimant must not be working (a “no work” provision) in their own occupation or another profession in order to collect benefits, while the second policy states that a claimant must not be working in their own occupation but must be working in another field in order to collect benefits (a “work provision”). Under this scenario, in essence, one of the policies you’ve been paying years of premiums for is worthless, as both requirements cannot be met at once.
These examples highlight why it is important that you do more than just check an “own-occupation” box on your application and/or blindly rely on your agent’s assurance that a new policy is compatible and/or the same as an existing one. If you end up with a policy you essentially cannot use, your recourse is limited, as insurance companies have gone to significant lengths to shield themselves from any liability based on an agent’s representations of a policy. It is therefore far better to take the time to review your policy at the outset, before you pay years of premiums, to ensure that it provides the coverage that you applied for and need.
In our last post we discussed why you should not rely solely on your agent’s representations when purchasing a new disability policy. It is similarly important that you not rely solely on your agent to complete the policy application.
While an agent may offer to help you by filling out the application, this could end up negatively impacting a future claim or even voiding your policy down the road, if the application contains any errors or omissions. As explained in our prior posts, while it may seem like telephone interviewers, licensed representatives, agents, and medical examiners have significant control over the application process and whether you receive a policy, many applications have language that explicitly limits your ability to rely upon representations made by such individuals, and expressly places the burden of reviewing the application for accuracy upon you (regardless of who completed the application). Below is a sample of policy language:
Thus, you may speak with several people during the application process, and give them the requested information, but it is ultimately up to you to make sure the information provided to the insurance company is correct. It is therefore very important that you read through your application carefully to make sure it is complete and accurate before signing.
It is also very important that you carefully review your policy when you receive it from the insurance company, and not just file it away without a second thought. When you receive your copy of the full policy, it will typically contain language stating that you have a certain time period (e.g. 10 or 30 days) to review the policy and return it to be voided if it does not contain the terms you expected. This clause will normally be found on the first page of the policy, and typically looks something like this:
If you decide to keep your policy and do not send it back within this review period, you are bound by all provisions of the policy, regardless of whether you are actually aware of them or not. For instance, if you asked your agent for a certain provision and/or requested it on your application, but the insurance company omits it for some reason, and you don’t catch it during this review period, you may end up paying years of premiums for coverage that is different than what you thought you had purchased. Similarly, if your policy contains an unfavorable provision that you didn’t know was going to be in the policy, you will still be bound by it unless you return the policy.
Reading through contracts, especially lengthy insurance ones, can be time consuming. Many policies contain confusing language, terms of art, and often include supplemental riders that change the terms or definitions contained in the main body of the policy. But if you don’t read your policy until it’s time for you to file a claim, you may be caught off-guard by what your policy actually says. This next series of posts will discuss the importance of taking the time to read through your policy, and will review some things to watch out for when you buy a disability insurance policy.
Dentists and physicians are often swamped with work, and rely heavily on insurance agents when selecting and purchasing a policy. One scenario we commonly see is doctors requesting a policy that is “the same” policy that the other doctors in the practice have. Another common scenario is the doctor who wants more coverage and just asks his or her agent for another policy that is “like” his or her existing policy, or has the “same coverage” as his or her existing policy. What they don’t realize is that some of the same favorable terms may no longer be available in today’s policies. For example, while most older policies contained “true own occupation” provisions, there are now several different variations of “own occupation” provisions, so if you just ask for an “own occupation” policy, you may not actually be receiving the coverage that you think you are.
It is also important to be aware that, over the years, insurers have sought to distance themselves from agents and now often go so far as to include clauses or statements in their policies and applications that state no agent or broker has the authority to determine insurability or make, change, or discharge any contract requirement. Here’s an example of this type of policy language:
So what does this mean? It means that, while solely relying upon an agent’s assurance of the terms of a policy may have been a more acceptable (but not advisable) option in the past (when policies were often similar and generally favorable to policyholders), you can no longer solely rely upon your agent’s description of the policy. No matter how well-meaning or knowledgeable your agent may seem, ultimately, you are going to be on the hook if your policy doesn’t say what you thought it said, so it is crucial that you carefully review your disability policy to ensure you are receiving sufficient coverage.
Our next post will discuss the importance of the application process and policy review period.
In our previous post, we looked at how important it is for residents to have a plan to protect themselves financially in the unfortunate event they become disabled. In this post we will address some critical terms to look for when comparing potential policies.
Perhaps the most important provision in your policy is the definition of “Total Disability.” For physicians, dentists, and other highly specialized professionals who have invested both years and hundreds of thousands of dollars in their careers, a policy that defines “Total Disability” in terms of your inability to perform the specific duties of your “own occupation” (as opposed to “any occupation”) is critical. If your policy defines “Total Disability” as being unable to work in “any occupation,” it will be much more difficult to establish that you are entitled to benefits, in the event you suffer from a disabling condition.
In addition to knowing and understanding your policy’s definition of “total disability,” it is also crucial to know how working in another profession is treated by your policy. For instance, if you happened to be an oral surgeon with an essential tremor, you may no longer be able to operate safely on patients, but you may still be able (and want) to teach. Alternatively, if you happened to be a physician who did not take steps to increase your disability coverage to match your increases in earnings, working in another capacity may be the only way to maintain your lifestyle in the event of disability. Consequently, it is also important to know if your policy will allow you to work in another capacity and still collect benefits. Along those lines, here are a few other provisions you will want to watch out for:
No Work Provisions
These provisions mandate that you cannot work in another field and still receive benefits. This can be problematic if you do not have sufficient disability coverage to meet all of your financial needs.
These types of provisions require you to work in another occupation. This, of course, can make it impossible to collect on your benefits if your disability prevents you from working.
In our next post we will look at how you can select a plan that grows with you over time, as both your financial obligations and income change.
Recently, insurers have started to allow consumers to build and personalize their own insurance policies online. For instance, Guardian recently announced the launch of its online insurance quoting tool. According to Guardian, the tool “educates clients on the costs for various options based on age and occupation, demonstrates how adding or removing certain options affects pricing, and shows how to create the plan that best matches their individual needs.”
If this “build your own insurance” concept catches on, consumers may have much more control over the terms of their policies than they have had in the past. Accordingly, in this post we are going to talk about things to look for in a policy, and some things to avoid in a policy.
Things to Look for in a Policy
Generally speaking, here are a few things that you will want to look for when selecting a policy:
- Make sure that the policy is a true “own occupation” policy.
- Make sure that the policy provides for lifetime benefits.
- If possible, add a specialty rider that clearly defines your own occupation as your specialty.
- Try and find a policy with a COLA (cost of living adjustment) provision. This provision will increase your potential benefits by adjusting for inflation as time passes.
- Make sure that you get the highest benefit amount you can afford. Remember, if you’re unable to practice, your monthly disability payments may be your only source of income.
Things to Avoid in a Policy
Generally speaking, here are a few things that you should avoid when selecting a policy:
- “No Work” provisions that only provide benefits if you are unable to perform the material and substantial duties of your own occupation and you are not working in any other occupation.
- Substance abuse exclusions.
- Provisions requiring you to apply for Social Security benefits.
Remember, purchasing disability insurance is no different than any other significant purchase. Be sure to take your time and obtain quotes from multiple insurance companies before making a final decision.
For more information regarding what to look for in a policy, see this podcast interview where Ed Comitz discusses the importance of disability insurance with Dentaltown’s Howard Farran.
 See http://www.businesswire.com/news/home/20151028005074/en/Guardian-Empowers-Consumers-Build-Disability-Insurance-Coverage.
We are expanding our list of insurance company profiles that specifically market to dentists and doctors to include Principal Life.
Principal Life (also known as “Principal Financial Group”) was founded in 1879. Initially, Principal Life operated primarily as an insurance company. Principal Life is now a member of the Fortune 500, and offers several additional services, such as retirement and asset management. Principal has most recently realized a growth in net income from $1.112 billion in June of 2014 to $1.290 billion in June of 2015.
Company: Principal Financial Group or The Principal.
Location: Des Moines, Iowa.
Associated Entities: Principal Financial Services, Inc.; Principal Life Insurance Company; Principal Real Estate Investors, LLC; Spectrum Asset Management, Inc.; Post Advisory Group, LLC; Columbus Circle Investors; Edge Management, Inc.; Morley Financial Services Inc.; Finisterre Capital, LLP.
Assets: $530.3 billion.
Notable Policy Features:
Principal Life sells polices that define “disability” as “own occupation”, which means that you are considered totally disabled if you are unable to perform the duties of your occupation. While this may seem like the right policy for a medical professional, you should be aware of a couple caveats. Coverage under a Principal Life policy is, in part, based upon a key definition that is usually referred to as your “occupation period.” Essentially, your “occupation period” is the time frame during which the “own occupation” definition of totally disabled applied. Once the “occupation period” has expired, Principal Life will only pay you benefits if you are unable to work in any occupation that you are reasonably suited to work in, based on your education, training, and experience.
The length of your “occupation period” can range from a base of 2 years after your disability to a period of 5 years, until age 65, until age 67, or until age 70, depending on your “occupation class.” Oftentimes, the policy provisions regarding “occupation periods” can be convoluted and difficult to decipher. If you unsure about the length of your “occupation period” under the terms of the policy, an experienced disability insurance attorney can help you understand the applicable policy language.
Claims Management Approach:
In comparison with other insurance companies, Principal Life generally conducts more in-person field interviews with claimants. Principal Life will not only conduct a field interview when you initially file your claim, but will also likely conduct several additional follow up interviews throughout the claims process.
Most insurance companies require you to fill out generic questionnaires that ask for information about the nature of your disability, among other things. Because Principal Life handles a lot of disability claims by physicians, it has created a particular “Medical Professional Occupation and Financial Questionnaire” that is more comprehensive than a generic questionnaire, and is specifically tailored towards collecting information from medical professionals. The questionnaire is quite extensive, and asks about a wide variety of information, from your ownership interest in your practice, to whether your practice participates in a health care network, to the credentials of the medical professional owners and associate professionals you work with, to whether you receive any reimbursements from prescriptions. If you are unsure about the content or scope of any questionnaire you receive, an experienced disability insurance attorney can help answer any questions you may have.
In this series, we’re taking a look at some of the most popular disability insurance companies for doctors. See our profiles of MassMutual and MetLife. Northwestern Mutual is another disability insurer that specifically markets its policies to physicians and dentists.
In 2014, the company insured 476,000 people through 727,000 individual disability policies. Northwestern Mutual prides itself on paying more dividends that its competitors. In order to do that, of course, it must maintain consistently high profit levels.
Company: Northwestern Mutual Life Insurance Company.
Location: Milwaukee, Wisconsin.
Associated Entities: Northwestern Long Term Care Insurance Co., Northwestern Mutual Investment Services, LLC, Northwestern Mutual Wealth Management Co., The Frank Russell Co.
Assets: $217.1 billion in 2014.
Notable Policy Features: Northwestern Mutual sells policies with an “own occupation” definition of total disability. However, these policies are often only truly “own occupation” for a limited amount of time, after which they become any occupation policies (only providing benefits if you are unable to work in any job) or “no work” own occupation policies (only providing benefits if you are unable to perform your job duties and are not working in another job).
For instance, a Northwestern Mutual policy might include the following definition:
Total Disability. Until the end of the Initial Period [defined elsewhere as 60 months of benefits], the Insured is totally disabled when is unable to perform the principal duties of his occupation. After the Initial Period [i.e., 60 months], the Insured is totally disabled when he is unable to perform the principal duties of his occupation and is not gainfully employed in any occupation.
In order to make sure a Northwestern Mutual disability insurance policy keeps the own occupation definition for as long as you hold the policy, you may need to purchase an additional benefit rider.
Read more about Northwestern Mutual’s interpretation of its own occupation policies.
Claims Management Approach: Some of the claims strategies that Northwestern Mutual is known to use include conducting in-home field interviews on top of third-party surveillance, hiring its own medical consultants to review claimants’ records and opine on whether or not they are disabled, and demanding that claimants (especially those with mental conditions) undergo “independent” medical examinations (IMEs) with providers of Northwestern Mutual’s choosing.
These profiles are based on our opinions and experience. Additional source(s): Northwestern Mutual’s 2013 Annual Report; Northwestern Mutual Fact Sheet 2014; Forbes.com.
We frequently discuss how important it is for your treating doctor to support your disability insurance claim. Oftentimes, though, doctors are reluctant to help with the process. Understanding why your provider is hesitant to get involved can better equip you to enlist his or her support.
In our experience, these are the most common reasons why treatment providers decline to assist with disability insurance claims:
They don’t have time. Doctors have extremely busy schedules. Often, they’re concerned that they simply don’t have enough time to properly complete all of the insurance company’s required forms or to answer questions from your claims adjuster.
They are worried about the insurance company harassing them. Many healthcare providers know how complex and combative disability insurance claims can be. Sometimes, providers don’t want to get involved with a claim at all, because they’ve heard of (or experienced) claims personnel harassing treating doctors. This can be a legitimate concern, as left unchecked, insurance companies will often bother treating doctors with repetitive requests for information, pushy phone calls, or by second-guessing the doctors’ treatment plan.
They are worried about doing something to hurt your claim. On the other hand, many providers aren’t familiar with the private disability insurance claims process at all. This sometimes makes providers hesitant to complete Attending Physician’s Statements or to discuss your claim with an adjuster for fear that they will inadvertently say something that prejudices you.
They don’t know the definition of disability in your policy. Not every treatment provider is familiar with the type of own-occupation policy that many physicians, dentists, and other professionals purchase. When some providers hear the word “disability,” they think of a state of total helplessness, or of the much more stringent Social Security definition of “disability.” If a provider doesn’t know that your policy deems you “disabled” if your condition prevents you from performing the duties of your own job, he or she might think you don’t qualify for benefits.
Understanding Residual Disability Benefits: Are They Worth The Cost?
Part 3 – Current Monthly Income
In our previous posts, we identified the basic formula disability insurers use to calculate residual (partial) disability benefits and discussed variations in how disability insurers calculate Prior Monthly Income. Now, we will examine the other principal component in calculating a residual disability benefit: Current Monthly Income.
Current Monthly Income is the calculation of how much a doctor is earning now, versus how much he was earning prior to his disability. Although this sounds like a simple concept, calculating Current Monthly Income can be challenging in the healthcare industry. Many physicians and dentists own their own practices or are a partner in a practice group. Their income is not only based on their productivity, but also includes a passive component from the other business activities of the practice. For example, a dentist may employ one or more hygienists or associate dentists who generate additional revenue. When a doctor becomes disabled, the practice revenue may remain relatively constant as associates increase their production to account for the doctor’s reduced schedule.
Some insurers take advantage of this by calculating Current Monthly Income not on the doctor’s production, but rather on the practice’s revenue. This fails to take into account the true financial impact of a disability because, while revenue may remain high, expenses increase as associate doctors and hygienists work more (and earn more) to fill in for the disabled doctor.
Additionally, many doctors pay themselves based on a percentage of their own production, in addition to the income they earn as practice owners. When a doctor becomes partially disabled, his income from working in the practice will drop, even if the practice’s overall profitability does not. Depending on the language in a particular policy, the policy may not take into account the drop in production, and the doctor may not be able to recover the full loss caused by his disability.
Disability Insurance Q&A: What is the Difference between “Own Occupation” and “Any Occupation” in Disability Insurance?
Question: What is the difference between “own occupation” and “any occupation” in disability insurance?
Answer: Most doctors purchase an “own-occupation” policy, which provides compensation following a disability that prevents the insured from performing his or her particular duties. If an insured doctor or dentist does not have an “own-occupation” policy, he or she must be disabled from performing the duties of any occupation for which he or she is reasonably qualified in order to receive disability benefits.
Some disability insurance policies are a hybrid, providing own-occupation benefits for a limited period of time, and then converting coverage to the “any occupation” standard.
In 2007, the Georgia Court of Appeals had to address this question in Pomerance v. Berkshire Life Insurance Company of America. 654 S.E.2d. 638 (2007). Alan Pomerance was an obstetrician/gynecologist with four disability insurance policies from Berkshire. These policies provided own-occupation coverage, meaning that “total disability” was defined as “your inability to perform the material and substantial duties of your occupation.”
Dr. Pomerance’s occupational duties included delivering babies, surgeries, C-sections, office visits, making hospital rounds, and being on call. After being diagnosed with a degenerative knee condition, Dr. Pomerance filed a total disability claim with Berkshire, explaining that he could no longer stand for long period of time, so he couldn’t perform deliveries and hospital surgeries, be on call, or assist in the emergency room. Because of his disability, Dr. Pomerance was forced to restrict his practice solely to wellness office visits, which included patient exams, counseling, nonsurgical care, and minor biopsies, but none of his other former duties.
Berkshire declined to pay Dr. Pomerance total disability benefits, arguing that he was only partially disabled because he could still perform one of his “substantial” duties, i.e., office visits. Dr. Pomerance contacted Berkshire and objected to its determination, but Berkshire still refused him total disability benefits. Dr. Pomerance filed suit against Berkshire, claiming breach of contract and bad faith refusal to pay the amounts owed. Continue reading “Case Study: What Does
“Material and Substantial” Mean?”
Unum announced last week that Jack McGarry, former CEO of Unum’s United Kingdom arm, has been brought back to the U.S. to manage Unum’s closed block of business. This “closed block of business” includes its individual disability policies issued prior to the mid-1990s–the type of policies that Unum no longer sells. According to Unum Group CEO Thomas Watjen, Unum hopes that McGarry’s experience will benefit the company:
“Our closed block of business represents over 25 percent of our capital, and I’m confident that Jack’s significant financial and operational expertise will help us improve the performance of this business.”
Unum doesn’t explain what it means by “improving the performance of this business.” The policies McGarry will be managing aren’t sold anymore, so he can’t improve that block’s performance by changing the way policies are sold, who they are sold to, or how they are priced. And at this point, Unum has to honor the outstanding policies as they are written, so he can’t lawfully help the block improve performance by skimping on benefit payments.
Watjen’s statement could mean that McGarry, who has discussed Unum’s confusing policy language in the past, will help the individual disability department better serve customers by making Unum’s communications easier to understand. However, it is also likely that “improving the performance” of that block of business means that McGarry will focus the company’s efforts on continuing to scrutinize claims made on the individual policies to avoid paying benefits (and thus save Unum money). Either way, our disability insurance attorneys will be closely monitoring Unum and any new developments under McGarry’s leadership.
Even though disability insurance companies have a duty under Arizona law to give your interests equal consideration to their own, insurers rarely act for the policyholder’s benefit. Claims benefit managers are frequently taught how to approach disability claimants to get a desired result, usually a denial or termination of benefits. From our years of experience with the disability insurance industry, we have learned some of the tactics claims personnel use. The following is a list of strategies to beware of. Though not every disability claim manager engages in these practices, it is always a good idea for claimants to be vigilant in order to protect their rights under their policy.
- Treating claims like a unit of production. Disability insurance companies often don’t care to know how being disabled and filing for benefits affects you personally. Don’t expect that they will understand or be sympathetic to the personal toll the entire process takes on a claimant, especially a doctor or dentist who has spent years in study and practice to achieve professional success. To disability insurers, each claim is a unit of production being channeled towards an end goal.
- Misinterpreting policy provisions. Disability insurance claims managers are not lawyers, and just like most people, often have trouble properly interpreting complicated insurance policies. For example, claims personnel might inform an insured that her claim is an “any occupation” policy when in fact it is an “own occupation” policy.
- Claiming rights that don’t exist under the policy. Claims managers will also frequently indicate that the disability insurance company can make claimants do certain things or provide certain information that is not actually required under the individual policy. For instance, an insurer might tell a claimant he needs to complete a detailed daily activity report, when there is actually no such requirement to do so in his policy. Make sure you know what your policy does and does not actually allow.
- Acting like your friend. Employees of disability insurance companies often try to act like your friend or partner in the process, when they are actually channeling your claim towards denial or termination of benefits. Often, claims managers will call an insured for a friendly chat, all the while peppering the insured with seemingly innocuous questions meant to provide evidence for claim denial. Policyholders should understand the questions being asked, and not get distracted by the congeniality of the caller.
- Sending “field investigators” to talk about your claim. Another common practice in the disability insurance industry is to schedule an in-person interview in the claimant’s home with a “field investigator.” These interviewers will spend hours asking about your symptoms and activities in excruciating detail, taking copious notes and even asking to photograph you. What they may not make clear is that the field investigator has no authority over the disposition of your claim. Rather, he or she is a private investigator hired by your insurance company to gather evidence against your claim and provide a starting point for surveillance.
The best way to make sure that these claims management practices aren’t used to take advantage of you when making a claim for disability benefits is to enlist an attorney who knows the tactics used and how to guard against them. Nevertheless, every insured should understand their insurance company’s approach to claims management and be cautious in their interactions with claims management personnel.