What is the Effective Date of My Disability Policy?
The “effective date” of a policy is the day your policy becomes enforceable. While this may seem like a simple concept, it is not always as straightforward as you might think. Understanding the date your policy became effective may require you to read several different provisions together. Additionally, if you apply for benefit increases at a later date to increase your policy’s monthly benefit, this can further complicate matters because, depending on the terms of your policy, you can end up with multiple effective dates for the same policy (corresponding to each benefit increase to the base amount).
Here is an example of a provision defining the effective date of a policy (taken from an actual policy):
EFFECTIVE – Coverage is Effective when this Policy is issued and delivered to You provided the first full premium is then paid and all answers on the application are true and complete as if made at the time of delivery.
Coverage is Effective on the Issue Date if a premium was paid at the time of the application; the Conditional Advance Premium Receipt was given at that time; and this Policy was issued at standard rates exactly as applied for.
Additional coverages are Effective on the Monthly Anniversary on or after the date We issue the new Policy Specifications containing the coverage, subject to payment at the initial premium. If the initial premium is not paid when due, the coverage will be treated as never having been Effective and new Policy specifications will be issued showing this fact.
Under this provision, there are three possible effective dates. First, the policy’s coverage will be effective when the policy is issued and delivered, as long as the first premium was paid and the application was accurate when it was submitted.
However, the provision alternatively states that the policy can be effective on the “Issue Date.” In this scenario, the policy will be effective on the “Issue Date” if: (1) a premium was paid at the time the application was completed and submitted; (2) a receipt for this payment was given to the policyholder at that time; and (3) the rates in the policy are exactly what were applied for. But what is the “Issue Date?” This is also separately defined in the policy:
ISSUE DATE – The date the Policy Specifications are printed. Subsequent Policy Specifications carry their own Issue Dates.
Finally, if the policyholder purchases additional benefits after the original policy has been issued, there is a different effective date for this new coverage (i.e. additional coverages are effective on the “Monthly Anniversary” on or after the new policy specifications are issued, as long as the first premium is paid). This requires the policyholder to understand what “Monthly Anniversary” (another separately defined term) means:
MONTHLY ANNIVERSARY – [This date is] computed from the Policy Date shown in the Policy Specifications…. The Monthly Anniversary is the same date in each succeeding month as the Policy Date.
So, as you can see, under some policies, determining when your coverage becomes effective (and/or whether benefit increases apply to your claim) can be particularly complicated and depend on the particular facts at play. Disability insurance policies—particularly newer disability policies—are complex documents, and insurers often take advantage of this complexity when denying claims. If you are having difficulty understanding your policy’s provisions, an experienced disability insurance attorney can help you interpret confusing policy language and apply it to your particular situation.