The presumptive disability is a feature that most carriers offer and all call it by the same name but as you have probably figured out by now, there are significant differences by carrier! In general, the presumptive benefit pays a total disability benefit in certain scenarios like loss of hearing in both ears, use of both hands, power of speech etc. The full benefit is paid regardless of whether the client is currently working or earning income and does not require the insured to be under the regular care of a doctor.
Consider the following scenario:
Your client, a 45 year old accountant, loses the use of both of his legs (and feet) after a serious car accident. Fortunately, due to the nature of his occupation, after some time spent recovering, he is able to return to work full-time with the use of a wheelchair. He has a disability benefit of $6,000/mo. with a 180 day elimination period and an age 65 benefit duration. Please see the benefits that he would likely receive from three different carriers below:
Carrier 1: $2,520,000 in benefits received (assuming the client passes away at age 79)
Carrier 2: $1,512,000 in benefits received
Carrier 3: $1,476,000 in benefits received
Why the disparity in disability insurance benefits?
Carrier 1: This carrier offers the following features under their presumptive disability rider:
- Insured is considered totally disabled regardless of ability to work or earn an income in the following scenarios resulting in total loss of use and no possibility of recovery.
- Power of speech, hearing in both ears, sight in both eyes, the use of both hands, both feet, or one hand and one foot.
- Insured is not required to be under the regular care of a doctor.
- The benefit will start to accrue on the date of loss (instead of after the elimination period).
- Lifetime benefits are payable when the benefit period is to age 65, 67 or age 70.
Benefit calculation: 35 years on claim (assuming death at age 79) x 12 months = 420 months on claim x $6,000/mo. of benefi t= $2,520,000 in total benefits
Carrier 2: This carrier offers the following features under their presumptive disability rider:
- Insured is considered totally disabled regardless of ability to work or earn an income in the following scenarios resulting in total loss of use and no possibility of recovery.
- Power of speech, hearing in both ears, sight in both eyes, the use of both hands, both feet, or one hand and one foot.
- Insured is not required to be under the regular care of a doctor.
- The benefit will start to accrue on the date of loss (instead of after the elimination period).
Benefit calculation: 21 years on claim x 12 months = 252 months on claim x $6,000/mo. of benefit = $1,512,000 in total benefits
Notice what is missing? With this carrier, there is no provision for lifetime benefits as with Carrier 1 above.
Carrier 3: This carrier offers the following features under their presumptive disability rider:
- Insured is considered totally disabled regardless of ability to work or earn an income in the following scenarios resulting in total loss of use and no possibility of recovery.
- Power of speech, hearing in both ears, sight in both eyes, the use of both hands, both feet, or one hand and one foot.
- Insured is not required to be under the regular care of a doctor.
Benefit calculation: 20 years and 6 months on claim x 12 months = 246 months on claim x $6,000/mo. of benefit = $1,476,000 in total benefits
Notice what is missing on this one? The elimination period is required and there is no provision for lifetime benefits.
So, what’s the takeaway here? I certainly would not choose a disability insurance policy based only on the differences in the presumptive benefit. However, if you are looking at multiple carriers with similar features and pricing, it is certainly good to know some of these finer details about the policies!
Want to learn more about policy language nuances? Check out my blog posts on other policy features like Residual, Catastrophic, Return of Premium and Waiver of Premium.
These are generalizations, meant to illustrate the importance of contract language so please check the specific product language of the carrier you are selling.
As always, contact DIS for the advice you need to protect your clients’ paychecks!
