If you are considering purchasing long term disability insurance, or have been offered a quote and are reviewing a contract, chances are there are a number of terms that are foreign to you. This is not a coincidence. Insurance contracts are notoriously confusing. Why is this? As we have noted in a number of our posts, the fewer payments an insurer has to pay out to claimants the more money they make.
With that, it is always good to understand the terms in an insurance contract so that you can make informed decisions about whether to purchase coverage or not. This post will highlight a few terms.
Elimination period – This refers to the time period that must pass before long term disability benefits will kick in. LTD products are not constructed to provide benefits for short term injuries. They assume that you will have other ways to navigate the period between an injury and the time that benefits are actually necessary, such as using savings or unemployment.
Benefit period – This refers to the time period that benefits will actually be paid. The benefits period could be as short as two years, or as long as the date from the end of the elimination period to one’s retirement age. Before signing any LTD contract, it is critical to know the length of the benefits period.
Guaranteed renewable – This term seems self explanatory, that your policy will not be canceled. However, it is inevitable that the policy will have the word “cancel” somewhere else in the policy. It is critical to know the circumstances in which a policy could be cancelled.
If you have additional questions about the terms of your LTD insurance contract, we invite you to contact us.