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The ABCs of Disability Insurance: A Glossary

Bridget CassidyMar 14, 2018

Shopping for disability insurance can be confusing, especially with all the industry terms used by insurance providers. So, we put together this comprehensive list, or ABCs, of disability insurance terms that we hope will assist you in your search for the best company and policy. When you are ready to shop, please see our Top Ten List of Best Disability Insurance Companies.

Accidental Medical Expense RIDER

This rider reimburses a portion of the medical expenses you incur as a result of an accidental injury.

Accident-Only Insurance

This type of disability insurance provides compensation for accidental injury or death only. You may choose this type of policy if you are employed in a high-risk physical job, for example, professional athlete or firefighter.

Any Occupation

"Any Occupation" is your inability to work in any occupation based on your background, including your education, training, or experience. It is a much broader definition than "Own Occupation" which only refers to the specific occupation you are in when you become disabled. See Own Occupation for more details.

Automatic Benefit Increase (Enhancer) Rider

Your benefit amount is determined by your annual income at the time you purchase your policy. This rider protects your future earnings by automatically increasing your benefit annually, as long as you pay your premiums in full.

Benefit

This is the weekly/monthly benefit paid to you in the event you become disabled and are unable to work.

Benefit Amount

This is the weekly/monthly benefit amount you will receive to help replace lost earnings during your period of disability. All benefits are limited to a maximum amount.

Benefit Period

A benefit period is the maximum amount of time that payment is received and is determined based on the eligibility of your benefit's claim. Examples of benefit periods are two, five, 10 years, or up to age 65.

Benefit Percentage

The benefit percentage is the amount payable to you based on a percentage of your income prior to your illness or injury. The proceeds are limited to an overall maximum amount.

Cash Value Rider

See Disability Income Rider.

Catastrophic Disability Rider

This rider provides an additional monthly benefit that covers living expenses in case you are unable to perform two or more daily activities for as long as your policy is paid in full. Some companies also waive premium payments while you are catastrophically disabled. Note: each company's definition of catastrophic disability can vary.

Cost of Living Adjustment (COLA) Rider

COLA protects your long-term benefit against the rate of inflation. After the first year of benefit, COLA increases your benefit each year by calculating a percentage based on the latest Consumer Price Index measure.

Critical Illness Benefits Rider

This rider pays a benefit if you have a first-time diagnosis of or receive a procedure for one of the covered critical illnesses defined by your insurance company. The definition of critical illnesses can vary by company. Some examples of critical illnesses include heart attack, stroke, and some types of cancers.

Disability Income Rider

This rider, also known as Cash Value, is available if you also participate in a whole life insurance policy. In addition to receiving your disability benefit, you will continue to be paid dividends from your whole life plan. The cash value also acts as a savings account and can continue to grow up to 100% by the age of 65.

Disability Insurance

Disability insurance is a protection policy against income loss resulting from an illness, injury, or other condition that causes you not to be able to work. Disability insurance is also known as disability income, income protection insurance, or DI.

Elimination Period

This is the period between when your illness or injury occurs and when you actually start to receive benefits. The longer the elimination period, the lower your premium. Examples of elimination periods are 30, 60, or up to 720 days.

Exclusions/Limitations

This is a policy provision that defines what will not be covered under your disability insurance policy. Common exclusions are self-inflicted injury or pre-existing condition.

Guaranteed Insurability Rider

With this rider, you can increase your monthly benefit amount without medical underwriting (verification of income only). This rider carries the same elimination and benefit periods as your base plan.

Guaranteed Renewable Policy

This rider guarantees coverage every year for as long as you pay your benefits. The premiums may be increased, but your policy cannot change.

Home Modification Benefit

This benefit allows you to make specific modifications or improvements to your existing home while you are disabled.

Hospital Confinement Indemnity Benefits Rider

This plan provides a lump sum benefit if you are confined to a hospital because of an accidental injury or sickness. The benefits are paid directly to you or your designee.

Inflation Protection

See Cost of Living Adjustment (COLA) Rider.

Level Premiums

Level premiums are available with all individual disability insurance policies. With a level premium, your premium is fixed and guaranteed to age 65.

Long-Term Disability (LTD)

Long-term disability pays a percentage of your income when you become disabled and cannot work. It provides coverage for multiple years, including to retirement age (65), or until you return to work. It provides lost income while you recover from a more serious illness or injury and it provides lifelong coverage if you become permanently disabled.

Maximum Benefit Period

The maximum benefit period is the longest length of time that benefits are payable as long as you are disabled. Short-term insurance is two years, and long-term insurance is 5 years, 10 years or to age 65.

Maximum Weekly/Monthly Payment

The maximum monthly benefit is the most the insurance company will pay on a monthly basis, regardless of the income percentage.

Non-Cancelable Rider

With this rider, your insurance company cannot cancel your policy, increase your premiums, or reduce your benefits as long as you pay your premiums.

Optional Benefits

Optional benefits are usually available in the form of riders and increase or modify the coverage of your basic policy. See Riders.

Own Occupation

Own Occupation refers to the specific occupation you are in at the time your disability occurs. See Any Occupation for further details.

Premium

This is the periodic payment you will make for your disability insurance to remain in effect.

Pre-Existing Condition

A pre-existing condition is any condition you received medical treatment or advice for prior to applying for disability insurance. It is a standard exclusion or limitation with most insurance companies.

Presumptive Total Disability

Most insurance companies have a pre-set list of conditions which presume total disability. Examples are the loss of sight, loss of speech or a loss of two limbs (both hands or feet). If you're affected by one of these conditions, you will receive your benefits immediately, your premiums may be waived while you are disabled, and you may continue to receive benefits even if you're able to return to work.

retroactive injury

This benefit will pay a premium (retroactively) if you become totally disabled within 30 days of your injury, and you remain disabled until the end of your elimination period.

Rehabilitation (Vocational) Benefit

This benefit covers most of the costs for vocational rehabilitation, to specifically retrain you for your current job or for a new occupation as a result of your disability.

Residual Disability Benefit

Residual disability or Partial disability is when you are disabled but can work part-time. This benefit compensates you for any income difference. It also allows you to transition back to full-time work while still receiving vocational rehabilitation.

Return of Premium Benefit Rider

If you remain healthy during your coverage period, you can receive a benefit refund upon cancellation of your policy, minus any claims paid.

Rider

A rider is any extra agreement that you add to your policy that expands or modifies your coverage or benefits. Riders are optional to the plan.

Short Term Disability (STD)

Short-term disability insurance pays a percentage of your income when you become disabled and cannot work full time. The benefit period is typically three to six months but coverage can last for up to two years. It is meant for more temporary disabilities like maternity leave or joint disorders.

supplemental disability income

If your company's disability plan does not provide the total percentage of the monthly income protection you need, you can purchase an individual disability insurance policy to supplement your company's plan. Most companies only cover 50-60% and do not offer many riders.

Survivor Benefit

The survivor benefit is an optional benefit and provides your beneficiaries with a lump sum payment if you die while receiving disability benefits.

Term of Benefit

The term of benefit is the time period when a policy is active.

Terminal Illness Benefit

This benefit provides you with a lump sum payment if you become terminally ill.

Waiver of Premium Rider

This rider waives premium payments if you become critically ill, seriously injured, or disabled. There is a waiting period where you will pay premiums, but you will receive a lump sum reimbursement for those payments.

Waiting Period

This is the time period between when your injury or illness occurs and when your benefit payments begin. See Elimination Period