If you are fully disabled for the rest of your working life, the disability benefits within your group medical insurance can easily exceed $1 million over time. In spite of the value of the coverage, and its financial importance in the event of a disability, most employees have a limited understanding of how the coverage would work for them in the event of a claim. Many will not be aware of insurability requirements for disability benefits.

A number of insurers are building in insurability requirements which employees must meet in order to be eligible for maximum benefits under the plan. A basic amount of coverage is in place without medical evidence. The basic coverage amount can be much less than you are eligible for based on your salary level. This is one way that insurers and employers keep plan costs under control. Medical evidence must be submitted by the employee and assessed by the insurer before the maximum benefit is approved.

For example, a recent plan that I reviewed had the following features:

  • Benefit: 66.67% of monthly earnings rounded to the next higher $1
  • Maximum Benefit $5,000
  • Benefit Period: Age 65
  • No Evidence Limit: Evidence of insurability is required for amounts in excess of $3,000.

So, based on the above limits, once a member of the plan, the employee automatically qualifies for 66.67% of salary coverage, until, their salary exceeds approximately $54,500. Unless they provide evidence of insurability, once they pass this income threshold, they will not be eligible for the maximum benefit under the plan. It is capped at $3,000.

I asked the client that is a member of the above plan how much disability coverage they have through work. They answered, “two thirds of my salary from what I recall”. This client earned $75,000 and thought that he was covered for about $4,200 per month. He was shocked to find out that at best he would get $3,000 because he had not provided evidence of insurability when his salary was increased beyond $54,500.

When was the last time you reviewed your group health insurance benefits thoroughly? I recommend that you pay particular attention to the disability benefits. That is one of the most important, and valuable, features of your plan.

This information is of a general nature and should not be considered professional advice. Its accuracy or completeness is not guaranteed and Queensbury Strategies Inc. assumes no responsibility or liability.