Section 2 -Disability (Accident & Health) Insurance Basics

Peril

A cause of loss
Disability insurance covers two specific perils:
1) Accidental Injury
2) Sickness

Accidental Injury

Injury that is unintentional and unforeseen

Health insurance

Sometimes called
1) Disability Insurance
2) Accident & Sickness Insurance
3) Accident & Health insurance

Sickness

Sickness or disease which first manifests itself after the effective date of the insurance policy

5 Types of disability (or health) insurance

1. Disability Income Insurance
2. Accidental Death and Dismemberment (AD&D) Insurance
3. Medical Expense Insurance
4. Dental Insurance
5. Long Term Care Insurance

Disability Income

Replaces your lost wages (net earnings) if you should become disabled. This type of policy will cover your loss of income only if you are totally disabled as defined in the policy

Accidental Death and Dismemberment (AD&D) Insurance

A form of Accidental Death Benefit rider.

Medical Expense

This is what people think of as health insurance--it's actually a medical expense plan. Insurance that covers your doctor and hospital bills.
2 types of plans:
1) Service plans: HMOs, PPOs.
2) Reimbursement plans (Indemnity plans)

Dental Expense

Insurance that is usually sold on a group basis due to adverse selection. Dental coverage may be integrated into a Medical Expense, i.e. the deductible in the plan can be satisfied with either medical or dental expenses.

Long Term Care Insurance

Insurance that is sold by private insurance companies to cover the cost of convalescent nursing home care, or home health care. This type of coverage is not provided in any other type of policy

Total disability

The insured is unable to perform his own job for the first two years and any job they are suited for based upon their
education, training or experience thereafter

Medicaid

A public assistance welfare type program for people with little or no assets or income. Participants do not have to be 65 to get Medicaid

Individual Policies

Usually require very strict underwriting due to adverse selection. Individual coverage often costs more than group and offers less coverage. Often contain probationary periods (pre-existing condition clauses) designed to protect the insurer.

Cancelable

The insurer may cancel at any time with proper advance notice and a return of unearned premium due, if any

Group health policies

Cheaper to buy since the cost of administration is lower (one policy may cover many insureds), and usually better than that provided by individual policies. upon termination of employment, group coverage is "convertible" to individual coverage without evi

Limited Policies

Limited for two reasons:
1) Limited coverage amounts (dollar amounts) stated in the policy
2) Limited covered perils - lots of exclusives - also specified in the policy what perils are covered
These types of policies do not follow the Principle of Indemni

Accidental Death and Dismemberment (AD&D)

Covers accidents only. AD&D policies may be written separately or may be added to a life or health policy by means of a rider. Consists of two parts:
1) The Principal Sum
2) The Capital Sum

Principal Sum

Pays for death and severe dismemberment only (such as the loss of two limbs in the same accident

Capital Sum

Pays for dismemberment (such as the loss of limb). The capital sum is usually written to be 50% of the principal sum. Although AD&D policies will cover accidental loss of eyesight, they do not cover loss of hearing

AD&D exclusions

The primary exclusion is being under the influence of alcohol or narcotics at the time of the accident. In addition, AD&D policies do not cover occupational or military related accidents and do not cover loss of digits, such as fingers and toes. Loss of a

Travel Accident

Will cover you while flying on a regularly scheduled commercial flight, but not on private planes. Coverage is usually written to cover one specific trip only. This coverage is also commonly available to some credit card holders for a small monthly fee

Specified (Dread) Disease

These policies cover a specific catastrophic illness, such as cancer. This type of policy will pay in addition to any other
coverage for cancer you may have (such as Medical Expense). These policies will not pay all of your medical expenses. Coverage is s

Hospital Confinement Indemnity

Coverage is limited to a certain amount for each day you are hospitalized, regardless of the cause. Coverage is in addition to any other coverage you may have

Credit Disability

This is a type of disability insurance sold by a lender that will cover the payment of a debt or other type of installment loan if the insured becomes disabled. Coverage is limited to the amount of the loan and decreases as the loan amortizes

Blanket Disability

Insurance written on schools, sports teams, and church camps in order to prevent lawsuits. The policy "blankets" all participants, so they do NOT have to be issued certificates of insurance

Prescription Drugs

Coverage offered as an optional coverage on a health insurance policy for medication

Vision Care

Usually not offered as a benefit. When it is, it often covers an annual eye exam and eyeglasses once every two years

Impairment Riders

Exclusions in health insurance are sometimes referred to as _________ ___________

Exclusions from Coverage

Things that are never covered. This relates to any type of health insurance. Insurers can exclude anything they want by issuing an impairment rider--even beyond the look back, even back as far as when you were a baby

Pre-existing Condition Clause

Also known as a Pre-existing Condition Exclusion
A clause that allows for a period of time when you do NOT have coverage. If the pre-existing condition reoccurs during the probationary period, there is no coverage and will never be during that probationar

Pre-existing Condition

Any condition, physical or mental, regardless of the cause of the condition for which medical advice, diagnosis, care or treatment that was recommended or received prior to the enrollment date (pregnancy is no longer a pre-existing condition) Pre-existing

Look back period

Usually 6 months prior to new health insurance contract

Replacement

A producer recommends that a client switch carriers, but fails to mention the new probationary period. By doing this, they could
be liable for uncovered claims under the Doctrine of Errors and Omissions

Common health insurance exclusions

intentionally self-inflicted injuries, injuries sustained by war or act of war, elective cosmetic surgery, treatment in government hospitals or facilities and participation in criminal activity

Worker's Compensation

Need Property & Casualty or Fire & Casualty license to sell. One the job or occupational health insurance. Eligibility is determined by the state NOT the insurance company. mandated by state law if an employer has one or more employees

Non-occupational health insurance policies

they cover you off the job only

Hazard

Increases the chance of loss

MIB

Created by life insurance companies to keep track of people's medical conditions

Rider

An amendment attached to the policy contract that modifies the conditions of the policy by decreasing (or expanding) its benefits or excluding certain conditions from coverage

Conditional Receipt

Makes the coverage effective on the date of application if the company finds the applicant to have been insurable on that date. Some Conditional Receipts make coverage effective on the date of application or on the date of the medical exam, whichever is l

Binding Receipt

provides unconditional coverage; givers a person immediate coverage without any conditions

Front-line underwriter

Once it is approved and issued, the producer usually will personally deliver the policy to the insured. This enables the producer to thoroughly explain all coverage provisions, exclusions and riders to the insured. Sometimes, the company will mail the pol

2 things required for a policy to go into effect

1) Premium has to have been paid
2) Policy has to have been issued

Collect on Delivery (COD) submittal application

Upon policy delivery, you will have to collect the first premium and have the client sign a Statement of Continued Good Health, ascertaining that their health has not changed since the original application was completed. Upon obtaining this statement and

Underwriting Criteria

The completed application, the Producer's Report within the application, Consumer Investigative Reports, medical questionnaires and physical exams and information supplied by the Medical Information Bureau (MIB)

MIB procedures require this

1. A written notice to the applicant that the insurance company may report health findings to the MIB.
2. Authorization by the applicant for the MIB to disclose information to member companies.
3. Disclosure to the applicant of information contained in MI

HIV consent form

No one may require the performance of an HIV-related test without first receiving the specific written informed consent of the applicant. No one may disclose that information, except to the applicant or to persons to whom disclosure is authorized in writi

Participation requirements

75% of the eligible employees enroll in a contributory group. 100% of the eligible employees must enroll In a non-contributory group

Loss ratio

The amount the insurers pay out in claims per year as a percentage of the amount of premiums they collect; dividing losses by total premiums received

Waiting Period

Also called the Elimination Period. Period of time that you have to wait until you are eligible for benefits ; mostly for Disability Income and Long Term Care policies

HIPAA

The 1996 Federal Health Insurance Portability and Accountability Act. A federal law protecting the privacy of patient-specific health care information and providing the patient with control over how this information is used and distributed.

portability

Individuals that terminate employment who were previously insured for at least 18 months on a group health insurance plan must be offered an individual health insurance policy without any pre-existing condition exclusions.

HIPAA credit for previous periods of creditable coverage

group health policies must give credit for previous periods of creditable coverage when an employee moves from one group to another, as long as coverage was continuous with
no break in coverage greater than 63 days. This means that if you had already sati

HIPAA probationary period/pre-existing condition

limits the probationary period for new enrollees in group policies to a maximum of 12 months and defines a pre-existing condition as medical advice, diagnosis, care or treatment that occurred within six months of enrollment