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Getting Past The Minefield Of A Disability Claim

If you sell disability insurance, you will likely have a client file a disability claim at some point. You will likely be the first person called and your client will expect timely and accurate advice. 

Advising on a disability claim used to be simple — but that was more than 25 years ago. Your client completed a simple one-page claim form and so did the attending physician. You might have secured the claim forms for the client and many claims were handled by a local claim office quickly with very little investigation. In those days you might have even had some clout with the local claim manager and would be able to get the claim paid even faster. Those days are long gone!

Disability claim departments today have staffed up with many additional personnel and the process has expanded beyond your wildest imagination. Claim forms for the claimant, the employer and the attending physician are multiple pages containing very detailed questions. Tax returns, procedure codes for the health care professionals (dentist, surgeons, etc.) and a host of other documents are now a routine part of the claim scenario. One mistake by the claimant, the employer or the attending physician can be the basis for a claim denial or termination.

In most cases, when your client goes on claim, you will also lose the renewal commission. So in essence, any advice you provide will be for no compensation. And if you make a mistake in the way of advice, you become a target for an errors and omissions liability lawsuit.

There is a way to limit your liability. Refer your client to someone who has a background selling disability insurance or previously worked in the claim department of an insurance company. These individuals are few and far between, but they are out there and are willing to provide advice to your client from the very beginning of a claim so you do not have to be involved.

In order for your client to have control of a disability claim, they must know the answers to the following questions. Not knowing the answers can make the difference between success and failure, and will affect the amount of money that will flow into your client’s bank account. Some of these questions relate to how they handle matters before filing a disability claim and some relate to what they do afterward.

1. If the client is a corporation, should the corporation deduct the disability premiums as a business expense? Will that influence the amount of tax-free benefits they receive? If premiums are paid by the corporation, can it prevent them from claiming “bad faith” if they are forced to sue the insurance company? Can they reverse the premium paying process where they do not take a business deduction and receive monthly benefits tax free? Will the same apply to the “bad faith” issue?

2. If they are in a state that offers state disability benefits and they have paid to be covered for them, will these benefits be deducted from their personal disability benefits? How about Social Security disability benefits if eligible — will they be deducted? And what if they have an association group plan and a group plan where there is an employer/employee relationship — will there be any “offsets” (deduction of monthly benefits) by one plan or the other? Could they wind up with neither insurance company paying?

3. If they own a practice, should they sell the practice before or after they go on a total disability claim?

4. If they have a partial disability claim and they hire another professional associate, will the insurance company consider only the claimant’s earnings based on their production or will they consider the earnings of the office (less business expenses)?

5. Do they know whether their doctor or medical staff has taken a course related to the completion of disability claim forms (Attending Physician Statement)? Do they know the difference in contractual wording as it relates to partial/total disability between your client’s personal disability policy, group disability, association disability, state disability, Social Security disability or worker’s compensation?

6. Do they know why many insurance companies are now having them mail claim forms to post office box addresses and not street addresses? I always have my clients send the initial claim documents to the insurance company via FedEx or UPS. The airbill indicates that the package must be signed for. This way, we know the insurance company receives the documents. When documents are sent to a post office box, it is too easy for the insurance company to say they never received them. This delays the claim and holds up payment to the client.  

7. Will only one Attending Physician Statement be required or will one be required for each of your client’s treating physicians and will that have an influence over the control of the claim? Is there anything your client can do to cause the insurance company to accept only one Attending Physician’s Statement?

8. Do they know how the insurance company uses your client’s social media to control the claim from their end?

9. When they get a new claim representative assigned to the existing disability claim, do they know if the new rep has read the entire file from the beginning? And if they have not, can that influence their thinking and approach to your client receiving their future benefits?

10. Should your client “build up” their practice for a higher potential sales figure before they claim total disability?

11. What’s the best way to transition from a partial disability claim to a total disability claim?

12. Is the definition of “total disability” based upon the client’s profession/occupation at the time they purchased a disability policy or at the time they claim disability?

13. When will an insurance company say that your client has a “dual occupation?”

14. If the disability policy is kept past age 65, there is usually a requirement that your client must be working “full time.” Do you know what “full time” means? Is it three days per week? Four days per week?

15. If the insurance company requests that your client be examined by a physician that they pay for, is a company representative required to attend this exam? If they want your client to be “tested” by a physical therapist for approximately three hours or more, are they permitted to do so? Does your client know how to get a copy of these reports?

16. If your client is seen at a field investigator’s residence, are they required to read and sign/date a document they hand them in response to questions that were asked of them?

17. When the claim form asks “How many people do you employ and how many people do you supervise,” do they know why this question is asked? Do you know that most claimants are ill-prepared for this question and get it wrong?

18. Do they know how to interpret policy contractual language such as: pre-existing conditions, fraudulent misstatements, prudent man clauses, incontestability, rehab, presumption of disability, etc.?

19. Do they know the difference between a “pure” Your Occupation’s total disability definition, a “modified” Your Occupation definition and a definition that relates to the client’s “education, training, and experience?”

20. If offered a “buyout” of their disability policy, would they know if it is a fair offer? Is there any room to negotiate a higher figure, and how much higher?

Your client must know the answers to these questions and many more that arise while they are applying for disability benefits or if they desire to keep their existing disability claim continuing. If they don’t know the answers, they are prejudicing their rights to collect on a legitimate disability claim.

Control of a disability claim not only provides a much higher rate of success but reduces the anxiety that goes along with the pile of paperwork that was never imagined when the client purchased coverage from their trusted advisor.

Art Fries is a disability claim consultant based in Nipomo, Calif. Art may be contacted at [email protected] .


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