Another Example Of Why Group Disability Insurance Policies Suck

I recently wrote about how I’ve been looking for a little more disability insurance, and how I’m okay with getting a group policy to add on to my individual one, especially to avoid a climbing exclusion.  Right as I was about to purchase the group policy offered through my partnership, I got junk mail from my specialty society, ACEP, as I frequently do, for their group disability policy.  It’s a nice policy for two reasons- it’s specialty-specific (although not true own-occ, see comments section) indefinitely, unlike most group policies, and it is very cheap when you’re in your 30s, although the price goes up every 5 years.  In fact, this year it’s almost 50% cheaper for me than the modified own-occ (specialty-specific only for two years) group policy I can get through my partnership.

This group policy also offers a cost of living allowance, which is also pretty unusual for group policies.  But I had to laugh when I saw it.  Here it is verbatim:

Cost-Of-Living Adjustment:
We will adjust Your Monthly Benefit for increases in the cost-of-living if:
1) You have been Disabled for 12 consecutive month(s); and
2) You are receiving benefits;
when the Cost-of-Living Adjustment is made. We make the Cost-of-Living Adjustment each year on January 1st.

We apply the Cost-of-Living Adjustment formula by:
1) determining the lesser of:
a) 3%; or
b) 1/2 the percentage change in the Consumer Price Index;
2) multiplying the resulting percentage (%) times the Monthly Benefit for Disability being received; and
3) adding the resulting amount to Your Monthly Benefit.

You will not receive a Cost-of-Living Adjustment after:
1) You cease to be Disabled;
2) You have received 5 adjustments; or
3) the date The Policy terminates.

I found this to be pretty hilarious.  Why bother?  First, at MOST it will give you 1/2 the change in the CPI.  Why not call it “Half a COLA” because that’s what it is.  But the best part comes at the end.  You only get it for 5 years.  What the heck?  The whole point of a COLA is to protect you against the ravages of inflation over decades. You want to know that if you get disabled at 35, you’ll still be getting enough to live on at 60.  I guess this COLA is better than nothing, but not by much.  Thanks ACEP/Hartford for demonstrating why it’s important to read the fine print with disability insurance policies.


Another Example Of Why Group Disability Insurance Policies Suck — 5 Comments

  1. The ACEP association plan with Hartford IS NOT specialty specific. In fact, it states the following:

    What is a total disability?

    A disability that results in a loss of earnings of 80% or more is considered to be a Total Disability. You’ll continue to qualify for benefits up to Age 65 (Plan I), or for up to 5 years (Plan II), if you cannot: perform the substantial and material duties of your own regular occupation; are under the care of a licensed physician other than yourself; and, are not gainfully employed in any occupation for which you are or become reasonably suited in terms of education, training or experience.

    Remember, the definition of total disability is only one aspect of a disability insurance policy and, as you have stated, there are many other limitations associated with group and/or association policies.

    • You’re right, I did miss that. It’s inability to do your occupation (which they do define as my specialty)AND loss of income. Interesting. Specialty-specific but NOT own-occ. What will they think of next! I should have included that in the post itself.

      “Your Occupation means Your Occupation as it is recognized in the general workplace. Your Occupation does not mean
      the specific job You are performing for a specific employer or at a specific location.
      If You are a Physician or dentist, Your Occupation means the general or sub-specialty in which You are practicing for
      which there is a specialty or sub-specialty recognized by the American Board of Medical Specialties.”

      On another note, the group insurance policy I actually do own is true own-occ, but only specialty-specific for two years. Complex products to protect against a complex financial catastrophe. Life insurance is so much easier. While I’ll admit there’s a few minutes there where it’s not entirely clear if someone is alive or dead, it’s always sorted out by the end of the day. Disability? Not so much.

  2. Frankly i blame insurance companies for producing such poor polices. The number and types of insurance products that are a bad deal when you really understand what is going on is just amazing. WCI, you are super well read on the subject and it appears even you missed part of the problem.

  3. As noted insurance is usually not very good and you always have to read and understand the fine print. In addition the insurance company wants to make money so if they somehow give you a good deal (too good for their tastes) they will find some way to change it to make it acceptable to them.

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