Disability insurance can mean different benefits, depending on the insurance solution you use. There are disability insurance solutions that will pay you a lump sum benefit, and there are some that will pay you a monthly benefit, and there are some that will pay you a combination of both. In the context of this article, I will be talking about Income Protection also known as disability insurance and the fine print around claiming a partial disability benefit.
What is Partial Disability?
Partial disability is where you have to work lesser hours because of sickness or accident, that usually means your income is reduced because of your lesser hours, and you may need to claim your loss of income from your private insurer.
How does partial disability insurance work?
Most private insurers have partial disability benefits built into their Income Protection products, but some of them require you to be totally disabled first before a partial disability claim can be considered, and some do not require you to be totally disabled first. Take a look at the two scenarios below. Scenario # 1: Insurer requires the client to be totally disabled first In this case, let’s assume Ben has a heart attack and is hospitalised for a few days and is sent home for a few days. But in Bens’ case, his doctor says he can return to work in a reduced capacity, and there is no need for him to stop work altogether. In this case, Ben submits a claim to his private insurer because he is working reduced hours and therefore is earning less. The fine print in his policy is that he has to be Totally Disabled for 14 days first before any partial disability claim can be considered. So in Ben’s case, he cannot claim. Scenario # 2: Insurer does not require the client to be totally disabled first In this case, let’s assume Jane get’s chronic fatigue, but since this can be a degenerative condition Jane can still work, but over a period of time, Jane works reduced hours. In this case, her insurer does not require her to be totally disabled first, so Jane submits a claim which is approved, and the insurer makes up for the financial loss because of her reduced hours. In both cases, neither client was totally disabled, and they were both cleared to return to work in a reduced capacity. The difference is that Jane was paid and Ben was not, and it all came down to the policy wording.
The value of an adviser
This is where the value of an adviser is worth its weight in gold. It’s our job to know the fine print and make recommendations based on research, knowledge and experience. It is so easy to miss such vital parts that are not obvious when purchasing insurance without an adviser. If you are considering getting Disability Insurance or have disability insurance and need us to review it, please contact us, and we will provide you with the right advice and the right cover.