Disability Insurance Articles

Determining When Disability Insurance Benefits Will Terminate

2010-07-25

When reviewing disability insurance quotes, an important consideration is to know when an insurance company can impose a benefit termination. Disability insurance provides a benefit to cover all or some of an insured person's lost income due to a disability or illness. Benefit amounts and durations are determined by the terms of the policy; therefore, it is crucial to understand the policy terms in order to know the circumstances under which the benefits may be terminated.

The most common reason for a benefit termination under a disability insurance policy is when the insured is no longer disabled and is able to return to work. Under some of the more expensive policies, benefits may continue unless the person can actually return to his or her previous occupation. Under some of the less expensive policies, benefits may be terminated if the person can return to any kind of work. Failure to provide the insurance company will medical proof of a continued disability may also result in a termination of benefits.

Similarly, benefits may be terminated when the policy's maximum benefit duration has been reached. Some less expensive policies limit benefit payments to a specific number of months or years; in many cases, coverage is not to exceed five years. More expensive policies may extend the maximum benefit period, or in some cases, provide benefits until the person has reached retirement age. Typically, all policies envision a benefit termination upon the person's retirement.

Termination of policy benefits often varies, and benefits can be terminated because the person can return to some kind of work or has reached the maximum benefit. Usually, the more restrictions on payment of benefits, the less expensive the premiums for the policy will be. In other words, an insured person may have greater coverage under a policy, but will pay more for such coverage.

Another circumstance that could result in a benefit termination is when the insurance company determines the policyholder provided false or misleading information during the application process. Insurance of all kinds is based on an insurance company's assessment of risk. Based on the risk assessment, the insurance company decides whether to write a policy and how much to charge for it. If the risk assessment was faulty because the insured person actually posed a higher risk but withheld relevant information, the insurance company was essentially deceived into writing the policy, and the insured person's fraud can form the basis for both a benefit termination and a policy cancellation.

For anyone interested in disability insurance quotes, knowing the when and how of benefit terminations will be critical to comparing the various quotes. Keep in mind, higher disability insurance quotes' premiums will usually be indicative of higher benefits levels.