Language to watch out for in a disability contract

Register now

When it comes to disability insurance, employers want to ensure that employees are covered and can easily access the coverage if they ever need to use it. However, there are some variables in these contracts that you should be aware of as an HR professional.

When a plan member/employee files a disability claim, there are a number of specific criteria to meet and rules to follow around when a person can make a claim, how long they can be out, when they can return to work and how they’ll be paid. Not understanding details of the plan can lead to miscommunication and a lot of headaches when someone needs to use their disability coverage.

Here’s what to look at to avoid confusion:

And/or provisions
And/or provisions dictate when a disability policy pays. If the contract is guided by an “and” provision, you need to meet each condition to receive disability. However, if it’s guided by an “or” provision, you only need to meet one of the three criteria to qualify for disability payments. While this may seem like a small difference — between one word or another — the “and/or” provision can make a big difference in the real world. It’s vital that you know how the contract is written so you can better understand if and when claims are paid out.

Pre-existing conditions
Employers should have a firm grasp on what, if any, pre-existing conditions prevent an employee from making a disability claim. If someone has a condition noted in the contract three months prior to making the claim, the member may not be eligible. One simple example is pregnancy. In many cases, a member must be on the plan for a specified amount of time before they can go out on disability due to pregnancy. Also of note: some pre-existing conditions don’t apply to new hires, while others do.

Return to work provisions
Just as there are rules about when a plan member can begin disability, there are rules about when someone may return to work. HR professionals should pay close attention to the specific rules guiding when someone can go back to the office. For example, if a plan member is on disability because of an injury to a hand and that person needs to type frequently, the insurance company may send them to classes or therapy so they can regain the use of the hand or learn to work around it.

Additionally, some return to work clauses allow a partial return to work, while others do not. HR professionals should be versed in exactly what their disability contract allows and how that would impact their business.

Definition of earnings
Similarly, a disability contract includes a definition of earnings clause that explains how disability claims are paid out for employees. If you employ a more fluid workforce or a large number of salespeople whose earnings may change periodically, it’s important to know how claims would pay out if someone with variable pay went on disability. Familiarize yourself with this clause and ensure it’s appropriate to your specific workforce.

The rules surrounding disability claims can be complicated for HR professionals and employees to sort through. It’s best that you have an understanding of what’s in your contract before a real-world scenario necessitates helping one of your employees handle a claim.

Knowing what’s in your disability contract ahead of time can limit headaches and confusion later.

For reprint and licensing requests for this article, click here.
Disability insurance Benefit communication Employee communications Healthcare plans Healthcare benefits