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The Disability Insurance Quandary

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By Scott B. Elkind, Esq.

Let me review some of the current statistics:
  • In 1999, 75% of U.S. households carried life insurance while only 40% carried disability insurance although you are three times more likely to suffer disability over the course of your working life
  • 9 out of 10 bankruptcies involve medical debt.
  • Nearly half of all bankruptcies were as a result of a person suffering from an unexpected illness or injury
  • It will take years to recovery from a disability lasting more than 90 days
Age     Disability Duration
25       2.1
30       2.5
35       2.8
40       3.1
45       3.2
50       3.1
55       2.6

Information from several sources including Society of Actuaries

I hope I have your attention now. You need disability insurance unless you are tremendously wealthy and can life on a limited budget should you not be able to earn any more income due to illness or injury.

If you do not already have disability insurance, it is available for purchase although you should be careful about the insurance company you choose. For example, UnumProvident holds approximately 60% of the disability benefits book in the United States. They also have thousands of cases in litigation (including some of mine).

Current disability insurance policies will cover up to 60% of your predisability income. Therefore, if you become disabled, you will not be living better. Hopefully, you will live well enough. Both types of policies to be covered usually have cost of living adjustment options available (they are not cheap).

There are two methods of obtaining disability insurance. The cheaper alternative is through a group policy. The practice pays for this policy with pretax dollars and your premium is much cheaper than if you obtained the policy privately. The group policy is bound under the Employee Retirement Income Security Act of 1974 (ERISA). If you choose the group policy option, be aware of some potential problems:
  • There are rarely jury trials available under ERISA
  • Your benefits will be taxable
  • Your benefits will be reduced by any other source of income including Social Security or Workers Compensation
  • Attorneys call ERISA “Everything Rotten Invented Since Adam” for a reason, especially since the standard of review for the insurer will be “abuse of discretion” also know as “arbitrary and capricious” meaning you must show that the insurer was arbitrary and capricious in denying your claim as based on the evidence available in the claims file-----Remember, No Trial
  • Your benefits will be taxable
If you choose a private policy, you will have to finance the policy on your own with post-tax dollars. This is far more expensive than the cost of a group policy. It is well worth it since a private policy has the following advantages:
  • Pursuit of your claim with a jury trial if needed
  • Tax free benefits
  • No offset of other benefits (if this option chosen----you had better do so)
  • A more favorable standard of review: Preponderance of the evidence, better know as the more likely than not rule. This is the typical standard for a civil trial
Why should you care about all these factors? Because physicians are declaring disability at a rate greater than all other professions and being deliberately targeted by the insurance industry to prevent losses due to “mertiless” claims. In addition to going through your medical records with a microscope, Insurers are more than happy to check your entire financial record to verify if you have another motive for declaring disability. Even if your claim still looks good, they will send out private investigators to conduct videosurveillance in hope that you will be engaging in any activity which can be used against you as evidence of nondisability.

Some examples of cases for physicians who were denied disability benefits which I have had the privilege of handling include:
  • An anesthesiologist suffering from life-threatening sclerosing cholangitis and hepatitis C.
  • An OB-GYN who suffered from a rotator cuff injury and could no longer perform deliveries without assistance of another specialist
  • A general physician who suffered from fibromyalgia and chronic fatigue syndrome
I have handled other cases from the outset in which I assisted physicians prepare their applications and acquire the necessary supporting documentation. I have had 100% success in obtaining benefits as a result of an initial application as of the writing of this article.

With all these complications, why should I bother? Because it is the only game in town. Just as you do not have the luxury of knowing your impending date of death (As I like to say: “Birth certificates do not come with expiration dates.”), you need to insure against the uncertainty of illness or infirmity in order to protect your savings and, to some extent, your ability to live comfortably. This, of course, includes those who are dependent on your income for their existence.

For this reason, you need to do your homework when you are taking out a policy. Therefore, you should take some time and shop around. As I always write in this column, I do not sell insurance and have no economic interest in your purchasing a policy. I cannot say the same concerning when you make a claim. Prior to making a disability claim, you should consult with an experienced attorney. Once you have been denied, it tends to be much harder to reverse the denial as insurers tend to fight harder as they want to keep your case off their books. Care remains the watchword in these instances.

Scott B. Elkind is a Principal with Elkind & Shea, The Disability Benefits Law Firm, located in Silver Spring, Maryland.
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