Are all Disability plans created equal?

by Michael on August 5, 2008

in Disability insurance,Insurance Newswatch

In a word, No!

Here are a few examples of things you should know about different types of disability insurance. They may seem the same, on the surface, but let me explain the very real difference.


An aggregate benefit policy and a non-aggregate policy issued for like amounts with the elimination and benefit periods being identical, not withstanding any variations in the policy provisions themselves, could pay identical benefit amounts on the first claim:

90 Day Elimination, 60 Month Benefit Period, $10,000 per month

Applicable benefits on each would total: A 31 month benefit claim $310,000.The difference would be the remaining benefits under each policy available for future disablement’s:

  • Aggregate Plan (60 months less 31 months already paid) =     $290,000
  • Non-Aggregate Plan – Full, fresh 60 months                     =     $600,000

The premium for the Aggregate Plan may have been less in the beginning, but on renewal the premium remains the same but the remaining aggregate benefit is less than the previous claim paid. The Non-Aggregate Plan provides a new, fresh 60 month benefit period for any new disability or a recurrence of a prior disability.

EXAMPLE: Dr. D was a very successful Gynecologist. He suffered a bad accident on his favorite ski slope shattering his right arm and leg. Multiple surgeries were required, but after 31 months there was optimism he could again practice.  And he did for two years. He incurred a tremor in his previously fractured hand. It did not respond to treatment and he was ordered to halt procedures. His E & O Insurer agreed. Dr. D has been back on disability for four years and it is obvious the condition is permanent. He will never recover.

If he had been insured on the Aggregate Benefit Basis he would have collected monthly disability for 31 months, the same as the Non-Aggregate, but his reserve disability benefits would be limited to 29 months whereas the Non-Aggregate plan would step up with 60 full months.

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1st Disability – 31 Months



2nd Disability

Max $290,000

60 Months $600,000

Total Benefit




Many physical conditions do not show up for long periods of time as was the case with Dr. D’s hand tremor.  As another example, prostate cancer is a slow evolving process. At claim time one Insurer is informed of the manifestation date which signals the need to determine the original date of the condition. If this pre-dates the Issue date of the policy it is identified as a Preexisting condition and such conditions are not covered.

As opposed to this slippery wording, some quality plans call for the date the condition is first diagnosed. If the condition was diagnosed prior to the issue date of the policy, either the policy would not have been issued or it would have been clearly identified as a non-covered pre-existing condition.


Some policies may have a “Right of Recovery” provision which states that the underwriters have the right to be reimbursed for any benefit paid for which the insured received payments from a Third Party such as:

  • A legal judgment
  • An arbitration award
  • A settlement

Obviously, this is not something a person would want if there was another option.

  • Ask me how to get a non-aggregate plan, with first manifest provisions and with no right to recovery.

  • In other words, ask me how to get the most value from your disability plan.

Michael P Myers


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