Product Information¶
Background¶
Individual disability income (IDI) insurance protects a policy holder from a loss of income from a qualifying accident or sickness event. The leading individual in IDI is to distinguish this form of insurance from group long term disability (GLTD) insurance which is commonly bundled as a benefit within an employee benefits package provided by an employer to employees.
Market¶
IDI insurance is purchased directly by indiviudals (indiviudal-bill) who are looking to protect themselves from a loss of income. Usually, these people do not have a GLTD policy available to them. This typically includes professionals (e.g., doctors, lawyers) and small business owners and employees. Individual-bill policies are typically underwritten.
IDI insurance is also purchased by employees in an employer-sponsored market. The administration is similar to typical group benefits with the billing going through the employer, though, the employer may pay all, partial, or none of the premiums. Depending on the percentage of premium paid by the employer and the uptake of enrollment from employees, underwriting can vary from individual underwriting (like the individual market) to guarantee issued (like traditional group benefits).
Typically, the policy holder and person covered by IDI insurance are the same person. However, business coverage does exist where the business can recieve a benefit in case an owner or employee becomes disbaled. This includes key person (KP) coverage and business overhead (BOE) coverage. KP insurance is purchased by the business to cover a loss of income if a key person within the business becomes disabled (e.g., a top producing sales associate). Note this person can also have coverage for themselves where they are the beneficiary. Business overhead coverage is similar though it is meant to cover the overhead of running the business if an individual with it were to become disabled.
Benefit Triggers¶
Accident and Sickness - covers both accident and sickness events which lead to disability
Accident Only - covers only accident events leading to disability
Sickness Only - covers only sickness events leading to disability
Riders¶
Below is a list of common riders and the status the they are included in this model.
Note the descriptions below correspond to how they are handled in this model. Varaiation of the following doe exist in industry.
Cost of Living Adjustment (COLA) - Available
A COLA rider increases your benefits while a policy holder is on claim. This is used to enhance coverage and protect an individual from inflation while on claim. The adjustment comes through as a percentage increase that compounds each year while on claim.
Social Insurance Supplemental (SIS) - Available
A SIS rider provides a benefit when the policy holder is not receiving a Social Security disability (SSD) benefit or a partial benefit when the SSD benefit is less than the SIS rider coverage.
Catastrophic Disability (CAT) - Available
A CAT rider provides an additional benefit amount if the disabiling event meets the catastriophic criteria. This is also referred as a long term care (LTC) rider as the criteria of catastrophic is usually not being able to perform 2 of the 6 activies of daily life which is typically the benefit trigger for LTC insurance.
Residual Benefit (RES) - Available
A residual benefit rider provides a partial benefit if the policy holder is still able to work at some capacity. As an example, if an individual loses 50% of their income due to a accident or sickness event, this rider benefit would pay 50% of the disability benefit.
Return-of-Premium (ROP) - Available
A return-of-premium (ROP) rider is a benefit that returns a percentage of the paid premiums less any paid benefits to the policy holder on a 7 or 10 year cadence.
Waiver-of-Premium (WOP) - Planned
A waiver-of-premium (WOP) is a benefit that waives the need of the policy holder to pay premium after being disabled for a certain amount of time.