BRIDGING DISABILITY INSURANCE ON JOB TERMINATION

As the ravages of restructuring have taken their human toll, the insurance industry has responded, albeit slowly, with products to meet specific needs. When an individual is terminated from employment, usually, it is possible to extend a number of benefits to the individual such as life insurance, medical and dental insurance, and others. However, it is not possible, usually, for the employer-sponsored disability insurance to be extended beyond the last day of actual employment. Clearly this poses a serious problem during a period of high stress caused by the transition.

There is a reason. Disability insurance is designed to protect an earned income. If you are not earning an income you do not have anything to protect and insure. Or at least that is the theory.

Too late for some, in recent years a few products have emerged which go some distance to meet this need. Not perfect, they provide a modicum of coverage for an individual for a limited period of time while they are between jobs, based on an earnings level in the previous employment. Typically they are single premium products which will provide a benefit, based on the definition of disability, if you are disabled during the transition period from when you left the former employer and before you have a new employer who is providing you with new group disability insurance.

If you had a privately-owned disability insurance plan that protected your earned income, before you left your previous job, you would not need bridging disability insurance. But if you didn’t, you are exposed. And this is for you.

The terms and conditions which trigger the payment of a claim vary widely between the small number of products available. Some won’t pay until the end of the severance period, since they assume your severance package is providing you with enough to live on during it. Some will provide a cost of living (COLA) rider to keep claim payments up to date with inflation. Some provide an “own occupation” definition of disability while others do not. The duration of claims payment varies widely, as do policy periods.

What is universal about them is that you must apply within 90 days of termination. In our office we provide a comparison between the products so you can see what you are getting and how one plan may be better or worse for you than another. See also the article So You’ve Been Terminated for a discussion about the disability insurance products available in job loss situations. The author invites your call for quotes and a discussion about replacing your group benefits upon job termination.