The Office of General Counsel issued the following informal opinion on August 7, 2002, representing the position of the New York State Insurance Department. Re: Waiver of PremiumIssue:Is an employer, which is an insurer, that furnishes proof of disability to a separate insurer that provides disability income benefits to the first insurer’s employees, deemed to have access to such information to ascertain if a disability exists for the purpose of a waiver of premium benefit under a life insurance policy that it has issued? Conclusion:No, each insurer is entitled to separate receipt of proof of disability. Facts:An insurance agent of a Pennsylvania domiciled life insurer licensed to transact an insurance business in New York, had benefits of payments under a group disability income policy issued to the insurer by a separate life insurer, a Maine domiciled insurer not licensed to transact business in New York. The agent was also a policyholder of his employer life insurer and had purchased several life insurance policies from it. The policies in question have a waiver of premium benefit, whereby the insurer would waive premiums during any period in which the policyholder is disabled. In 1991 the agent became disabled and became entitled to payments under the group disability income policy issued by the separate life insurer. In 1996, the United States Department of Health & Human Services (HHS) recognized the agent as disabled and the agent became entitled to payments under Social Security, 42 U.S.C.A. § 423 (West 1991 and 2002 Supplement). Information confirming the agent’s continued disability was furnished by the agent to the Human Resources Department at the agent’s employer, which in turn forwarded the information to the separate life insurer. While the agent’s employer originally honored its obligation to waive premiums under the policies, it subsequently determined that it would not continue to waive premiums unless the agent furnished it with information confirming the agent’s continued disability. The agent contends that since his employer’s Human Resources Department and Claims Department are units of the same entity, information furnished to his employer for transmittal to the separate life insurer should be deemed to be in the possession of his employer’s Claims Department. Accordingly, the agent has refused to either furnish information to his employer’s Claims Department or authorize the separate life insurer to furnish information to the employer’s Claims Department. Analysis:New York Insurance Law § 3215(a) (McKinney 2000) provides, in pertinent part:
No policy of life insurance . . . which provides benefits by reason of the disability of the insured, including waiver of premium, shall be delivered or issued for delivery in this state unless it contains in substance the following provisions or provisions which in the opinion of the superintendent are more favorable to policyholders: (1) That disability benefits be paid or allowed only in case of total disability and defining total disability in either of the following forms: (A) Total disability is incapacity of the insured, resulting from injury or disease, to engage in any occupation for remuneration or profit. Such a policy shall be known and described as a ‘total disability’ policy or contract. . . . (4) That there be reasonable requirements as to the time, method and form of proof of disability and as to the continuance of disability, including an examination of the insured by the insurer at reasonable intervals. Failure to furnish proof of disability within the time required shall not invalidate or reduce any claim if it was not reasonably possible to give proof within such time, provided such proof is furnished as soon as reasonably possible and in no event, except in the absence of legal capacity, later than one year from the time proof is otherwise required. . . . The agent’s policies define total disability as:
Total disability is disability which: (a) is caused by sickness or bodily injury; and (b) prevents the Insured from engaging in an occupation. During the first five years of total disability, ‘occupation’ means the regular gainful occupation of the Insured at the time the disability started. However, the Insured will not be deemed totally disabled if, during this 5-year period, he or she is engaged in any gainful occupation for which he or she is qualified. After the first 5 years of total disability, ‘occupation’ means any gainful occupation for which the Insured is qualified. . . .
The agent’s policies further provides:
Written notice and due proof of total disability must be given to the Company at its Home Office while the Insured is living and totally disabled. . . . The Company may ask for proof of continued total disability from time to time. Such proof will not be required more than once a year after total disability has continued for two full years. As part of any such proof, the Company may require medical examinations of the Insured by physicians named by the Company. Accordingly, the agent’s employer is contractually entitled to secure confirmation of the disability’s continuation. Since the employer life insurer did not retain a copy of the information it transmitted to the separate life insurer and is not affiliated with it, it may receive the information only in compliance with applicable requirements. The transmittal of protected health information is governed by regulations promulgated by HHS, pursuant to a requirement set forth in the Health Insurance Portability and Accountability Act, Pub L No. 104-191 (1996). The HHS regulations are applicable, inter alia, to Health Plans, which includes Health Insurance Issuers, 45 C.F.R. § 160.103 (2000). Health insurance issuers are in turn defined in that same section:
Health insurance issuer . . . means an insurance company, insurance service, or insurance organization (including an HMO) that is licensed to engage in the business of insurance in a State and is subject to State law that regulates insurance. Such term does not include a group health plan. Health Information is defined, 45 C.F.R. §160.103:
Health information means any information, whether oral or recorded in any form or medium, that: (1) Is created or received by a . . . health plan, . . . life insurer, . . . and (2) Relates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual Individually Identifiable Health Information is defined, 45 C.F.R. § 164.501 (2000):
Individually identifiable health information is information that is a subset of health information . . . and: (1) Is created or received by a health care provider, health plan, employer, or health care clearinghouse; and (2) Relates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual; and (i) That identifies the individual; or (ii) With respect to which there is a reasonable basis to believe the information can be used to identify the individual. Protected Health Information is defined, 45 C.F.R. § 164.501:
Protected health information means individually identifiable health information: . . . that is: (i) Transmitted by electronic media; (ii) Maintained in any medium described in the definition of electronic media . . . or (iii) Transmitted or maintained in any other form or medium. The HHS regulations require, 45 C.F.R. § 164.508(a)(1) (2000):
Except as otherwise permitted or required by this subchapter, a covered entity may not use or disclose protected health information without an authorization that is valid under this section. When a covered entity obtains or receives a valid authorization for its use or disclosure of protected health information, such use or disclosure must be consistent with such authorization. A review of the HHS regulation does not reveal any circumstances under which the separate life insurer could reveal the information that the agent supplied to the agent’s employer without his authorization. Accordingly, the agent’s employer is correct to assert that, under applicable Federal regulations, it could not secure from the separate life insurer the information required to verify disability without the agent’s authorization. Since the employer life insurer was within its rights in refusing to continue to waive premiums absent proof of continued disability, it would not be required to pay interest on any premiums that the agent may have paid. Therefore, the conclusion previously expressed by this Office in Ms. Kaufer’s June 22, 2001 letter has not changed. For further information, you may contact Principal Attorney Alan Rachlin at the New York City Office.
A waiver of premium rider is an insurance policy clause that waives premium payments if the policyholder becomes critically ill, seriously injured, or physically impaired. Other stipulations may apply, such as meeting specific health and age requirements. Policyholders may want to purchase a waiver if they are concerned about making ends meet if they are injured on the job, for example.
Policyholders often add the rider as an optional or supplemental benefit to a life insurance policy. It's available only when a policy is issued, and costs vary per insurer and applicant. Insurance companies typically add the rider fee to the premium or charge an upfront fee. This fee will raise the cost of a life insurance policy, which may be something to consider before purchasing. Most waiver of premium riders contain a waiting period during which there can be no claim of benefits. If physically impaired or hurt during the waiting period, the policyholder may receive a full refund of paid premiums. Without a waiting period, the insurer’s assumed risk increases substantially, and devastating losses could result. Applicants with pre-existing disabilities aren't permitted to obtain benefits. Placing a pre-existing limitation avoids the possibility of writing a policy that would not see premium payments from the high-risk applicants. Physical impairment, critical illness, and severe injury are the most common qualifying conditions under the waiver of premium rider. Terms, conditions, and benefits may vary by insurance product and issuing company. A policyholder must be disabled for a specific period (e.g., six consecutive months) before the premiums waiver goes into effect. The waiver is also useful if an injury or illness prevents the policyholder from working in a traditional capacity. The most commonly considered diseases are those that require significant hospital stays resulting in the policyholder being unable to work. Some riders stipulate that the condition need only adversely affect the policyholder's occupation in which they received training and worked.
Waiver of premium riders may not be available in all states. Requirements for filing a claim vary, but typically include a physician's statement and notice from the Social Security Administration (SSA) confirming the physical impairment or disability. The applicant could then submit a completed claim form. The waiver of premiums allows the redirection of limited personal funds to palliative care, personal finances, and living expenses. However, the most substantial benefit is the continued protection of the insurance policy.
It'll cost 15% to 25% of a term life insurance policy's monthly premium, according to Haven Life. That would be just under $3 a month if you're a 35 year old man buying a 20-year, $500,000 policy for $21.05 a month.
For starters, the waiver isn't available in all states. Also, those with a physical impairment or those with a pre-existing condition are ineligible. Health and age requirements may apply.
Typically to file a claim a holder must submit a physician's statement and notice from the Social Security Administration (SSA) confirming the disability. The waiver of premiums allows the redirection of limited personal funds to palliative care, personal finances, and living expenses. |
What is initial requirement for an insured to become eligible for benefits under the Waiver of premium provision?
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