Income Protection Insurance Lawyers

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 What is Income Protection Insurance?

Income protection insurance (IPI) is a policy which an individual can purchase that protects them in the event that they become unable to work. Typically IPI policies cover individuals who are unable to work due to disability, often due to an illness or accident.

IPI plans, when they are referred to as such, are commonly available in countries such as Australia and the United Kingdom. In the United States, IPI policies are typically referred to as disability insurance.

What is Employee Disability Insurance?

Disability insurance is a form of insurance which is designated to cover certain expenses that arise when an individual becomes chronically, though, typically, not permanently, disabled and are not able to work, often due to a work-related injury. Many state governments as well as the federal government provide some disability insurance for ill or injured workers.

There are 5 states which have mandatory disability insurance, including:

  • California;
  • Hawaii;
  • New York;
  • Rhode Island; and
  • New Jersey.

In California, employee disability insurance is covered by a tax that is deducted from an employee’s paycheck. This insurance covers physical disabilities as well as paid family leave, which allows the employee to take time off or work for maternity or paternity as well as to care for a member of their family who is seriously ill.

Typically, the program’s benefits equal 55% of the employee’s pay, up to a certain maximum amount. If an employer in one of the states listed above fails to carry disability insurance for their employees, they may face a lawsuit.

What Benefits Does this Type of Policy Provide?

Benefits from disability insurance will not begin until the deferred period, or the policy provided amount of time between the disability and the beginning of payment of benefits, has elapsed. When the benefits do commence, they will be provided in the amount stated in the insurance policy, which is typically a percentage of the normal income of the insured.

The amount may also be a set dollar amount instead. There are some policies which allow for payment of insurance premiums as well as other expenses, including mortgages.

The policy will also govern the length of time the benefits will last. Typically, the longer the benefits period, the higher the premium will be for the policy.

When an individual is purchasing a policy, they should carefully review all of the terms and be certain that they understand those terms as well as what they will be entitled to in the event they are required to use their insurance.

A copy of an individual’s policy should be available to them. If they need assistance understanding the terms, they can contact an attorney.

What if the Insurance Company Refuses to Pay Benefits?

In order for an individual to receive the benefits of the policy, they are required to meet its terms. First, they must meet the policy’s definition of disabled.

If the individual does not meet the requirements to be considered disabled, their benefits will be denied. The insurance company will conduct an investigation and the individual will be required to comply in order to avoid a denial of their benefits.

The payments received as benefits will also terminate when the individual returns to work. If an individual receives a denial of benefits and they believe it is in error, they have appeal rights.

The individual who was denied will need evidence that supports their disability claim during their appeal. This may include medical records as well as other types of documentation.

The appeal process will vary depending upon whether the policy was self-funded or funded by the individual’s employer. If the policy was self-funded, the case will be governed by the contract and insurance laws of the state.

If the policy was funded by the individual’s employer, it may be covered by the Employee Retirement Insurance Security Act (ERISA).

What is ERISA?

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal statute which provides the minimum standards for employers in the private sector that choose to offer policies to their employees. The provisions of ERISA protect workers by ensuring that the pension plans have adequate funding and reasonable vesting requirements.

Employee benefit plans which are covered by ERISA must meet certain requirements, including:

  • Providing plan information: Participating employees must have access to copies of plan rules, financial information, and documents pertaining to plan management.
  • Creating a fiduciary responsibility: Plan trustees, administrators, and investment committees are all subject to duties of care and loyalty.
  • Providing a grievance and appeals process: ERISA plans must provide a mechanism to request payment of benefits and to appeal benefit denials.

If the employee benefit plan does not meet these requirements, ERISA also provides workers with the right to sue their employer in federal court.

ERISA is a very technical statute that contains a great deal of specific terminology and requirements. If an individual has any issues, questions, or concerns related to the statute, it may be helpful to consult with an attorney.

Is My Retirement Plan Covered by ERISA?

In general, ERISA applies to the majority of private sector employers that choose to offer some type of retirement plan to their employees. There are, however, certain exceptions, including:

  • Most government employers;
  • Churches;
  • Benefit plans designed solely for complying with:
    • workers’ compensation;
    • disability; or
    • unemployment laws;
  • Unfunded excess benefit plans; and
  • Plans maintained outside of the United States intended to benefit non-resident aliens.

It is important to note that ERISA does not require an employer to provide retirement benefits.

What are ERISA Appeals?

If an individual’s policy is governed by ERISA and they are denied benefits, they are required to first file an appeal with the insurance company itself. During this appeal, the individual may present evidence which supports their claim.

If the insurance company denies their appeal, they have further recourse to file an appeal of the insurance company’s decision in court. Under an ERISA claim, however, an individual will be prevented from presenting any further new evidence in court.

The court will be required to make a decision based upon the record from the appeal within the insurance company. In addition, an individual may not demand a jury trial.

What are Non-ERISA Appeals?

Claims which are not governed by ERISA may have a different procedure for appeals. An appeal to the insurance company may not be required before appealing in court. In addition, an individual may be able to demand a jury trial.

What if the Insurance Company Drops a Client from Coverage?

Insurance companies may drop an insured individual because of nonpayment of premiums or because of fraud. In general, the insurance company is required to provide them with notice of the termination.

In certain cases, the termination may be appealable. A lawyer can help an individual make this determination.

Can a Lawyer Help with an Income Protection Insurance Claim?

Insurance policies often contain language which is difficult to understand and may even be designed to be tricky for individuals who are not experts in the field. It may be helpful to consult with a workers’ compensation lawyer to understand your insurance policy benefits.

Your lawyer can review your policy and explain the benefits and requirements to you. In addition, if you experience a denial of your benefits, your lawyer can assist you through the appeals process.


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