Accident and Sickness Insurance¶

an example of policy:
- 3 month elimination period
- subject to maximum 5 year benefit period
- monthly pay when full disability
    - insurer normally offer 60% of the pre-tax monthly income

- standard exclusion on a disability policy
    - disabilities arising from war
    - terrorist acts
    - self-inflicted wounds
    - attempted suicide
    - participation in illegal activities
    - normal pregnancy

- the insurer's inability to unilaterally cancel the policy

- calculate income loss
- calculate percentage income lost
- check whether 80/20 rule applies
    - if loss > 80%, the insurer treat as 100% loss and will pay full benefit
    - if loss < 20%, will treat as no loss and pay nothing
- if not apply, = percentage lost * maximum benefit amount

- the insurer automatically assume the individual is disabled
- waive the elimination period
- will pay the full benefits for the full period without asking for proof of not working

- presumptive disabilities are below
    - total and permanent loss of hearing
    - total and permanent blindness
    - loss of use of two limbs (both legs, arms or one)

benefit from 2nd claim (recurrent need to be in 6 month after return to work)
= [max benefit period - (1st off-work period - elimination period, eg. 90 days)] * monthly benefit

- only apply to insurable income

- stated amounts of coverage
- stated dates
- without evidence ofinsurability (no medical underwriting)
- subject to a financial underwriting

- if there are no claim by age 65, the premium will be returned
- if the total claims paid out < the total premiums paid, the difference will be repaid
- if the policy is cancelled after certain years, a partial premium is returned

- cover the cost of a LTC facility or cost of caregiver
- cover the expense up to a daily or monthly maximum
- provide benefit if unable to perform 2 or more ADLs (activity of daily living)

for new issued policy
    - first 30 days is not covered
    - the insured must survice 30 days
- so at least 60 days window before benefits is payable

- own occupation (lowest risk, best benefit/coverage, easiest claim)
- regular occupation
- any occupation (highest risk, hardest claim, worst coverage)

required by cpp = severe + prolonged

- allow the insurer to increase the premiums
- or even adjust benefits if the insured change to higher-risk classification

- for life insurance, insurer can change nothing on already-issued policy

- age and gender
- health of the insured/family health history/claims history
- smoking status
- occupation
- definitaon of "disability"
- elimination period and benefit period

- with particular injuries which can cause longer period of disability
    - back, neck, knees
- the exclusion can
    - deny a claim
    - impose a longer elimination period
    - offer a shorter benefit period
    - impose a premium rating

- refund = retention account
- non-refund account

- ASO (admin srv only)
    - the insurer provides administrative service only
        - collecting premiums
        - approving members
        - underwriting claims
        - performing actuarial services
    - ideal for large companies that self-insure, pay claim from own cashflow

- normally reserved for employees, not owners
- many disqualify when own > certain percentage of business
- often restricted to =< 100% of annual salary
- many include a replacement expense benefit rider

- elimination period should be fairly long (1-2 years)
    - to ensure the disabled partner not likely return to work soon
- own occupation most frequently used to define "disability"
- benefit amount should be enough to buy out the shares

- after triggered, benefit will pay even if insured recovered
- lump-sum payouts are common
- or can pay a lump sum with the remainder in equal installments over certain years

- method of buyout price
    - multiple of prior year's sale
    - a price formula
    - 3rd party valuator

    - least choice: fixed price as not able to adopt when business value changed

- to qualify for EI premium reduce
    - no more than a one-week waiting/elimination period
        eg. 5 day waiting period
    - benefit must be at least 15 weeks
        eg. 18 week benefit period
- apply to ESDC (Employment and social development Canada)

- one week elimination period
- maximum 15 weeks of benefit period

- so individual DI elimination set to 16 weeks

- premium is not tax deductible
- the benefit received is tax free too

- marital problems (marriage counselling)
- depression (psychological counselling)
- drug or alcohol abuse (addiction counselling)
- legal issues (legal conselling)

- confidential

- based on qualifying income
- split 50/50 between employee and the employer

- self employed pay 100%

- adult: own employer
- children: earlier birthday parent

- single deductible
    - only occur once per member
- family deductible
    - maximum annual deductible for the whole family
    - add up each individual deductible occurred

- deductible
- co-insurance factor

- calculate first payer amount = (claim - deductible) * co-insurance factor
- the unpaid amount = claim - first payer amount
- the 2nd payer pay the less of
    - the amount as they are 1st payer
    - the unpaid amount

- living benefit
    - design pay out when have a serious illness and survive
    - if die after waiting period (30 days), benefit still payable

- 3 condition
    - heart attack, stroke and cancer
- 4 condition
    - heart attack, stroke, cancer and coronary bypass surgery
- 10/20 condition

- need to be unrelated claim
- a lesser level of benefits

- for new issued policy to be active
    - 30 days of qualification period (90 days for cancer)

- for benefits to be paid
    - 30 days survivial/waiting period

- to claim
    - claim within 30 days of diagnosis
    - medical proof with 90 days after claim

- underwriter's role, not agent's
    - order inspection report
    - medical tests
    - APS (attending physician's statement)

- agent
    - hazardous sports questionnaire

- things can change insurability
    - health
    - job change
    - job loss

- deliver in person (to make sure no change on insurability)
- require the applicant to sign an acknowledgement that no change on insurability
- if changes noticed, no deliver
- if no change, collect first premium