Disability Income Insurance – two myths debunked

Most people know at least something about this product – usually called DI – however there are a lot of misconceptions and I am going to try and sort out a couple of the main ones here.

Myth – none of the policies ever pay and if they do pay, you have to be nearly dead!
While it is true that there tends to be some litigation or mediation involved for many claims, most situations where payment is contested by an insurance company involve either a lack of full disclosure of pre-existing conditions or issues arising from the claim itself concerning the true extent of disability. When answering the medical, personal habits and activities question, make sure you disclose everything, regardless of how trivial it might seem. Ensure your advisor is accurately recording your responses because you are responsible for what is on the application even though someone else wrote the information. All insurance contracts are defined as contracts of the “utmost good faith” and the insurance companies have a legal right – and responsibility – to hold to that definition. Trying to hide or not disclosue information such as recreational drug use or even something such as mountain biking, can result in the claim being denied.

As for the second part of this Myth, it is unfortunate that news reports only focus on cases where benefits are being denied, not the hundreds of millions of dollars that are being paid. Cases that involve obvious physical or medical injuries or damage are very rarely questioned – it is the potentially ambiguous cases that get challenged. Many such cases involve soft-tissue injuries which don’t appear on traditional X-rays, MRIs or CT-scans – it is the client’s word and most medical practitioners will err, as they should, on the side of caution and support claims for disability when requested. Believe it or not, the insurance company does want to pay the claim – but only the legitimate claim. Soft-tissue cases are very hard to evaluate but there is new technology that is now being used – IR scans – Infra-Red scans of the human body. Quite interesting to see actually – the scan measures heat being radiated and displays this on screen or printed hardcopy in living colour! Our bodies are miraculous compensators and the body does its best to heal itself. It does this by sending more blood to injured parts of the body – and concentrations of blood are WARMER than the surrounding tissue. Guess what, the higher temperature areas appear in RED on the IR scan and it is very easy to see if there is indeed an injury to soft tissue, because the affected area now appears bright red!

Guess what – no concentrated area of heat, no soft-tissue injury and therefore no valid claim!

If a claim is denied, there is always a sound reason for that decision – insurance companies don’t take those decisions lightly; they know it will end up in the media somewhere. When you do see such stories, don’t judge by the headlines; read the facts. Headlines are written to get your attention and mine – they do not tell the entire story.

Travel Insurance – needed in Canada and overseas!

As we approach year-end, many Canadians are planning for trips abroad to escape some of our winter weather and for holiday trips to other parts of Canada. So for the next couple of blogs, I am going to point out some issues and considerations of which people need to be aware. I will start with travel within Canada but outside your Province or Territory of residence.

Many people are under the very mistaken belief that they are fully covered for accidents and illness by their own Provincial/Territorial medical plans – nothing could be further than the truth! While not well publicised, your Provincial/Territorial plan ONLY covers what your home province would pay to their own healthcare providers – NOT what another jurisdication might pay to their providers.

Maybe an example would help here. In Province A, the fee paid to a hospital for admitting someone to an Emergency Ward is $800.00, the fee paid for taking x-rays of a broken arm and having the x-rays read by a radiologist is $400.00 and then applying a cast, using necessary anesthetic results in a payment of $500.00 – total amount paid to the healthcare facility is $1,700.00. If this is your home Province or Territory, you don’t pay anything (although some jurisdictions now have a user-fee for such visits).

But what happens in Province B for the same accident? If Province B’s fee payments are LESS than Province A, then no problem, the healthcare facility bills Province A’s plan and everyone is happy. If Province B’s payments are MORE than Province A’s – you have a problem! You will get a bill from Province B – and you may have to give them a credit card or cash payment while you are being treated!

While the differences in the example may be modest, if you require admitting to hospital – say in the Intensive Care or Cadiac Care Wards, payments can vary widely between Provinces and Territories and the last thing you want is a bill when you check out!

Some group and private extended health plans will reimburse a portion of such out-of-province costs – but there will be limits on such payments.

Most financial advisors, other groups such as CARP and the various branches of the Canadian Automobile Association, together with many travel agents and on-line ticket sellers, offer travel insurance at very modest cost – and it is needed when you travel outside your home province – as the old slogan goes “don’t leave home without it!”

Next blog will discuss the out-of-Canada issues and some tips to consider.