MetLife Unfair Practices – Total Disability vs. Residual
MetLife is by no means the only DI insurer that abuses policy provisions to limit benefits to age 65 and avoid paying Lifetime benefits.
However, recently it came to my attention that MetLife is engaging in unfair claims practices in order to avoid payment of Lifetime benefits.
Policies that stipulate Lifetime payouts for Total Disability but only to age 65 for Residual claims are consistently “alleged” to result in the payment of benefits “residually” in order to avoid payouts for Lifetime benefits.
This is particularly true of the typical DI insured who also has investments in passive income such as rentals, land development and other partnerships. Although passive income is usually reported on Schedule E of the US tax return, legal tax avoidance in some cases may place portions of the income on Schedule C as self-employment income – a huge mistake for those with private disability claims.
MetLife’s mantra is to allege insureds had a dual pre-disability occupation such as a Dentist and partner in rental management. Therefore, any income from rentals appears as though it’s earnings and not passive income. “Earnings” results in the payment of Residual disability and therefore benefits are limited to age 65.
Are you following MetLife’s logic? The insured is limited to benefits to age 65 because he has “passive rental income” and can be said to be “residually disabled.” Although passive income is most often derived from investments, rents, royalties, copyrights etc. most insurers look to other investments to allege “residual earnings” even when they have to pay 100% benefits, residually for passive income losses.
Unum does the same thing but in distinguishing between Sickness and Injury. Both insurers are engaging in deceptive claims practices involving interpretation of information and contract provisions (without ERISA discretionary authority I might add.)
The solution, in the form of preventing this problem begins in the planning stage before DI policies are purchased as part of a total family future portfolio package. Policies that distinguish maximum duration for Total vs. Residual disability should be suspect to the point of limiting alternative passive income. Another solution might be to add Lifetime Riders for both Total and Residual Disability, and Injury and Sickness.
It is extremely important for DI buyers to consider future possibilities before purchasing DI products. In addition, it is clear that insureds should be very careful of passive income and how it is reported on yearly tax returns. The door is already open to abuse by most DI insurers in those policies that distinguish between Total disability and Residual.