Those who have IDI policies, (non-ERISA), and delay filing initial claims, risk getting paid for prior periods even when the definition of disability has been met for total or residual disability. The idea that because the policy is IDI, and not subject to federal jurisdiction does not mean that insureds can decide on their own when to file. Doing so is a huge mistake.
IDI policies specifically contain provisions that require insureds to file within 90 days after the end of a period of claimed disability; or, within one year for mental incapacity. Policies generally also state insureds should file as soon as possible. Therefore, the decision to file a disability claim under an Individual Disability Income Replacement policy should be made as soon as a medical condition is made by a qualified physician that precludes work capacity in some way.
While I understand the need of professionals to “wait and see” before giving up their chosen professions, insurance companies have no obligation to pay claims that have been “prejudiced” by late filing.
“Prejudice” means that the insured waited so long to file a claim that reasonable evidence to support the claim is unavailable. The best way to understand prejudice is the statement, “An IME today would not be the same as an IME if we had the opportunity to investigate the claim when benefits are claimed.”
Although in most states insurers are not permitted to deny insurance claims for prejudice unless they can prove lack of support for past disability, I can easily see how IDI insureds take advantage of insurers and attempt to file for prior period benefits sometimes 10 or more years in the past.
Periods of claimed disability for past periods of time are often denied due to the lack of evidence to support. Another aspect of IDI application is that many insureds who contact me do not understand that ONLY A PHYSICIAN CAN TAKE PEOPLE OUT OF WORK. The nature of IDI policies suggests that insureds can be more in control over when they file claims than they really are.
Policy provisions are very clear – 90 days after the end of a claimed period of disability; up to 1 year and 90 days if late filing is delayed due to mental incapacity. IDI insureds cannot “just stop working” and then file claims for prior periods without documentation from treating physicians.
One tactic that has been tried and failed is when insureds obtain documentation from current physicians that say, “it is likely this patient was totally disabled [prior date of disability]. Companies like DMS rightfully come back with, “this doctor wasn’t even treating you 3 years ago!
I’m not saying insureds can’t file for prior periods of disability, but I’m not recommending it. Insureds should file claims right away when they find they are no longer able to work as they used to. Waiting to see what happens isn’t a good idea in the long run.