Every disability policy contains a “Surviving Spouse” provision. While there are many different versions of the actual provision, it basically awards three times the gross disability benefit if insureds meet their elimination period and then pass away at some point in the future. This assumes, of course, there are no outstanding debts owed to the insurance company such as back SSDI overpayments etc., which will be deducted from the gross payment.
The Surviving Spouse provision is one of the most ignored provisions in disability policies largely because no one wants to think about what would happend if they died. For most disabled persons, “disability” is considered only temporary, and therefore the overall benefits are often left ignored and unclaimed, if the unthinkable happens. Beneficiaries to the Survivor’s Benefit include either the surviving spouse, children, estate, or inheritors designated in a Will. Having a Will designating a specific beneficiary is extremely helpful in cases where there is a divorced spouse who would be likely to petition the estate, or probate court for their piece of the pie.
In order to receive the benefit, the surviving spouse is asked to provide a copy of the death certificate to the claims handler. The cause of death does NOT have to be related to the claimed disability. Disability claim Survivor Benefits should always be discussed with those who may be involved in receiving the benefit if anything were to happen to you. In fact, a copy of your Plan or policy should be included with your portfolio, or “important papers”, with a note reminding of the Survivor’s Benefit. Family members should be made aware of the provision and its benefits.
Survivor’s Benefit provisions can amount to large sums of money when monthly benefits of $10,000-$20,000 per month are paid. Three times $20,000, or $60,000 could be compared to a Life Insurance benefit paid at the time of death. In fact, regardless of the amount, Survivor’s Benefit provisions could be compared to a 3 x gross monthly benefit paid as a lump sum. In fact, despite the payout, Survivor’s Benefit provisions are often ignored by those who could inherit. This is unfortunate when the heirs are children of the deceased insured.
Finally, Survivor’s Benefits should always be part of the insured’s investment portfolio, particularly if the benefit will be payable to the insured’s estate. Under the Administrator’s direction, a lump sum payout could be used to satisfy estate debt, and/or provide for the payment of any other existing debt or asset resource.
I strongly recommend that insureds locate the Survivor Benefit Provision in their own Plan or Policy, and do some planning just in case the unthinkable happens.
