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The impact of terrorism (or acts of war) on medical,
life and disability insurance
Group medical coverage provides protection for accidents and illnesses that
are not job related. If a medical condition is work related (typically an
injury) workers compensation will provide coverage. While most health
insurance policies have exclusions for acts of war, the consensus is that
the WTC attack does not fit into that category but, rather, is an act of
terrorism and will be covered.
Regarding life insurance, most policies will have no exclusions with the
exception of a two year suicide exclusion. Many life insurance plans also
have an AD&D benefit that doubles the life insurance payment if death is
caused by an accident. While there may be a war exclusion, acts of terrorism
are, generally, covered.
Disability or income protection plans fall into two categories, short term
and long term. Short term income protection policies in NJ & NY are required
by law. They replace a portion of lost income for up to six months in the
event that an individual is unable to work due to a non occupational
accident or illness. If the condition is job related, workers compensation
provides protection. There may be a war exclusion in the short term
disability policy but acts of terrorism are not excluded.
Long term disability (LTD) provides income protection, typically up to age
65 following a qualifying period of three or six months. During this time,
short term disability protection is in effect. Most LTD policies provide
twenty four hour coverage. This means that the plan will provide protection
for accidents or illnesses regardless of where they occur. However, if it is
determined that the condition is job related and workers compensation
provides coverage, the LTD plan will reduce payment by the amount of the
workers compensation payment. Once again, an act of war is the typical
exclusion.
The financial impact to the insurance industry because of this terrorist
attack will be felt, primarily, by commercial insurance carriers. While it
is estimated that several billion dollars in life and disability insurance
claims will be paid out, the impact is likely to be offset by a renewed
interest in the purchase of life and disability insurance policies. There
are already signs of this added interest in both individual and group life
and disability coverages.
It is not anticipated that medical costs will be impacted although the cost
of medical care is already spiraling upward due to circumstances unrelated
to the WTC attack.
As independent agents, it is our job to counsel clients and prospective
clients on any changes in policy provisions or coverages that may be
required in order to provide adequate protection. For example, the insurance
industry will likely consider changes in policy provisions that deal with
war or terrorism. The importance of life and disability insurance protection
is evident. We will continue to advise you as policy changes occur. In the
meantime, please call us with your questions and concerns.
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