Accurate absence records are important for ensuring employees maintain access to the benefits they are entitled to, especially when illness or injury prevents them from working. A lesser known but important feature of many life insurance plans is the Waiver of Premiums (WoP) benefit. This provision ensures coverage continues even when an employee cannot work due to disability.
What is Waiver of Premium (WoP), and when does it apply?
The WoP benefit waives insurance premiums for employees unable to work due to disability. This allows them to maintain vital coverage, such as Group Life insurance, even during extended absences.
Here’s how WoP works:
- If the employee is on Long Term Disability (LTD):
When an employee is approved for an LTD claim and the contract includes a Waiver of Premium benefit, the WoP and the LTD claims are typically processed together.
- If LTD Is Not Included in the Plan:
Employees may still qualify for a stand-alone WoP benefit for their life insurance coverage. To confirm this feature, check the Group Life Benefit section of your Schedule of Benefits.
Why reporting absences matters
Employers should report all employee absences due to illness or injury within one week (if the employee hasn’t returned to work) promptly, regardless of whether their plan includes disability benefits. Here’s why:
- Tracking the Waiting Period
Reporting ensures that absences are recorded and the WoP waiting period (typically six months) is tracked. Once satisfied, monthly billing reports notify employers that a WoP claim can be initiated.
- Avoiding Missed Benefits
If absences aren’t reported, the disability provider may not recognize changes in the employee’s status, resulting in missed opportunities to activate WoP.
Timely reporting ensures employees retain access to the full range of benefits.
Benefit coverage ends when employees no longer meet eligibility requirements outlined in the policy. This includes prolonged absences due to disability.
Consequences of Not Applying for WoP:
- Life and Living Benefits coverage may lapse, potentially leading to denied future claims.
- Beneficiaries expecting a life insurance payout may face a declined claim due to lapsed coverage.
Applying for WoP on time ensures ongoing coverage and prevents these issues.
How you can help
Employers play a vital role in maintaining employees’ benefits during absences. Here’s what you can do:
- Maintain Accurate Absence Records
Regularly update absence records to track eligibility and avoid potential coverage issues.
- Reach Out for Support
Contact your benefits provider for guidance on insurance continuation during absences.
Note: Paying premiums does not guarantee coverage. Eligibility is confirmed when a claim is submitted. If eligibility requirements are not met at the date of loss, claims will be denied, and premiums refunded.
A Real-Life Example: Karim’s Story
Karim, a full-time employee at a hardware store, is unable to work due to cancer treatment. Unfortunately, Karim’s Long-Term Disability (LTD) claim is denied because of a Pre-Existing Conditions clause in the policy.
However, despite the LTD denial, Karim may still be eligible for the Waiver of Premium (WoP) benefit under his Group Life insurance plan. Here’s why:
- Group Life Insurance Does Not Have a Pre-Existing Conditions Clause:
If Karim is under 65 and Totally Disabled for the required waiting period (typically six months), he can qualify for WoP, even if LTD benefits are denied.
- Why Filing for LTD Still Matters:
Filing an LTD claim triggers the concurrent application for the WoP benefit, which is critical for maintaining coverage.
What Does WoP Cover?
If approved, WoP waives premiums for Karim’s Group Life insurance, Accident & Serious Illness coverage, and other related benefits. This ensures Karim and his family remain protected.
For example:
- If Karim’s condition worsens and he passes away, his beneficiaries may still be eligible to receive the Life insurance benefit, even though he was not actively working at the time.
- This is possible because WoP removes the “Actively at Work” requirement typically needed for coverage.
What If LTD Isn’t Included in the Plan?
If Karim’s plan offers Group Life insurance but no LTD coverage, it’s crucial for Karim to apply for the WoP benefit independently. If approved:
- Karim’s premiums would still be waived.
- The Actively at Work requirement would no longer apply, preserving Karim’s eligibility for the Life insurance benefit.
However, if Karim does not apply for the WoP benefit and stops working, they may lose eligibility for the Life benefit due to the Actively at Work requirement.
Key Misconception: Premium Payments Alone Do Not Guarantee Coverage
Employers may continue paying premiums with the assumption that coverage will remain intact. However, without an approved WoP benefit, the Actively at Work provision in the Group Life policy may disqualify an employee from coverage at the time of a claim.
In Summary
Employers play a critical role in ensuring employees maintain their coverage:
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- Always update disability providers with changes to an employee’s status.
- Facilitate appropriate applications for LTD and/or WoP benefits.
Doing so ensures ongoing coverage for employees, preserves their eligibility for future claims, and protects the integrity of Group Life and other benefits.