Insurance Jargon, Decoded: Pre-Existing Condition Limitation

15 Dec Insurance Jargon, Decoded: Pre-Existing Condition Limitation

Often, if a disability insurance claim is declined, it is the result of a pre-existing condition limitation. But what does it mean? At its root, it means that there was something in a plan member’s health history before they obtained coverage that lead to a disability. In other words, there was smoke, but no fire.

A pre-existing condition is a health concern for which an employee is treated, obtains medical advice, or takes prescription drugs. It can include treatments by a chiropractor or other health practitioner as well.

Pre-existing conditions have a historical time limits, usually within three to six months before insurance was effective.

Let’s look at an example to explain:

John was diagnosed for multiple sclerosis (MS) in 2015. In September 2016, he applied for and obtained a position with a new company. His new group benefits plan includes disability insurance benefits. In October, he suddenly became disabled due to his MS and was unable to work in his new role.

John’s claim would be declined because he was being treated by a doctor during the 13-week pre-existing condition period outlined in his insurance contract. Because of his ongoing treatment, that claim would fall under the pre-existing condition period.

However, if John had continued working without incident for his new employer, any claim arising from his pre-existing condition after September 2017 would be covered.

It’s important that employees understand the pre-existing condition limitation set out in their disability insurance contracts so that there are no surprises in the event of a claim. This is most important for new employees or when disability insurance is introduced for the first time.