Age and Time Limits to the Application of the Clause
A necessary part of any disability clause is that which states the time
when the risk begins, the circumstances under which it remains in force,
and the time when it ceases to be effective, if at all. Benefits are usually
promised "if the insured, while less than sixty years of age, after the
first premium has been paid to the company on account of this policy, shall
furnish due proof to the company, while the policy is in full force and
effect," that he is disabled. The risk begins in this case as soon as one
full annual premium has been paid. A few clauses require the payment of
two or even three premiums. This is equivalent to maintaining a probationary
period of one or two years between the beginning of the life insurance and
of the disability insurance. Most clauses, as the above, continue the disability
insurance while the policy is in full force and effect. Some state that
there must be no default in the payment of premiums. The question that arises
here is whether in the event of the lapse of the policy through default
in premiums the disability protection, stands on the same footing as the
life insurance. Most policies allow thirty days of grace for the payment
of premiums and some upon request by the insured allow the premiums to be
paid automatically thereafter from the reserve. The question is, will the
disability benefits be continued on the same terms? In many cases there
is no way of answering this question from the phraseology of the clause.
The few references to the period of grace in premium payments, if definite,
usually continue the disability insurance during this time, although cases
to the contrary exist. One clause gives the company the option of cancellation
within the period of grace following any anniversary of the contract. The
most liberally drawn contracts state that the clause operates "while the
policy is in full force and effect", as above, or "during the continuance
of the policy." This phraseology puts the life and the disability protection
on equal terms.
A very few policies limit the operation of the disability clause to the
time during which premiums are paid. Thus in a twenty-payment life policy,
the disability insurance lasts for only twenty years. This would be of no
significance if the waiver of premiums were the only benefit granted, but
the fact is in every instance of this sort the policy matures upon disability
and is paid in some form to the insured. This limitation constitutes a serious
indictment of the clauses in which it is found.
In the clause quoted above benefits are paid only where disability occurs
before the insured is sixty years of age.
This, or an equivalent, age limitation is found in a large majority of
these contracts. This appears at first glance to be objectionable. The man
who wants disability insurance wants protection throughout the entire period
of his life. The main reason why the limitation exists is probably the fact
that our actuarial information regarding the chances of disability after
age 60 is so imperfect that insurance of the risk is largely guesswork.
But there is a more fundamental reason why protection is not needed after
approximately this age. The clause stands as a guarantee that the permanence
of a man's insurance will not be endangered by his becoming disabled. The
"insurance" period of life, however, is the period of productivity, and
it does not extend ordinarily beyond sixty or sixty-five years of age. In
other words, by this time the average man retires from active business or
professional life and his later years are, or should be, cared for by the
accumulations previously made. There is no special reason, therefore, why
disability insurance should cover this later period.
Many of the clauses which set an age limit have not, how[ ever, left the
insured entirely without protection during the later years. Provision is
made whereby, if disability occurs after the age limit has been reached,
the premiums thereafter becoming due will be allowed to accumulate as a
lien against the policy without interest. This is a highly commendable practice.
A few companies issue clauses to apply without age limit.