01 Jun Understanding Non-Evidence Maximums
At JRP, we know that there are many aspects of your Group Benefits Program that are not clearly understood. This month we will demystify non-evidence maximums, also called non-evidence limits.
Non- evidence Maximum’s (NEM) can apply to Life Insurance, Accidental Death & Dismemberment Insurance, Short Term and Long Term Disability. The NEM is determined by the insurance provider and is based on the size of a group, the average salary of its members, and the overall maximum provided for each benefit.
For Example:
- Any member whose earnings indicate that they are eligible for Long Term Disability insurance of more than $3,500, are eligible to apply for the excess amount of insurance.
- Using an example of a member eligible for $4,500 of Long Term Disability insurance, the member would need to provide Medical Evidence of Good Health to the insurance provider for their consideration of the excess $1,000 of coverage (the amount over the NEM).
- Medical Evidence of Good Health is a form that is completed by a member, which asks a series of health related questions, the completed form is provided to the insurance provider for review.
- If the member does not complete the medical evidence form, or should the insurance provider not approve the request for the $1,000 of excess insurance coverage, the member will receive $3,500 of Long Term Disability insurance, as this is the non-evidence maximum.
- However, if the member is approved for the additional $1,000 of insurance coverage, they will receive $4,500 of Long Term Disability insurance coverage, and applicable premium is charged by the insurance provider each month. If Long Term Disability is a member paid benefit, then the payroll deduction for the members needs to be adjusted accordingly.
Once the insurance provider has determined the NEM for each benefit, they will also determine how many members are eligible for coverage over the NEM, based on their earnings.
It is considered a Best Practice to ensure that all members who are eligible for coverage over the NEM are notified on a timely basis, so they clearly understand what is being offered to them, and the implications of not applying for the additional coverage.
As a members earnings are the trigger for coverage over an NEM, not purchasing the excess coverage could possibly lead to the member being inadequately insured should they need to claim, specifically for Short Term or Long Term disability where the benefit is intended to be income replacement.
It is important to know that should you change insurance providers in the future, any member who was approved for coverage over a non-evidence maximum will have this coverage ‘grandfathered’ by the new provider. This is an industry standard that means a member does not have to submit medical evidence again, as the new insurance provider will honour the prior insurance providers approval of excess insurance.
Also, it is possible for the non-evidence maximum and the overall maximum to be the same – and this simply means that all members received the maximum available coverage without any need to apply for excess insurance.
Being informed about all aspects of your Group Benefits program is vital for sustainability. As is knowing what is considered Best Practice, and how to provide clear communication to members. Take the first step towards achieving success in your Group Benefits Program by Contacting JRP today.
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