Mobile Menu Toggle Request a Quote
Articles

Capital Sum Rider vs. Presumptive Total Disability

January 22, 2025
Read More

Disability Insurance Residual Rider

There are several policy provisions that are included in your policy when you purchase individual disability insurance. Two of these provisions often cause some confusion. This is the capital sum benefit and the presumptive total disability clauses. These are benefits that are paid regardless of the definition of disability. These riders are built into the policy and are no additional cost.

Understanding Presumptive Total Disability

Presumptive total disability is a provision in a disability insurance policy that offers immediate and full benefits if you experience a catastrophic condition. This benefit is triggered when an insured person suffers from the permanent and total loss of specific abilities such as sight, hearing, speech, or the use of both hands, both feet, or one hand and one foot. Unlike other disability benefits that may require ongoing proof of inability to work, presumptive total disability benefits are typically paid without the need to satisfy an elimination period.

A good example of presumptive total disability is a client of mine who lost his hearing permanently. He was a surgeon. His employer made accommodations in the operating room so he could still practice surgery. However, under the presumptive total clause, he received full benefits even though he was still working and receiving disability benefits.

Another example is an attorney client of mine who became a parapalegic. Even though he was still able to work full time, he was able to receive full benefits under the presumptive total disability clause since he lost the use of both legs.

Capital Sum Benefit

The capital sum benefit provides a lump sum payment in addition to the regular monthly disability benefits. Typically the policy will pay 12 month’s worth of benefit in a lump sum. Disability benefits are not reduced or modified by this payment.  This benefit is usually triggered by the same catastrophic conditions that qualify for presumptive total disability.  To qualify for a capital sum benefit, you usually need to have a loss of one eye, hearing in one ear, loss of limb, etc… It is designed to help policyholders with immediate financial needs such as medical expenses, home modifications, or other one time costs associated with their condition.

I recently had a client contact me who was in a bad accident and loss the use of one eye. He was a surgeon. His employer was making accommodations for him and he was unsure of his future outlook. Since he was now blind in one eye, he would likely qualify for the capital sum benefit regardless of how his policy would pay. His monthly benefit was $20k/month. As such, he would likely get a tax free check of $240,000 in addition to any benefits paid.

Key Differences Between the Two Provisions

While both presumptive total disability and the capital sum benefit provide financial support in the event of a severe disability, they differ in several important ways:

  • Payment Structure: Presumptive total disability ensures ongoing monthly payments for the duration of the benefit period, while the capital sum benefit provides a one time lump sum in addition to regular monthly benefits.
  • Purpose: Presumptive total disability focuses on long term income replacement, ensuring the insured has steady financial support. The capital sum benefit is intended to address immediate financial challenges arising from a catastrophic disability.
  • Eligibility Requirements: Both provisions typically require the same qualifying conditions, such as the permanent loss of a specific bodily function. However, presumptive total disability benefits usually continue for the life of the policy, whereas the capital sum benefit is a single payment.

What This Means for You

These provisions are included in your policy and do not require additional selection. Understanding how they function ensures you are aware of the protection they provide in case of a qualifying disability. If you are in a profession where a catastrophic loss could severely impact your ability to work, these provisions provide comprehensive protection. Knowing the nuances of each provision allows you to plan for your financial security and peace of mind.

For more information about the Capital Sum benefit or the Presumptive Total Disability provision, contact Set for Life Insurance today!