The lawyers in our firm are focused on helping people with disability policies and ERISA claims. We want to give you the edge in understanding your policy. Today, we want to help you understand what the term “prior coverage credit” means in your disability policy.

What is prior coverage credit?

Prior coverage credit comes into play when your employer switches from one disability insurance company to another. It is usually not a concern with a private disability policy. Prior coverage credit provides that if you are insured and don't have a preexisting condition issue with the first company, then you won't have a preexisting condition issue with the second company.

When does prior coverage credit matter?

For example, an employee was insured for five years with an employer-provided disablity policy when he had a colon cancer diagnosis. He kept working while he was treated, but it began to take a toll on him. His employer, in order to save a few dollars, switched to a new disability insurance company in January. The employee grew weaker, and in March, he could no longer work.

In this case, the preexisting condition exclusion in the policy would normally exclude a disability arising from the cancer treatment if it occurred in the first year of the new policy and if there was prior treatment. However, due to the prior coverage credit term, since the preexisting condition conclusion did not apply any longer under the first disability insurance policy, it did not apply under the second policy.

The prior coverage credit term allows you and your employer to have peace of mind when transferring coverage from one disability insurance company to another.

Now that you know about this policy provision, you need to be vigilant and make sure you bring this provision to the attention of your insurance adjustor. The insurance adjustor may be unaware that prior coverage credit is due.

Remember our ERISA attorneys and long-term disability lawyers are here to help if you run into problems. Contact us at the first sign of trouble with your disability claim.