Disability Insurance for Loss of Work Capacity — When Is the Insurance Company Required to Pay

By: Attorney Michael Lev

Disability insurance for loss of work capacity is one of the most important insurances for every working person, yet also one of the most complex from the perspective of handling claims. In our work, we encounter many cases where insurance companies attempt to avoid paying justified compensation through a deductible in the policy or deviations from the terms of the agreement. Understanding the rights and obligations in this insurance is critical to ensuring receipt of the compensation owed.

Definition of Loss of Work Capacity According to Law

According to the Insurance Contract Law 5741-1981 and the accompanying regulations, loss of work capacity is defined as an inability of the insured to perform their regular work or any other work suited to their education, qualifications, and experience. The law distinguishes between two main types of loss of work capacity.

Full loss of work capacity: This is a situation where the insured is completely unable to work, and their income has decreased by 75% or more from their previous income. In these cases, the insured is entitled to receive the full monthly compensation established in the policy.

Partial loss of work capacity: This refers to a situation where the insured can still work in a limited manner, when their income has decreased between 25% and 75% from their original income. In these cases, the compensation is calculated proportionally to the income decline.

What Needs to Be Proven in Order to Receive Compensation

For the insurance company to be required to pay, several conditions must be met simultaneously. First, the loss of work capacity must be a direct result of an illness or accident covered in the policy. Most policies include broad coverage for illnesses and accidents, but it is important to examine the specific exclusions.

Second, one must complete the defined waiting period. This period, which generally ranges between 30 and 90 days from the onset of loss of work capacity, constitutes a period during which the insurance company does not pay compensation. It is important to note the length of the waiting period established in your policy.

Additionally, the insured must prove the loss of work capacity with appropriate medical certificates. We recommend obtaining documents from the treating physician, a specialist in the relevant field, and in some cases also a medical committee. Delays in submitting medical documents can give the insurance company grounds to reject the claim.

How Insurance Companies Act to Reject Claims

Various tactics are used by insurance companies to minimize or prevent the payment of compensation. One common approach is the demand for additional examinations or obtaining medical opinions from company physicians, which sometimes reach different conclusions from those of the treating physician.

Another approach is the claim that pre-existing conditions not disclosed at the time of signing the policy existed. Insurance companies examine the insured’s medical history in depth and always seek to prove that the current medical condition is related to a pre-existing condition, and not to an accident or new illness covered by the insurance.

Additionally, the insurance company may claim that the insured can engage in another profession suited to their current capabilities. This claim requires a fundamental examination of the insured’s qualifications, education, and experience, against the current medical limitations.

Ways of Coping with Rejection of a Claim

Rejection of a claim is not the end of the road. When an insurance company rejects a claim for loss of work capacity, there are possible courses of action. The first step is submitting a formal objection to the insurance company, specifying the reasons for disagreement with the rejection decision. This objection must be based on medical and legal evidence.

It is also advisable to obtain an additional opinion from a specialist physician or an independent medical committee. Such an opinion can be significant in negotiations with the insurance company.

If the objection is rejected as well, a complaint can be submitted to the supervisor of the insurance at the Ministry of Finance. The supervisor examines the conduct of the insurance company and can instruct it to conduct a new examination of the claim. In exceptional cases, legal action against the insurance company in court is an option worth considering.

Why Professional Legal Representation

Coping with insurance companies on the subject of loss of work capacity is a complex task requiring deep legal and medical knowledge. Insurance companies employ teams of lawyers and medical advisors, and therefore the insured is entitled to professional legal representation and experience in dealing with insurance companies. An attorney specializing in disability insurance for loss of work capacity can assist in many things: analyzing the policy, submitting the claim, collecting the required medical documents, and managing the negotiations with the insurance company. When the insurance company rejects a claim, professional legal representation can be decisive in receiving the full justified compensation or preventing the full loss of the claim.

In our practice, we have repeatedly seen cases where insureds managed the claim alone and received partial compensation or full rejection of the claim, while with the help of professional legal representation they were able to receive the full compensation they deserved.

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