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Know Which Benefits Require Evidence of Insurability & When

Technically, this is implicit in last week’s tip, but since so many issues can arise if this is overlooked, we thought we’d make it its own point.

Every carrier has its own version of an evidence of insurability (EOI) or statement of health (SOH), though they all ask the same kinds of questions. Insurance companies don’t allow applicants to enroll in insurance only when they need it; otherwise, many people would only have insurance for a few months of the year, and insurance companies would likely pay out more than they receive in premiums. Then they’d be no help to anyone! An evidence of insurability form enables an insurance carrier to make inquiries into the state of an employee’s health in order to determine if this is what they’re trying to do. 

Benefits that require an EOI 

An EOI or SOH is most often (though not always) required with the following benefits: Voluntary life, critical illness, and sometimes short-term disability and long-term disability.  

The way this typically works, the insurance company will set a guaranteed issue (GI) amount for these benefits, which means a maximum volume that, if elected during an employee’s new hire waiting period, will automatically be granted to the employee. For example, if my company offers a voluntary life policy in which the GI is $100,000, that means, if I elect $100,000 in voluntary life coverage within my new hire waiting period, the insurance carrier will grant me that volume, no questions asked. 

When is an EOI required? 

The following situations are the ones in which an EOI is required: 

  1. If an employee applies for the benefit afterhis new hiring waiting period has expired, even if it’s for less than or equal to the GI amount, an EOI will be required. This makes sense, if you’ll recall the reason that EOIs are required in the first place. 
  2. #1 means that if your company’s open enrollment falls afteran employee’s initial period of eligibility, he’ll need to supply an EOI in order to obtain that benefit. 
  3. Any time the employee is asking for an increase in a benefit. 

There are exceptions to two and three (it wouldn’t be insurance if there weren’t exceptions, right? ; ), which we’ll explain at the end of this post. 

Why is it important to know this? 

It’s important to know the rules that apply to these policies, if your company offers them, because if an employee applies for a certain volume and they don’t know they need to supply an EOI, then the insurance carrier will not grant them their requested amount. But, if they don’t know they need an EOI, and you don’t know they need an EOI, then they will think they have the benefit in the amount they applied for when they may, in fact, not have it at all. 

It’s important to know these rules at open enrollment because at no other time of year will so many employees need to supply an EOI, and many employees may end up with benefits very different than what they applied for if not directed to do so. If the rules are explained to them and they’re reminded periodically of what they need to do, that will prevent much confusion and frustration down the road. 

Exceptions to 2 & 3 

If the policy (voluntary life, critical illness, STD, or LTD) includes a provision that allows increases during open enrollment every year, then employees will not need to provide an EOI to increase their volume the permitted amount.  

If the current policy your company offers does not allow yearly increases without an EOI, then let your account manager know that you’d like it to, and we’ll work on making that happen for next year. 

If the insurance carrier has granted a true open enrollment, then the carrier will treat your company’s open enrollment similar to a new hire waiting period for all of your employees. They can elect a benefit for the first time, up to the GI amount, or they can increase a permitted amount, and they will not have to supply an EOI. 

So. All of that being said, if you don’t know these features of your organization’s benefits for the next plan year, take a moment to review them.  

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Done yet? Pat yourself on the back! You’re more prepared for open enrollment! Great job, you. 

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