Chapter 10 Unknowns
The additional monthly benefit (AMB) rider is offered by many insurance companies as a short-term additional benefit in the form of a rider which normally covers the first: A 6 to 12 months B 12 to 18 months C 3 to 6 months D 1 to 3 months
A 6 to 12 months
Which of the following is needed to qualify for a Social Security Disability Benefit? A Be either currently or fully insured B Be age 60, widowed, and have one dependent C Have less than $1,000 in assets D Fulfill a 4-month waiting period, and have paid into Social Security
A Be either currently or fully insured
Which optional disability income insurance rider waives the elimination period if the insured is hospitalized and pays only when the insured is being treated as an inpatient. A Hospital confinement B Non-disabling injury C Cost-of-living D Impairment
A Hospital confinement
Attaching a(n) ___________ rider excludes coverage for a condition that would otherwise be covered. A Impairment B Lifetime benefit C Waiver D Rehabilitation benefit
A Impairment
The optional guaranteed purchase option rider allows the insured to purchase additional coverage in all of the following situations, except: A Job change B Marriage C Birth of a child D Reaching a specified age or date
A Job change
A Short-Term Disability Policy generally is for a disability lasting for: A Not more than 2 years B 3-5 years C 2-3 years D 2 weeks
A Not more than 2 years
All of the following are correct concerning partial disability, except: A Partial disability payments are usually 75% of the total disability benefit B It pays a benefit for the duration of the disability following the elimination period, subject to any limitation on the benefit period C Partial disability is an inability to perform one or more of the regular duties of an occupation D Partial disability payments are either based on the percentage of lost wages, or a flat 50% of the total disability benefit
A Partial disability payments are usually 75% of the total disability benefit
A court reporter develops arthritis making it impossible to continue this employment. The reporter now has other employment at a reduced salary and receives a monthly benefit from an insurance contract due to which of the following policy provisions? A Residual Disability B Partial Disability C Recurrent Disability D Total Disability
A Residual Disability Residual Disability recognizes one's ability to continue to work, but at a reduction of earnings.
The guaranteed purchase option (guaranteed insurability, future increase) rider guarantees that the insured may purchase additional monthly benefits without proof of insurability based on all of the following occasions, except: A Specified holidays B Specified occurrences C Specified ages D Specified dates
A Specified holidays
Which statement is false concerning Social Security disability benefits? A The employee must only be unable to engage in his/her own occupation to be considered disabled B The amount of the benefit is based on the employee's Primary Insurance Amount C Benefits may only start after 5 full calendar months of disability, and are not retroactive to the date of disablement D To be fully insured for disability benefits, the employee must be either fully or currently insured under the Social Security system
A The employee must only be unable to engage in his/her own occupation to be considered disabled
The optional guaranteed purchase option rider allows the insured to purchase additional coverage in all of the following situations, except: A - Job change B - Birth of a child C - Reaching a specified age or date D - Marriage
A - Job change
Most group Disability Income contracts are offered on a(n): A - Nonoccupational basis B - Noncontributory basis C - Occupational basis D - Contributory basis
A - Nonoccupational basis
A Business Overhead Expense policy, as a form of disability insurance, provides payments for all of the following, EXCEPT _____________. A - Owner's income B - Taxes, utilities, rent C- Raw materials used to manufacture goods sold D - Employee wages
A - Owner's income A Business Overhead Expense policy will not pay the wages of the business owner. By paying the other expenses of the business, the business can remain financially stable until the owner is able to return to work.
An insured took out a disability income policy while working in a low hazardous occupation. When filing a claim for disability income benefits, after a job related accidental injury, the insurance company discovered the insured changed jobs 2 years prior to the loss. The new job would have been classified as more hazardous. The insurance company will most likely: A - Reduce the benefit to an amount the actual premium paid would have purchased under the proper job classification B - Pay the benefit as contracted for since the policy is over 2 years old C- Reduce the benefit payment dollar for dollar to account for the premium underpayment D - Pay no benefit since the insured failed to inform the insurance company on a timely basis of the change in occupation
A - Reduce the benefit to an amount the actual premium paid would have purchased under the proper job classification The insurer will pay only the amount of benefit that the insured would have been able to purchase, with the premium already paid, for the more hazardous job, so his benefit will be reduced accordingly.
If a disability insurance applicant is insurable, but not at a standard rate, all of the following are actions an underwriter can take, except: A - Reduce the dividends the policy is eligible for B - Increase the elimination period C - Charge a higher premium D - Reduce the benefit period and/or amount
A - Reduce the dividends the policy is eligible for
Which of the following would be considered a presumptive disability? A - The loss of the ability to speak B - The partial loss of hearing in an ear C - The loss of sight in an eye D - The loss of a leg below the knee
A - The loss of the ability to speak
_______________ is insurance provided by an employer to cover injuries that occur on the job only. A - Workers' Compensation B - Group health insurance C - Group accidental death and dismemberment D - Group disability income
A - Workers' Compensation
All of the following are possible business uses of Disability Income Insurance, except: A - Workers' Compensation B - Key Employee Insurance C - Business Overhead Expense D - Buy-Sell
A - Workers' Compensation Disability Income Insurance would not be used to provide benefits under Workers' Compensation.
The Age Discrimination in Employment Act (ADEA) affects both the short- and long-term group disability benefits for people employed after age _______. A. 65 B. 55 C. 62 D. 60
A. 65 The Age Discrimination in Employment Act (ADEA) affects both the short- and long-term group disability benefits for people employed after age 65.
The two primary definitions of disability are "any occupation" and "own occupation." Which of these statements best describes the difference between the two definitions? A. An own occupation policy is less restrictive because it is easier to qualify for benefits B. An any occupation policy is less restrictive because it is harder to qualify for benefits C. An own occupation policy is more restrictive because it is harder to qualify for benefits D. An any occupation policy is more restrictive because it is easier to qualify for benefits
A. An own occupation policy is less restrictive because it is easier to qualify for benefits An "own occupation" policy is less restrictive because one must only be unable to perform the essential duties of their occupation at the time of disability. An "any occupation" would not pay benefits if the insured could perform the duties of any occupation for which he/she was suited by reason of education, training, or prior experience, and is considered more restrictive.
The two categories of Group Disability Income policies are: A. Long-Term and Short-Term B. Partial and Residual C. Medicare and Social Security D. Sickness or Accidental
A. Long-Term and Short-Term
Ole Olson owns a Business Overhead Expense Policy whereby if he should become disabled, the policy will continue to cover most business expenses in his absence. The policy would cover all of the following, except: A. Ole's personal lost income B. Ole's utility bills C. Ole's office rent D. Ole's employee payroll
A. Ole's personal lost income The intent of the policy is to offset expenses, not to replace the disabled owner's personal lost income. If Ole is concerned about his own personal lost income, he should own an individual Disability Income policy.
Which statement is false concerning Social Security disability benefits? A. The employee must only be unable to engage in his/her own occupation to be considered disabled B. Benefits may only start after 5 full calendar months of disability, and are not retroactive to the date of disablement C. To be fully insured for disability benefits, the employee must be either fully or currently insured under the Social Security system D. The amount of the benefit is based on the employee's Primary Insurance Amount
A. The employee must only be unable to engage in his/her own occupation to be considered disabled The employee must be unable to engage in any kind of gainful employment, not just his/her own occupation.
The State Disability Insurance (SDI) program provides short-term benefits to eligible workers who: A Contribute a fixed dollar amount of their gross wages each pay period while employed B Contribute a small percentage of their gross wages each pay period up to the annual maximum C Are covered by two programs -- unemployment and Medi-Cal D Are covered by two programs -- job retraining and severance pay
B Contribute a small percentage of their gross wages each pay period up to the annual maximum
Insurance companies writing disability income generally have an occupational classification system based on considerations of all of the following, except: A Claims history of the occupation B Earning potential C Job duties D Stability of the industry
B Earning potential
Which rider would eliminate coverage for a preexisting condition? A Return of Premium Rider B Impairment Rider C Guaranteed Purchase Option D Lifetime Benefit Rider
B Impairment Rider
If an insured is not able to work full-time as a result of a current disability, and is receiving a disability income based upon this partial loss, it is considered a: A Perpetual Disability B Partial Disability C Presumptive Disability D Recurrent Disability
B Partial Disability
If a disability insurance applicant is insurable, but not at a standard rate, all of the following are actions an underwriter can take, except: A Reduce the benefit period and/or amount B Reduce the dividends the policy is eligible for C Increase the elimination period D Charge a higher premium
B Reduce the dividends the policy is eligible for
24-Hour Care Coverage is the joint issuance of a Workers' Compensation policy for nonoccupational injuries and illnesses with all of the following, except: A - A health care service plan contract B - A life insurance policy C - A disability insurance policy D - A medical type of insurance coverage policy
B - A life insurance policy
Under a Key Employee Disability Income Policy, the employer is the: A - Policyowner B - All of the answers listed C - Recipient of the proceeds D - Premium Payor
B - All of the answers listed
Which of the following terms best describes the maximum length of time that disability income benefits will be paid to the disabled insured? A - Coverage period B - Benefit period C - Elimination period D - Disability period
B - Benefit period The benefit period determines the amount of time a benefit will be paid. Benefits are limited by the policy's elimination period, duration of benefit, definition of disability, and any age limitations.
Insurance companies writing disability income generally have an occupational classification system based on considerations of all of the following, except: A - Job duties B - Earning potential C - Stability of the industry D - Claims history of the occupation
B - Earning potential
A disability that is presumed to result from the same or a related cause of prior disability is a _____________. A - Delayed disability B - Recurrent disability C - Presumptive disability D - Residual disability
B - Recurrent disability A disability that was believed to have been resolved, but which returns within a stated period of time (such as 6 months) is known as a recurrent disability.
Which of the following are ways that the insurer can issue disability income coverage for a substandard risk? A - Higher premium, higher benefit, shorter elimination period B - Reduced benefit, higher premiums, rider excluding coverage C - COLA waiver, future purchase waiver, waiver of premium D - Rated up in age, graded benefit, temporary lien
B - Reduced benefit, higher premiums, rider excluding coverage Reduced benefits, higher premiums, and elimination of coverage for known risks (preexisting health conditions, vocational/avocational risks) are three of the ways in which insurers deal with substandard risk.
To reduce the risk of insuring a substandard disability applicant, an insurer may take all of the following actions, except: A - Charge additional premium B - Remove all of the exclusion riders C - Reduce the amount of benefit D - Increase the elimination period
B - Remove all of the exclusion riders
All of the following are true regarding 24-Hour Care Coverage in California, except: A - It is designed to lower the cost of Workers' Compensation and health insurance coverage for employers in California B - The 24-Hour Care Coverage product may include the sale of life insurance C - Life agents desiring to sell the coverage are required to obtain 4 hours of Continuing Education credits in Workers' Compensation Insurance D - It is designed to be a seamless system to provide both occupational and nonoccupational coverage
B - The 24-Hour Care Coverage product may include the sale of life insurance
All of the following statements about the future increase option rider are true, EXCEPT: A - Additional coverage obtained will be based on the insured's attained age premium rates B - The additional coverage is available at each option date regardless of the insured's current earned income C - To guard against overinsurance the insurer will limit that amount of additional coverage that can be applied for on each option date D - It enables an insured to purchase additional disability insurance protection regardless of insurability at specified future dates
B - The additional coverage is available at each option date regardless of the insured's current earned income The insured's current earned income must warrant the additional coverage applied for on the option date otherwise it will not be issued. This is to guard against overinsurance.
The cost of living rider automatically increases monthly benefits, including after the onset of a disability: A Every 3 years B Every 2 years C Annually D Semi-annually
C Annually
If the insured changes occupations after the policy is issued, which of the following statements is correct? A No changes are made in the policy since the policy was issued and is in-force B If the policy is within its first two years the insurer can void the policy C It could result in a change of benefits depending on the new occupation, or the insurer could change the amount of premium to fit the occupational rating for the current level of benefit D If the insured changed to a more hazardous occupation the benefit would increase and/or the premium would be lowered
C It could result in a change of benefits depending on the new occupation, or the insurer could change the amount of premium to fit the occupational rating for the current level of benefit
Sam is totally disabled and receiving benefits while attending an insurer-approved vocational training program. What provision guarantees the continuation of benefits while Sam participates in the training program and remains totally disabled? A Temporary Disability B Presumptive Disability C Rehabilitation D Impairment Disability
C Rehabilitation
Which of the following definitions does not match the term? A Waiver of Premium -- In the event total disability continues beyond a specified period, the insurer will waive premiums for the duration of the disability B Cost of Living -- Automatically increases monthly benefits, after the onset of disability, often in relation to increases in the Consumer Price Index C Return of Premium Rider -- A special provision that provides for a refund of the cash value if disability occurs after a certain period D Guaranteed Purchase Option -- Guarantees that on specified dates, ages or occurrences, the insured may purchase additional monthly benefits, if income justifies it, without proof of insurability
C Return of Premium Rider -- A special provision that provides for a refund of the cash value if disability occurs after a certain period
Most employers in California must participate in the State Disability Insurance (SDI) Program unless a voluntary plan has been approved by the: A The National Association of Insurance Commissioners (NAIC) B The California Department of Insurance (CDI) C The California Employment Development Division D The California Department of Managed Health Care
C The California Employment Development Division Most employers in California must participate in the State Disability Insurance (SDI) Program unless a voluntary plan has been approved by the California Employment Development Division.
Josh is a concert pianist and earns a very good living with his talent. He was in a car accident and broke his arm. His disability is considered: A Partial, temporary B Total, partial C Total, temporary D Temporary only
C Total, temporary
Under what provision will a disability policy provide benefits if the insured is totally disabled because of donating an organ to another individual? A Total Disability B Residual Disability C Transplant D Permanent Disability
C Transplant
24-Hour Care Coverage in California is designed to: A - Lower to the cost of health insurance provided to employees B - Raise revenue for the California Department of Insurance C - Lower the cost of Workers' Compensation and health insurance coverage for employers D - Increase the revenues of domestic insurers
C - Lower the cost of Workers' Compensation and health insurance coverage for employers The concept of 24-Hour Care Coverage is to lower the cost of Workers' Compensation and health insurance coverage for employers in California.
Ole Olson owns a Business Overhead Expense Policy whereby if he should become disabled, the policy will continue to cover most business expenses in his absence. The policy would cover all of the following, except: A - Ole's office rent B - Ole's employee payroll C - Ole's personal lost income D - Ole's utility bills
C - Ole's personal lost income
Which statement is false concerning Social Security disability benefits? A - To be fully insured for disability benefits, the employee must be either fully or currently insured under the Social Security system B - Benefits may only start after 5 full calendar months of disability, and are not retroactive to the date of disablement C - The employee must only be unable to engage in his/her own occupation to be considered disabled D - The amount of the benefit is based on the employee's Primary Insurance Amount
C - The employee must only be unable to engage in his/her own occupation to be considered disabled
Residual Disability Income pays funds to the insured, to make up for what the insured would have earned after returning to work, and while recovering from ___________. A - Long-term disability B - Short-term disability C - Total disability D - Partial disability
C - Total disability
Own occupation is the: A. Inability to perform all duties of any occupation for which one is qualified based upon education, training, and experience B. Presumption an individual is disabled due to the loss of sight, hearing, speak, or the loss of 2 limbs C. Inability to perform all duties of one's own occupation D. Inability to perform one or more duties of one's occupation
C. Inability to perform all duties of one's own occupation
What type of disability income insurance pays a benefit to a business to help in the search, cost, and hiring of a replacement when an employee becomes disabled and is unable to work for the company? A. Buy-sell B. Reducing term C. Key employee D. Business overhead expense
C. Key employee
One of the most important underwriting factors in disability income insurance is ________. A. Number of quarters paid into social security B. Pre-tax (Gross) Income C. Occupation D. Marital status
C. Occupation
All of the following are correct concerning partial disability, except: A. Partial disability is an inability to perform one or more of the regular duties of an occupation B. Partial disability benefits are referred to as "at-work" benefits C. Partial disability payments are usually 75% of the total disability benefit D. Partial disability benefits are typically paid for 3 to 6 months
C. Partial disability payments are usually 75% of the total disability benefit
Which of the following is a typical benefit period for a group long-term disability benefit? A 13 weeks B 26 weeks C 52 weeks D 5 years
D 5 years
Steve Borden, a kindergarten teacher, was in a boating accident and lost both legs. Although he will continue to teach, his disability policy pays full benefits because of this provision: A Residual Disability B Total Disability C Partial Disability D Presumptive Disability
D Presumptive Disability
Which of the following regarding the additional monthly benefit (AMB) rider is not correct? A The rider is not related to Social Security, therefore, the rider is used to define the benefit B Some insurers refer to the this rider as a Social Security Rider as it pays benefits while the insured is awaiting Social Security Benefits C The rider does not consider the amount of a Social Security Benefit, it is strictly in addition to all other disability benefits D The long-term benefit of the rider can supplement only a government benefit plan
D The long-term benefit of the rider can supplement only a government benefit plan
An insured purchases a disability income policy with a 90 day elimination period. If a disability lasts 100 days, the insured would be entitled to receive benefits for: A - 90 days B - 190 days C - 100 days D - 10 days
D - 10 days The elimination period acts like a time deductible. The insured would be eligible to receive 10 days of benefit payments. Of the 100 days he was disabled, the first 90 are eliminated, leaving the remaining 10 days eligible for claim payment.
A disability income policy would honor a covered claim submitted by an insured in which one of the following situations? A - Hazardous hobbies or occupations B - War or act of war C - Active duty in the military D - Broken limbs during a recreational league sporting event
D - Broken limbs during a recreational league sporting event
What type of disability income insurance provides funds to cover business expenses when the business owner becomes disabled? A - Reducing term B - Buy-sell C - Key employee D - Business overhead expense
D - Business overhead expense
24-Hour Care Coverage in California is transacted by: A - Only a licensed Property & Casualty agent B - Any licensed life insurance agent C - Any licensed agent D - Only a licensed Accident & Health agent
D - Only a licensed Accident & Health agent Only a licensed Accident & Health agent may be authorized to transact 24-Hour Care Coverage who must complete 4 hours of CE in Workers' Compensation.
All of the following statements regarding 'own occupation' total disability are true, except: A - Requires the insured's inability to perform the main duties of own occupation B - Typically reserved for more skilled occupations and may result in a higher premium C - Often applies for the first 2 years of a disability, then changes to any occupation D - Own occupation is more restrictive than 'any occupation' and harder to qualify for benefits
D - Own occupation is more restrictive than 'any occupation' and harder to qualify for benefits
An insured owns a disability income policy that has a waiver of premium rider in the event he/she suffers a total disability. 5 years after the issuance of the policy, the insured suffers a disability and is unable to work for 18 months before returning to work. The rider has a 3 month waiting period. Which of the following best describes the benefits of the waiver of premium rider? A - Since the disability was not permanent, no benefits are received from the rider B - The first 3 months premium waived C - All premiums will be waived during the period of disability except for the first 3 months D - Premiums will be waived retroactively to the beginning of the disability
D - Premiums will be waived retroactively to the beginning of the disability The insured would have had to have paid the first three months premium until he/she was on claim, then the company would have refunded those premiums and waived the rest of the premiums while he was still on claim.
The elimination period in a disability income insurance policy: A - Defines what causes of loss are eliminated from potential claim payment B - Describes how long the policy must be in force before claims can be considered C - Addresses where accidents and sicknesses must not occur in order for a claim to be payable D - Serves as a time deductible before benefits are payable
D - Serves as a time deductible before benefits are payable The elimination period is the period for which an insured person must be disabled before benefits begin. Benefits begin only after this period of time is satisfied.
Which measure could an underwriter use to reduce the risk when underwriting a Disability Income Policy? A - Increase the benefit period and increase the amount of the benefit B - Shorten the elimination period and increase the amount of the benefit C- Increase the benefit period and shorten the elimination period D - Shorten the benefit period and increase the elimination period
D - Shorten the benefit period and increase the elimination period By making the benefit period shorter and the elimination period longer, total claims exposure is reduced. Each of the other choices includes actions that would expose the insurer to more claims payments.
Which one of the following regarding the State Disability Insurance (SDI) program is true? A - The State Disability Insurance (SDI) program benefits received for a period of disability and benefits received for time off under the Paid Family Leave program are federally taxable as income B - The State Disability Insurance (SDI) program benefits received for a period of disability and benefits received for time off under the Paid Family Leave program are not federally taxable as income C - The State Disability Insurance (SDI) program benefits received for a period of disability are taxable as income, but benefits received for time off under the Paid Family Leave program are not federally taxable as income D - The State Disability Insurance (SDI) program benefits received for a period of disability are not taxable as income, but benefits received for time off under the Paid Family Leave program are federally taxable as income
D - The State Disability Insurance (SDI) program benefits received for a period of disability are not taxable as income, but benefits received for time off under the Paid Family Leave program are federally taxable as income
In addition to language similar to the any occupation definition of total disability, Social Security's definition of disability also includes which of the following statements? A - Unable to sit, stand, or lie down for extended periods of time B - Unable to qualify for benefits under any personal or state-sponsored disability insurance plan C - Unable to perform more than 50% of one's customary duties D - Unable to perform any substantial gainful activity
D - Unable to perform any substantial gainful activity Social Security's definition of disability includes the statement about unable to perform any substantial gainful activity, which makes qualifying for SSDI benefits difficult in many cases.
Which of the following is a typical benefit period for a group short-term disability benefit? A. To age 65 B. 2 years C. 5 years D. 52 weeks
D. 52 weeks Short-Term Disability Income plans are characterized by maximum benefits for periods of rather short duration, such as 13, 26, or 52 weeks.
Which of the following should be put in place by two business partners who want to be assured that the business will not be lost should either one of them become disabled? A. An Errors & Omissions Policy B. A Guaranteed Purchase Option C. A Business Overhead Expense Contract D. A Buy-Sell Agreement
D. A Buy-Sell Agreement
ll of the following are scenarios in which an insured would automatically qualify for total disability benefits whether or not they could actually continue working EXCEPT: A. A truck driver is involved in an accident and loses both legs B. A drummer in a band loses hearing C. A small business owner contracts a throat disease that causes the inability to speak D. A dancer slips and falls and sprains an ankle
D. A dancer slips and falls and sprains an ankle Presumptive disability includes loss of use of any two limbs, total and permanent blindness, and loss of speech or hearing.
From the insured's perspective, which of the following types of disability coverage would be the most restrictive as to qualifying for benefit payments? A. Social security B. Own occupation C. Worker's compensation D. Any occupation
D. Any occupation Under any occupation, an insured is disabled if he/she cannot perform the duties of any occupation for which he/she is suited by reason of education, training, or prior experience. This is more restrictive than if an insured is unable to perform the essential duties of his/her own occupation.
Attaching a(n) ___________ rider excludes coverage for a condition that would otherwise be covered. A. Lifetime benefit B. Waiver C. Rehabilitation benefit D. Impairment
D. Impairment
Which of the following disability income benefit periods will result in the highest premium? A. Age 65 B. 5 years C. 2 years D. Life
D. Life The benefit period is the time period the insured is eligible to receive payments after the elimination period has been met. The benefit period may be written for a specified number of years (2, 5, or 10 years), to age 65, or for life. The longer the potential benefit period, the higher the premium.
Martha's Disability Income policy contains a definition of 'Presumptive Disability'. Each of the following situations would meet this definition, except: A. Loss of speech B. Loss of hearing C. Loss of sight D. Loss of a finger
D. Loss of a finger Presumptive Disability involves the loss of two or more limbs, not the loss of a finger.
All disability policies cover ___________________________ disabilities, which are those occurring outside work. A. Occupational B. Noncontributory C. Contributory D. Nonoccupational
D. Nonoccupational
Penelope received benefits from her disability policy and went back to work. After 30 days she found she was not able to work and began to immediately receive her disability payments. Which of following provisions made this possible? A. Second Injury Provision B. Presumptive Disability Provision C. Residual Disability Provision D. Recurrent Disability Provision
D. Recurrent Disability Provision
In the event total disability continues beyond a specified period of time, future premiums will not be required to be sent in to the insurer for the duration of the disability. This optional rider is called the _________ rider. A. Lifetime benefit B. Return of premium C. Impairment D. Waiver of premium
D. Waiver of premium