Life and Health Chapter 10

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:

10 days

All 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 dancer slips and falls and sprains an ankle.

The two primary definitions of disability are "any occupation" and "own occupation." Which of these statements best describes the difference between the two definitions?

An own occupation policy is less restrictive because it is easier to qualify for benefits

From the insured's perspective, which of the following types of disability coverage would be the most restrictive when considering qualification for benefit payments?

Any occupation

Which of the following terms best describes the maximum length of time that disability income benefits will be paid to the disabled insured?

Benefit period

All disability policies cover ___________________________ disabilities, which are those occurring outside work.

Nonoccupational

One of the most important underwriting factors in disability income insurance is ________.

Occupation

A Business Overhead Expense policy, as a form of disability insurance, provides payments for all of the following except _________________________.

Owners' income

An insured owns a disability income policy that has a waiver of premium rider in the event they suffer 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?

Premiums will be waived retroactively to the beginning of the disability

A disability that is presumed to result from the same or a related cause of prior disability is a ________________.

Recurrent disability

Which of the following are ways that the insurer can issue disability income coverage for a substandard risk?

Reduced benefit, higher premiums, rider excluding coverage

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:

Reduced the benefit to an amount the actual premium paid would have purchased under the proper job classification

The elimination period in a disability income insurance policy:

Serves as time deductible before benefits are payable

All of the following statements about the future increase option rider are true EXCEPT:

The additional coverage is available at each option date regardless of the insured's current earned 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?

Unable to perform any substantial gainful activity

An evaluation of Simon's past earnings reveals his average earned monthly income to be about $4,000 monthly. The greatest amount of benefit that Simon will likely be able to purchase under a Disability Income Policy, in order to reduce malingering in the event of a claim, is: a. $2,500 monthly b. $4,000 monthly c. $1,000 monthly d. $2,000 monthly

a. $2,500 monthly

The waiting period from the start of a disability to be eligible to apply for Social Security disability is: a. 5 months b. 6 months c. 12 months d. 3 months

a. 5 months

If a disabled worker is eligible for a Social Security disability benefits, his or her spouse and children may each also be eligible for a benefit in the amount of ____% of the disabled worker's benefit. a. 50 b. 25 c. 0 d. 100

a. 50

Insurance companies writing disability income generally have an occupational classification system based on considerations of all of the following, except: a. Earning potential b. Job duties c. Stability of the industry d. Claims history of the occupation

a. Earning potential

A Disability Income Policy has a period of deductibility immediately following a disability during which time benefits are not payable. This period is called a(n): a. Elimination Period b. Waiting Period c. Loss of Time d. Loss of Income

a. Elimination period

Which rider would eliminate coverage for a preexisting condition? a. Impairment Rider b. Return of Premium Rider c. None of these d. Lifetime Benefit Rider

a. Impairment rider

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 office rent c. Ole's utility bills d. Ole's employee payroll

a. Ole's personal lost income

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. Recurrent Disability Provision b. Residual Disability Provision c. Second Injury Provision d. Presumptive Disability Provision

a. Recurrent Disability Provision

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

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. Total Disability d. Recurrent Disability

a. Residual Disability

When disabled, which of the following would ensure payment for the wages of a business owner's employees? a. Business expenditures b. Business overhead c. Presumptive disability d. Disability buyout

b. Business overhead

Which of the following will be covered under a business owner expense (business overhead) policy? a. Weekly income to a disabled employee b. Business property rental c. Income to the disabled owner d. Business profit losses

b. Business property rental

The two categories of Group Disability Income policies are: a. Partial and Residual b. Long-Term and Short-Term c. Medicare and Social Security d. Sickness or Accidental

b. Long-Term and Short-Term

Martha's Disability Income policy contains a definition of 'Presumptive Disability'. Each of the following situations would meet this definition, except: a. Loss of sight b. Loss of a finger c. Loss of hearing d. Loss of speech

b. Loss of a finger

All of the following are 'statutory claims' for benefits under most states' Workers' Compensation laws, except: a. Disability b. Maternity c. Survivors d. Rehabilitation

b. Maternity

Hank, an auto mechanic, had an accident in his garage. He was unconscious for several hours and he awoke in the hospital with a broken leg and missing an arm. His disability would be: a. Partial, temporary b. Partial, permanent c. Total, temporary d. Total, permanent

b. Partial, permanent

The purpose of the Social Insurance Supplement rider is to: a. Waives the elimination period if insured is hospitalized during the period of elimination, but only pays when being treated as an inpatient b. Provide benefits in case an insured is declined Social Security disability benefits c. Pay the medical expenses that are related to an injury that does not result in total disability d. Provide a refund of 80% of premiums paid in to that point, less any dollar amounts paid out in claims

b. Provide benefits in case an insured is declined Social Security disability benefits

What provision states that if there is a second disability due to the same cause within a specified period, the elimination period will be waived? a. Second Disability b. Recurrent Disability c. Rehabilitation Disability d. Residual Disability

b. Recurrent Disability

Which statement is false concerning Social Security disability benefits? a. The amount of the benefit is based on the employee's Primary Insurance Amount b. The employee must only be unable to engage in his/her own occupation to be considered disabled c. To be fully insured for disability benefits, the employee must be either fully or currently insured under the Social Security system d. Benefits may only start after 5 full calendar months of disability, and are not retroactive to the date of disablement

b. The employee must only be unable to engage in his/her own occupation to be considered disabled

All of the following are false statements regarding group disability plans, except: a. The plans usually cover work-related disabilities b. The plans are typically written on a non-occupational basis c. There is individual medical underwriting d. Benefits are not available to individuals employed beyond age 65

b. The plans are typically written on a non-occupational basis

Which of the following is not a reason that insurers limit disability income benefits to 70% or less of the insured's past earnings? a. To account for other sources of income the insured may have during a disability b. To keep their expenses down c. To prevent overinsurance d. To discourage malingering

b. To keep their expenses down

_______________ is insurance provided by an employer to cover injuries that occur on the job only. a. Group accidental death and dismemberment b. Workers' Compensation c. Group health insurance d. Group disability income

b. Workers' Compensation

Which of the following is a typical benefit period for a group short-term disability benefit? a. 2 years b. To age 65 c. 52 weeks d. 5 years

c. 52 weeks

Which of the following examples of elimination periods provides the lowest benefit: a. 3 weeks b. 5 days c. 6 months d. 7 days

c. 6 months

Stephen must be disabled 60 days before he will receive any benefits from his disability policy. This 60-day period is the: a. Policy Period b. Probationary Period c. Elimination Period d. Waiting Period

c. Elimination period

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. Business overhead expense c. Key employee d. Reducing term

c. Key employee

In Disability Income underwriting, the single most important rating factor from an underwriting standpoint is the applicant's: a. Health b. Finances c. Occupation d. Gender

c. Occupation

Which statement is false regarding Social Security Disability benefits? a. To collect disability benefits, an employee must be unable to engage in any kind of gainful work because of a medically determined physical or mental condition that has lasted, or is expected to last, at least 12 months or to result in death b. The waiting period is 5 months c. Qualification for benefits is contingent only upon the employee's having 45 work credits and being unable to perform his or her usual job d. The benefit for a qualifying disabled worker is a percentage of the PIA

c. Qualification for benefits is contingent only upon the employee's having 45 work credits and being unable to perform his or ger usual job

What type of disability income insurance is designed help a small business continue to make regular monthly payments on its long-term financial commitments in the event of the owner's disability? a. Key employee b. Business overhead expense c. Reducing term d. Buy-sell

c. Reducing term

To reduce its exposure to claims from a substandard disability risk, an insurer may take all of the following actions, except: a. Charge additional premium b. Reduce the amount of benefit c. Remove all of the exclusion riders d. Increase the elimination period

c. Remove all of the exclusion riders

Which provision provides a loss of earnings benefit to an employee who returns to work after sustaining a total disability, if the insured's earnings are less than they were before the disability. a. Restorative Disability b. Presumptive Disability c. Residual Disability d. Recurrent Disability

c. Residual Disability

Which of the following would be considered a presumptive disability? a. The loss of a leg below the knee b. The partial loss of hearing in an ear c. The loss of the ability to speak d. The loss of sight in an eye

c. The loss of the ability to speak

Under the Coordination of Benefits provision, if an insured is disabled due to a work-related loss, the primary payer is a. Individual disability b. Group disability c. Workers' Compensation d. Social Security disability

c. Workers' Compensation

Which of the following elimination periods found in a disability income policy will result in the highest premium? a. 60 days b. One year c. 90 days d. One month

d. 1 month

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 Business Overhead Expense Contract c. A Guaranteed Purchase Option d. A Buy-Sell Agreement

d. A buy-sell agreement

Which of the following is needed to qualify for a Social Security Disability Benefit? a. Have less than $1,000 in assets b. Fulfill a 4-month waiting period, and have paid into Social Security c. Be age 60, widowed, and have one dependent d. Be either currently or fully insured

d. Be either currently or fully insured

What type of disability income insurance provides funds to cover business expenses when the business owner becomes disabled? a. Buy-sell b. Reducing term c. Key employee d. Business overhead expense

d. Business overhead expense

An insured may find it more difficult to qualify for benefits, but will enjoy a lower premium, when a more restrictive definition of _________ is found in a Disability Income policy. a. Benefit b. Rehabilitation c. Presumptive d. Disability

d. Disability

Own occupation is the: a. Presumption an individual is disabled due to the loss of sight, hearing, speak, or the loss of 2 limbs b. Inability to perform all duties of any occupation for which one is qualified based upon education, training, and experience c. Inability to perform one or more duties of one's occupation d. Inability to perform all duties of one's own occupation

d. Inability to perform all duties of one's own occupation

The optional guaranteed purchase option rider allows the insured to purchase additional coverage in all of the following situations, except: a. Marriage b. Birth of a child c. Reaching a specified age or date d. Job change

d. Job change

Pete is a valuable veteran of 21 years at Joe's Garage working with 24 people and filling in for Joe when he is not in. Joe wants to insure Pete to offset any losses and the costs of trying to find, recruit and train a replacement, should Pete become disabled. What type of policy should Joe purchase? a. Special Insurance Supplement b. Business Overhead Insurance c. Employee Impairment Insurance d. Key Employee Insurance

d. Key employee insurance

Which of the following disability income benefit periods will result in the highest premium? a. 2 years b. Age 65 c. 5 years d. Life

d. Life

In Individual Disability Income underwriting, the single most important rating factor from an underwriting standpoint is the applicant's: a. Gender b. Finances c. Health d. Occupation

d. Occupation

A disability that is presumed to be total and permanent due to the loss of sight, hearing, speech or the loss of two limbs is: a. Recurrent b. Residual c. Partial d. Presumptive

d. Presumptive

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. Total Disability b. Partial Disability c. Residual Disability d. Presumptive Disability

d. Presumptive Disability

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. Temporary only c. Total, partial d. Total, temporary

d. Total, temporary

A partial disability is defined as an individual: a. Presumed to be disabled due to the loss of sight, hearing, speech, or the loss of 2 limbs b. Unable to perform all duties of any occupation for which he/she is qualified based upon education, training, and experience c. Unable to perform all duties of his/her occupation d. Unable to perform one or more duties of his/her occupation

d. Unable to perform one or more duties of his/her occupation

Group Disability Income is usually offered only on a nonoccupational basis, which will not cover work-related disabilities, because: a. Damages for work-related injuries are determined in court b. Most individuals have their own disability income policy c. The insurer may reduce its financial obligation this way d. Work related injuries are normally covered under Workers' Compensation

d. Work related injuries are normally covered under Workers' Compensation