Disability Income and Related Insurance Questions

The coverage provided by a disability income policy that does not pay benefits for losses occurring as the result of the insured's employment is called A Nonoccupational coverage. B Unemployment coverage. C Occupational coverage. D Workers compensation.

A Most group disability income is nonoccupational coverage, covering insureds only off the job. The employer carries workers compensation for on the job injuries or sickness.

An insured is involved in a car accident. In addition to general, less serious injuries, he permanently loses the use of his leg and is rendered completely blind. The blindness improves a month later. To what extent will he receive Presumptive Disability benefits? A No benefits B Full benefits C Partial benefits D Full benefits until the blindness lifts

A Presumptive Disability plans offer full benefits for specified conditions. These policies typically require the loss of use of at least two limbs, total and permanent blindness, or loss of speech or hearing. Benefits are paid, even if the insured is able to work. Because the insured's blindness was only temporary and the loss of use in only 1 leg, he does not qualify for presumptive disability benefits.

Which of the following are the main factors taken into account when calculating residual disability benefits? A Present earnings and earnings prior to disability B Earnings prior to disability and the length of disability C Employee's full-time status and length of disability D Present earnings and standard cost of living

A Residual disability will help pay for loss of earnings by making up the difference between the employee's present earnings and what they were earning prior to disability.

If an individual is covered by a policy that includes an Accidental Death & Dismemberment rider, what term describes the maximum benefits he will receive if he loses sight in both eyes as a result of a fire? A Percentage of full amount B Principal sum C Reciprocal amount D Capital sum

B If the insured dies, the insurer pays the full amount, also known as the "principal sum". Principal sum will most likely be paid out if the insured loses sight in both eyes or loses two limbs. If the insured lives but loses a hand or foot or the sight in one eye, the insured will be paid a percentage of the principal sum, called the "capital sum."

All of the following apply to short-term disability plans EXCEPT A A benefit period of 26 weeks is most common for group plans. B Both group and individual plans are renewable. C Group plans can provide benefit periods of up to 52 weeks. D Individual plans can provide benefit periods of up to 2 years.

B Short-term disability plans are not renewable.

In order to collect Social Security disability benefits, the claimant must be able to demonstrate that the disability will last at least A For life. B 12 months. C 24 months. D Until age 65.

B Social Security disability benefits are paid to claimants whose disability is expected to last at least 12 months or lead to death.

Which of the following would best describe total disability? A A person's inability to qualify for insurance coverage. B A person's ability to work is significantly reduced or eliminated for the rest of his/her life. C A person's inability to perform one of the regular duties of his/her occupation. D A person's total loss of income.

B While different policies might define "total disability" differently, any definition would imply that under a total disability a person's ability to work is significantly reduced or eliminated for the rest of his/her life.

An insured is hospitalized with a back injury. Upon checking his disability income policy, he learns that he will not be eligible for benefits for at least 30 days. This would indicate that his policy was written with a 30-day A Probationary period. B Disability period. C Elimination period. D Blackout period.

C The elimination period is the time immediately following the start of a disability when benefits are not payable. This is used to reduce the cost of providing coverage and eliminates the filing of many claims.

Disability income coverage specifies that the policy covers the insured if he is unable to perform any job for which he is qualified. In this case, total disability is defined as A Any occupation - less restrictive than other definitions. B Own occupation - more restrictive than other definitions. C Own occupation - less restrictive than other definitions. D Any occupation - more restrictive than other definitions.

D If total disability is defined as any occupation, it means the coverage will apply only if the insured cannot find any means of income whatsoever. This is more strict than own occupation, where a person merely has to prove that they cannot perform the job for which they were previously trained.

Any occupation disability typically means that individuals are unable to perform the duties of the occupation for which they are suited by all of the following EXCEPT A Preference. B Education. C Training. D Experience.

A By definition used by most insurers, any occupation disability typically means that an individual is unable to perform the duties of the occupation for which they are suited by education, training, and experience.

What is the number of credits required for fully insured status for Social Security disability benefits? A 4 B 10 C 30 D 40

D The term "fully insured" refers to someone who has earned 40 quarters of coverage (10 years of work times 4 maximum annual credits).

What is the elimination period for Social Security disability benefits? A 5 months B 6 months C 12 months D 3 months

A The elimination period for Social Security disability benefits is 5 months.

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters? A 4 credits B 6 credits C 10 credits D 40 credits.

B To be considered currently (or partially) insured, an individual must have earned 6 credits during the last 13-quarter period

A small business owner is the insured under a disability policy that funds a buy-sell agreement. If the owner dies or becomes disabled, the policy would provide which of the following? A Cash to the owner's business partner to accomplish a buyout B The rent money for the building C The business manager's salary D Disability insurance for the owner

A If an owner dies or becomes disabled, the disability policy under the buy-sell agreement would provide enough cash to accomplish a buyout of the company.

In disability income insurance, the own occupation definition of disability applies A For the first 2 years of a disability. B During the waiting period. C During the elimination period. D As long as an individual is unable to work.

A The own occupation definition of disability usually applies to the first 24 months after a loss.

Disability income policies can provide coverage for a loss of income when returning to work only part-time after recovering from total disability. What is the benefit that is based on the insured's loss of earnings after recovery from a disability? A Income replacement B Residual disability C Recurrent disability D Partial disability

B A residual disability will pay an amount to make up the difference between what the insured would have earned before the loss.

An employee insured under a group health policy is injured in a car wreck while performing her duties for her employer. This results in a long hospitalization period. Which of the following is true? A The group plan will pay depending on the employee's recovery. B The group plan will not pay because the employee was injured at work. C The group plan will pay. D The group plan will pay a portion of the employee's expenses.

B Because the employee's injuries were work related, the group health policy would not respond. The insured would have to rely on worker's compensation for coverage.

Which statement accurately describes group disability income insurance? A Short-term plans provide benefits for up to 1 year. B The extent of benefits is determined by the insured's income. C In long-term plans, monthly benefits are limited to 75% of the insured's income. D There are no participation requirements for employees.

B Group plans usually specify the benefits based on a percentage of the worker's income. Group long-term plans provide monthly benefits usually limited to 60% of the individual's income.

Benefit periods for individual short-term disability policies will usually continue from A 3 months to 3 years. B 6 months to 2 years. C 2 years to age 65. D 1 week to 4 weeks.

B Short-term disability is defined as a disability lasting not more than 2 years.

According to the Future Increase Option Rider (FIO), which of the following is NOT a qualifying event to increase an insured's benefit level? A Birth of a child B Death of a spouse C Age 40 D Marriage

B The FIO rider allows insureds to increase their benefit levels to certain amounts at specific times without proof of insurability. The following are the typical occasions when an insurer allows for a benefit increase: ages 25, 28, 31, 34, 37 and 40; marriage; and the birth of a child.

Which of the following disability income policies would have the highest premium? A 15-day waiting period / 5-year benefit period B 15-day waiting period / 10-year benefit period C 30-day waiting period / 10-year benefit period D 30-day waiting period / 5-year benefit period

B The waiting, or elimination, period is the time from the onset of disability the insured must wait before becoming eligible for benefits. The shorter the waiting period, the higher the premium. After the insured satisfies the waiting period, they will receive benefits from the insurer for a limited benefit period. The longer the benefit period, the higher the premium. A disability income policy that includes the shortest waiting period and the longest benefit period would be most expensive.

The minimum number of credits required for partially insured status for Social Security disability benefits is A 4 credits. B 6 credits. C 10 credits. D 40 credits.

B To be considered partially insured, an individual must have earned 6 credits during the last 13-quarter period.

Which of the following statements about occupational vs. nonoccupational coverage is TRUE? A Individual disability policies never cover nonoccupational injuries. B Only group disability income policies can be written on an occupational basis. C Disability insurance can be written as occupational or nonoccupational. D Group medical expense policies and individual medical expense policies always cover both occupational and nonoccupational injuries.

C All disability insurance can be written on either an occupational or nonoccupational basis.

If an employer provides long-term group disability insurance for its employees, what percentage of monthly wages are lower-paid employees eligible to collect? A 33 and 1/3% B 50% C 66 and 2/3% D 90%

C If an employer provides long-term group disability insurance for its employees, the benefit period may be limited to age 65, and benefits will be limited to 50% of the monthly wages for higher-paid employees and 66 and 2/3% of the monthly wages for lower-paid employees.

Under which of the following disability income plans would the benefits be subject to income tax? A Key person B Partnership buy-out C Group D Individual

C In group disability income policies, benefit payments that are attributed to employee contributions are not taxable, but benefits payments that are attributed to employer contributions are taxable to the employee.

A brain surgeon has an accident and develops tremors in her right arm. Which disability income policy definition of total disability will cover her for all losses? A "Any occupation" - less restrictive than other definitions B "Any occupation" - more restrictive than other definitions C "Own occupation" - less restrictive than other definitions D "Own occupation" - more restrictive than other definitions

C In theory, the brain surgeon could find other work, but because her disability income policy specifies that she is covered for her own occupation, she would be wholly covered.

After a year of receiving disability income benefits, the insured notices that her monthly benefit has increased slightly. What rider does the policy most likely have that would cause this? A Social Security Rider B Additional Monthly Benefit Rider C Cost of Living Adjustment Rider (COLA) D Annual Renewable Term Rider

C The cost of living adjustment (COLA) rider will help protect against inflation. Under this rider the insured's monthly benefit will be increased automatically, once the claim has begun. Generally the first increase would be at the end of one year to be followed by annual increases for as long as the insured remains on the claim.

In a Disability Income policy, all of the following are considered presumptive disabilities EXCEPT A Loss of two limbs. B Loss of speech. C Loss of one eye. D Loss of hearing.

C The definition of a presumptive disability varies by company, but generally includes a total loss of sight, speech, hearing or the use of any two limbs.

The relation of earnings to insurance provision allows the insurance company to limit the insured's benefits to his/her average income over what period of time? A 1 year B 18 months C 2 years D 6 months

C The relation of earnings to insurance provision allows the insurance company to limit the insured's benefits to his/her average income over the last 24 months.

All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT A Fully insured status. B Waiting period of 5 months. C Being age 65. D Inability to perform any gainful work.

C The term fully insured refers to someone who has earned 40 quarters of coverage (the equivalent of 10 years of work), and is therefore entitled to receive Social Security retirement, Medicare, and survivor benefits. The waiting, or elimination period for Social Security disability benefits is 5 months.

Bethany studies in England for a semester. While she is there, she is involved in a train accident that leaves her disabled. If Bethany owns a general disability policy, what will be the extent of benefits that she receives? A Full B 50% C 25% D None

D General disability policies do not cover losses caused by war, military service, intentionally self-inflicted injuries, overseas residence, or injuries suffered while committing or attempting to commit a felony.

An applicant is considered to be high-risk, but not so much that the insurer wants to deny coverage. Which of the following is NOT true? A The insurer can increase the premium. B The insurer can add exclusions to the policy. C The insurer can rate-up the policy. D The insurer will issue a conditional coverage.

D If an applicant is considered to be too much of a risk, the application can be denied. If, however, the applicant's risks are not high enough to decline, two measures can be taken to protect the insurer: the policy can be rated-up, which means that the premiums will increase, and exclusions can be added, which means that the insurer will not have to cover conditions that make the applicant a high risk to insure.

Underwriting for disability insurance is unique due to the type of risk involved. Which of the following situations illustrates this? A A stunt person pays a low premium and receives a superior classification of disability. B An attorney pays a higher premium and receives a poorer classification of disability. C A secretary pays a higher premium and receives a superior classification of disability. D A construction worker pays a higher premium and receives a poorer classification of disability.

D In disability income policies, the insured's occupation is a critical underwriting factor. The more hazardous the applicant's occupation, the higher the premium the insurance company will charge.

An insured's disability income policy includes an additional monthly benefit rider. For how many years can the insured expect to receive payment from the insurer before Social Security benefits begin? A 5 B 3 C 2 D 1

D The additional monthly benefit rider stipulates that the insurer will pay benefits comparable to what Social Security would pay. After a year, the insurer ends the benefit and assumes that Social Security will begin benefit payment.