Disability Income and Related Insurance Quiz

What is the shortest possible elimination period for group short-term disability benefits provided by an employer?

0 days; If an employer provides short-term disability benefits for its employees, the elimination period can be nonexistent, and the benefits can last as long as two years. The benefit typically spans 70-80% of the insured's income.

A client has a new individual disability income policy with a 20-day probationary period and a 30-day elimination period. Ten days later, the client breaks their leg and is off work for 45 days. How many days of disability benefits will the policy pay?

15 days; A probationary period refers to the amount of time that coverage is not available for illness-related disabilities, so it would not apply to a broken leg. The elimination period, however, is the time that must elapse between the onset of the disability and when benefits will start being paid.

The minimum number of credits required for partially insured status for Social Security disability benefits is

6 credits; during the last 13-quarter period

All of the following benefits are available under Social Security EXCEPT A. Welfare benefits. B. Old-age and retirement benefits. C. Disability benefits. D. Death benefits.

A

Under workers compensation, which of the following benefits are NOT included? A. Death benefits B. Legal benefits C. Medical and rehabilitation benefits D. Income benefits

B

John owns a medical expense policy that he purchased for his family. John's employer purchased a Group Disability Income policy for John and all eligible employees. John subsequently suffered an accident on the job that left him unable to work for four months. If John receives benefits from his disability income policy, which of the following would be true? A. John can deduct his medical expense benefits from his income tax. B. Benefits received that are attributable to employer contributions are fully taxable to the employee as income. C. Premiums John paid for his medical expense policy are normally deductible from his income. D. Benefits from employer contributions are not taxable.

B; Group disability income premium payments are considered tax-deductible by the business as an ordinary business expense. In a plan funded entirely by the employer, income benefits are included in the employee's gross income and taxed as ordinary income.

A policy available to business owners that provides payment for normal business expenses in the event that the owner is disabled is called

Business Overhead Expense; Premiums paid are tax deductible as a business expense, but proceeds paid are taxable as income.

In disability income insurance, the own occupation definition of disability applies

For the first 2 years of a disability

If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is

Fully insured

In which health plan are benefit payments attributed to employer contributions taxable to the employee?

Group disability income

What type of benefit helps to pay for accidental injuries that are not severe enough to qualify as disabilities?

Medical Reimbursement Benefit

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. What will her group plan do?

The group plan will not pay because the employee was injured at work; 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.

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 he/she is suited by

education, training, & experience

Which of the following is NOT a characteristic of a group long-term disability plan? A. The benefit can be up to 66 and 2/3% of one's monthly income. B. The benefit can be up to 50% of one's yearly income. C. The elimination period is the same as in the short-term plan's benefit period. D. The benefit period may be to age 65.

B; The maximum benefit is based upon monthly income

In comparison to a policy that uses the accidental means definition, a policy that uses the accidental bodily injury definition would provide a coverage that is

Broader in general; A policy that uses the accidental bodily injury definition will provide broader coverage than a policy that uses the accidental means definition.

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.

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

Cash to the owner's business partner to accomplish a buyout

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

D; 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.

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?

None; 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

Regarding the taxation of Business Overhead policies,

Premiums are deductible and benefits are taxed; The premiums paid for BOE insurance are tax deductible to the business as a business expense. However, the benefits received are taxable to the business as received.

Under a disability income policy, the insurer does not pay a monthly benefit that is equal to the insured's previous income. The reason for paying a benefit amount that is less than the insured's income is to

Prevent overutilization and malingering; The insurer wants the insured to have a financial incentive to return to work.

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?

Principal sum; 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."

Which of the following statements regarding Business Overhead Expense policies is NOT true? A. Any benefits received are taxable to the business. B. Leased equipment expenses are covered by the plan. C. Benefits are usually limited to six months. D. Premiums paid for BOE are tax-deductible.

C; Business Overhead Expense (BOE) insurance is sold to small business owners for the purpose of reimbursing the policyholder for business overhead expenses during a period of total disability. Premiums are tax-deductible for a business, but any benefits received are taxable as income. Overhead expenses, including equipment and employee salaries, are covered by the plan. Salaries and profits of the employer are not protected.

Which of the following conditions would a disability income policy most likely NOT require in order to qualify for benefits? A. The insured must be confined to the house B. The insured must provide proof of disability C. A specified income status prior to the disability D. The insured must be under a physician's care

C; Some Disability Income policies require that the insured must be under the care of a physician and possibly confined to his/her house in order to be eligible for disability benefits. Even though disability income benefits are limited to a percentage of earned income, to qualify for benefits, a person must meet the disability definition.

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

Workers compensation insurance covers a worker's medical expenses resulting from work related sickness or injuries and covers loss of income from

Work-related disabilities; All states have workers compensation laws, which were enacted to provide mandatory benefits for employee's work related injuries, illnesses, or death.

A policy that has an "any occupation" provision will only provide benefits when the insured is unable to perform

any of the duties of the occupation for which they are suited by reason of education, training, or experience.