VA Health License Chapter 5
Business Overhead Expense Insurance
A form of disability income coverage designed to pay necessary business overhead expenses, such as rent, should the insured business owner become disabled.
Workers Compensation
A form of insurance paid by the employer providing cash benefits to workers injured or disabled in the course of employment.
Buy-Sell Agreement
A legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled.
Presumptive Disability
A provision that is found in most disability income policies which specifies the conditions that will automatically qualify the insured for full disability benefits.
Currently Insured
A worker must earn at least 6 quarter credits during the full 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or is entitled to retirement benefits.
Benefit Period
The length of time over which the insurance benefits will be paid for each illness, disability or hospital stay.
The amount of social security disability benefits are based upoon the worker's Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over which years? Which years of income may be deleted from calculation?
Their highest 35; lowest 5
What is the main purpose of a total disability plan?
To protect individuals or families against the economic loss after a total disability of the wage earner
Residual Disability
Type of disability income policy that provides benefits for loss of income when a person returns to work after a total disability, but is still not able to perform at the same level as before becoming disabled.
Accidental Bodily Injury
Unplanned, unforeseen traumatic injury to the body.
social security disability insured status
fully insured or currently insured, depending on the number of coverage credits earned
requirements of eligibility for social security disability income
fully insured status, waiting period of 5 months, inability to perform any gainful work
Under which of the following disability income plans would the benefits be subject to income tax?
group
Total Disability
inability of the insured to perform any occupation for which he or she is reasonably suited by reason of education, training or experience
Own Occupation Disability
inability to perform any or all of the duties of his own occupation
Partial Disability
inability to perform one or more of the regular duties of one's own occupation or the inability to work on a full-time basis, which results in a decrease of the individual's income
Overinsurance
insurance that exceeds in amount the actual value of the person or property insured or insurance in a greater amount than the insured can afford
Workers' Compensation Laws benefits
medical benefits, income benefits, death benefits, rehabilitation benefits
Nonoccupational Coverage
only covers claims that result from accidents or sicknesses occurring off the job
injury
physical harm or damage to someone's body
Individual Disability Income
premiums not deductible benefits not taxable
total disability plan
protects the family or an individual against the economic loss that comes with the total disability of the wage earner
Occupational coverage
provides benefits for illness, injury or disability resulting from accidents or sicknesses that occur on or off the job
disability income insurance
provides payments to replace income when an insured person is unable to work
Key Person Disability
purchased by the employer on the life of a key employee; the contract is owned by the business, the premium is paid by the business, and the business is the beneficiary
Valued Contract
A contract that pays a stated amount in the event of a loss (disability insurance/life insurance).
Business Disability Insurance
A business purchases this on its key employees to protect it from loss when the employee becomes disabled.
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?
1 year
Waiting Period for Social Security disability benefits
5 months
If an employer provides long term group disability insurance for its employers, what percentage of monthly wages are lower paid employees eligible to collect?
66 and 2/3%
Waiver
An intentional, knowing relinquishment of a legal right.
Waiver of Premium
Continuation of life insurance coverage if the insured becomes totally disabled and is unable to pay the premiums.
Sickness or illness
Defined as either a sickness or disease contracted after the policy has been in force for at least 30 days, or a sickness or disease that first manifests itself after the policy is in force
probationary period
Designed to reduce adverse selection, waiting period for benefits (usually 10-30 days), only at beginning of a policy, in addition to elimination period, only prevents coverage for sickness, not injuries
Long Term Disability
Helps replace income for up to 5 years or until the disabled individual turns 65.
Additional Monthly Benefit (AMB) Rider
Many insurance companies offer a short-term additional benefit in the form of a rider. The rider normally covers the first 6 to 12 months of a disability. Some insurers refer to the rider as a Social Security Rider as it pays benefits while the insured is awaiting Social Security Benefits
Future Increase Option (FIO) Rider
Marriage, birth of a child, age 40
Short Term Disability
Minimal period of incapacitation; often used to describe an insurance policy that insures one's income for the immediate future following an incapacitating event, usually 6 months to 2 years
6 credits
Minimum number of credits required for partially insured status for Social Security disability benefits is
A 37-year-old owns a policy with a Guaranteed Insurability Rider. The policyowner would like to increase the benefit amount offered by the policy. What documentation will be required?
No documentation
Income Replacement Contracts
Policies which replace a certain percentage of the insured's pure loss of income due to a covered accident or sickness.
Regarding the taxation of Business Overhead policies,
Premiums are deductible, benefits are taxed.
Which of the following are the main factors taken into account when calculating residual disability benefits?
Present earnings and earnings prior to disability
Recurrent Disability
Specifies period of time (usually within 3-6 months) during with the recurrence of an injury or illness will be considered a continuation of a prior disability
Which of the following is not a characteristic of a group long term disability plan
The benefit can be up to 50% of one's yearly income
Capital Sum
a portion of the principal sum of a health insurance policy; paid for accidental dismemberment or loss of sight in one eye
tax deductible
a qualified expense that may reduce the amount of income subject to taxation
Elimination Period
amount of time that lapses after a disabling event before the insurance company begins to pay benefits
Old Age, Survivors, and Disability Insurance (OASDI)
designed to provide protection against eligible workers and their dependents against finanical loss due to old age, disability, or death
Earned Income
salary, wages, or commissions; but not income from investments, unemployment benefits, and similar sources of income
fully insured
someone who has earned 40 quarters of coverage (the equivalent to 10 years of work) and is therefore entitled to receive Social Security retirement, premium free Medicare Part A, and survivor benefits
taxable
subject to taxation
prinicipal sum
the amount of coverage paid for an accidental death under a health insurance policy
accidental
unintentional
Quarter of Coverage (QC) system
used to determine whether or not an individual is qualified for Social Security Benefits. Type and amount of benefits are determined by the amount of credits or QCs a worker has earned.
Social Insurance Supplements
will pay a benefit in the approximate amount that Social Security would pay