4 - Disability Income Insurance

A physician opens up a new practice and qualifies for a $7,000/month Disability Income policy. What rider would the physician add if he wants the ability to increase his policy benefit as his practice and income grow?

Guaranteed Insurability Option rider

What does a Guaranteed Insurability rider provide a Disability Income policyowner?

The ability to periodically increase the amount of coverage without evidence of insurability

P received Disability income benefits for 3 months then returns to work. She is able to work one month before her condition returns, leaving her disabled once again. What would the insurance company most likely regard this second period of disability as?

A recurrent disability A second period of disability from the same or related cause of a prior disability is called a recurrent disability.

J has a Disability Income policy that does NOT provide benefits for losses occurring as the result of his employment. What kind of coverage is this?

Nonoccupational coverage The coverage provided by a Disability Income policy that does not provide benefits for losses occurring as the result of the insured's employment is called nonoccupational coverage.

Which of these statements concerning an individual Disability Income policy is TRUE?

Normally includes an Elimination period

A disability elimination period is best described as a

time deductible

V is insured under an individual Disability Income policy with a 30-day Elimination period. On July 1, he is involved in an accident and temporarily disabled. He returns to work on December 1. How many months of benefit are payable?

4 months After the 30-day Elimination period has been satisfied, there will be 4 months of benefit payments.

A CEO's personal assistant suffered injuries at home and as a result, was unable to work for four months. Which type of policy will pay a monthly benefit to the personal assistant?

In this situation, a Disability Income policy would pay monthly benefits.

T was insured under an individual Disability Income policy and was severely burned in a fire. As a result, T became totally disabled. The insurer began making monthly benefit payments, but later discovered that the fire was set by T in what was described as arson. What actions will the insurer take?

The insurer will rescind the policy, deny the claim, and recover all payments made

Non-occupational disability coverage is designed for

employees who suffer non-work related disabilities, since work-related disabilities are covered by Workers' Compensation

An individual Disability Income insurance applicant may be required to submit all of the following information EXCEPT

spouse's occupation

Z owns a Disability Income policy with a 30-day Elimination period. Z contracts pneumonia that leaves him unable to work from January 1 until January 15. Z then becomes disabled from an accident on February 1 and the disability lasts until July 1 the same year. Z will become eligible to receive benefits starting on (not enough information. Did not say when he bought the policy)

The correct answer is "March 1". The elimination period is the period of time between the onset of a disability, and the time you are eligible for benefits. It is best thought of as a deductible period for your policy. After a 30-day Elimination period, Z will become eligible for receiving benefits on March 1.

With Disability Income insurance, an insurance company may limit the monthly benefit amount a prospective policy holder may obtain because of the insured's

gross income at the time of purchase

When determining the monthly benefit amount for a Disability Income policy, the factor that limits the amount a prospective insured may purchase is

income When determining the monthly benefit amount for a Disability Income policy, the factor that limits the amount a prospective insured may purchase is income.

An insured owns an individual Disability Income policy with a 30-day Elimination Period for sickness and accidents and a monthly indemnity benefit of $500. If the insured is disabled for 3 1/2 months, what is the MAXIMUM amount he would receive for an approved claim?

$1,250 3.5 months - 1 month elimination period = 2.5 months. 2.5 months X $500 monthly indemnity = $1,250.

B is a teacher who was injured in a car accident and cannot work. She is now receiving monthly benefits as a result of this accident. Which type of policy does B have?

Disability Income In this situation, a Disability Income policy will pay monthly benefits to a teacher who is unable to work as a result of a car accident.

Bryce purchased a disability income policy with a rider that guarantees him the option of purchasing additional amounts of coverage at predetermined times without requiring to provide evidence of insurability. What kind of rider is this?

Guaranteed insurability rider A guaranteed insurability rider guarantees the insured the option of purchasing additional amounts of disability income coverage at predetermined times without requiring the insured to provide evidence of insurability.

When an insured has the same disability within a specified time period and the insurance company provides the same benefits without a new waiting period, the second disability is covered under which of the following benefits?

Recurrent Disability In this situation, the insurer will provide the same benefits without a new elimination period under the Recurrent Disability benefit.

D is an architect receiving Disability Income benefits who is not able to return to work full time, but can work on a part-time basis. Which of these features would allow D to continue receiving benefits?

Residual Benefit clause A residual amount benefit is based on the proportion of income actually lost due to the partial disability, taking into account the fact that the insured is able to work and earn some income.

Disability policies do NOT normally pay for disabilities arising from which of the following?

War

What is the primary factor that determines the benefits paid under a disability income policy?

What is the primary factor that determines the benefits paid under a disability income policy?

N is covered under an individual Disability policy with a 30-day Elimination period and a monthly benefit of $500. N is totally disabled for 3 1/2 months. N's total benefit received on this claim is

$1,250 After the 30-day Elimination period has been satisfied, the total benefit paid on this claim is $1,250 ($500+$500+$250).

M becomes disabled and is unable to work for six months. M dies soon after from complications arising from this disability. M has a Disability Income policy that pays $2,000 a month. Which of the following statements BEST describes what is owed to her estate?

Earned, but unpaid benefits In this situation, any earned but unpaid benefits will be paid.

In a Disability Income policy, which of these clauses acts as a deductible?

Elimination Period The Elimination Period serves as the deductible in a Disability Income policy.

What is the elimination period of an individual disability policy?

The correct answer is "Time period a disabled person must wait before benefits are paid". The elimination period of an individual disability insurance policy refers to the amount of time a disabled person must wait before benefits are paid.

When a person returns to work after a period of total disability but cannot earn as much as he or she did before the disability, this situation is called which of the following?

Residual disability A residual amount benefit is based on the proportion of income actually lost due to the partial disability, taking into account the fact that the insured is able to work and earn some income.

The provision in a health insurance policy that suspends premiums being paid to the insurer while the insured is disabled is called the

Waiver of Premium The Waiver of Premium provision in a health insurance contract suspends the insurer's right to receive premiums during a covered period of disability.

Which of the following is the MOST important factor when deciding how much Disability Income coverage an applicant should purchase?

Applicant's monthly income

K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income?

Disability Income

T has Disability Income policy that pays a monthly benefit of $5000. If T becomes partially disabled, what can he likely expect?

Less than $5,000 per month benefit regardless of the cause In a $5,000 per month Disability Income Policy, a covered partial disability will typically result in less than $5,000 per month regardless of the nature of the disability.

A Disability Income policyowner suffers a disability which was due to the same cause as a previous disability. Both disabilities occurred within a five-month period. The insurer may cover the second disability without a new elimination period under the

Recurrent Disability provision

R had received full disability income benefits for 6 months. When he returns to work, he is only able to resume half his normal daily workload. Which provision pays reduced benefits to R while he is not working at full capacity?

Residual Disability A residual disability benefit is usually a percentage of the total disability benefit for periods when the insured is unable to perform some of the duties of his/her occupation.