Chapter H4: Disability Income Insurance

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.

What is the purpose of a Disability Income Benefit?

Provide money for living expenses.

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

Spouse's occupation.

Non-occupational disability coverage is designed for:

employees who suffer non-work related disabilities, since work-related disabilities are covered by Workers' Compensation Non-occupational disability coverage is designed for employees who suffer non-work related disabilities, since work-related disabilities are covered by Workers' Compensation.

Coming from an insurance point of view, which of the following is the main risk associated with disability?

Loss of income.

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

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

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

"Normally includes an Elimination period" (Disability Income policies typically contain an Elimination )

An example of a presumptive disability would be ?

Deafness.

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.)

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.

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

$1250 3.5 Months - 1 month elimination period = 2.5 months x $500 monthly indemnity = $1250.

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:

$1250 After the 30-day elimination period has been satisfied, the total benefit paid on this claim is $1250 ($500+$500+$250).

What percentage of a participant's income are group long-term disability benefit amounts typically limited to?

60%

Loss of income insurance provides?

An individual the means to replace wages.

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

Applicant's monthly income. (In determining how much Disability Income insurance a prospective insured should purchase, the most important factor to be considered is the insured's monthly income.)

A disability policy owner is injured and becomes totally disabled. The benefits pay for 2 years, starting from the date of the injury. What is this time period called?

Benefit period.

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?

Disability 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 Disability Income would reimburse an insured for loss of earnings if the insured became sick.

In the event of an illness, a ________ ________ policy would reimburse an insured for loss of earnings.

Disability Income (would reimburse an insured for loss of earnings due to sickness)

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.

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

Elimination Period.

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.

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 clause defines total disability as being unable to perform the major duties of the insured's regular occupation?

Own occupation clause.

A policyowner suffers an injury that renders him incapable of performing one or more important job duties. Any decrease in income resulting from this injury would make him eligible for benefits under which provision?

Partial disability.

Which type of disability would be less than total impairment and equal to permanent impairment?

Permanent partial disability.

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?

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

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.)

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.

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.

What is the elimination period of an individual disability policy?

Time period a disabled person must wait before benefits are paid.

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

Wages The major factor in determining the benefit amount paid under a disability income policy is wages.

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

War.

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

income

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 The insured's earned income at the time of purchase limits the amount of the monthly benefit that an insured may purchase in a Disability Income Policy.

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 (earned income at the time of purchase limits the amount of the monthly benefit that an insured purchase in a Disability Income Policy.)

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.

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

Income.

Which of the following actions may NOT be taken by an insurance company to insure a substandard applicant for disability income coverage? 1) Increase the premium 2) Do not cover the substandard condition 3) Limit the type of coverage 4) Lengthen the contestability period

Lengthen the contestability period An insurer may legally take all of these actions to provide disability income coverage to a substandard applicant EXCEPT Lengthen the contestability period.

X owns a Disability Income policy. X recently suffered a disability which was due to the same cause as a previous disability. These disabilities both occurred over a four-month span. Which of the following provisions allows X's second disability to be covered without a new elimination period?

Recurrent Disability (Insurer will provide the same benefits without a new elimination period under the recurrent disability provision. A period of time is specified where the recurrence of a disability is considered a continuation of the prior disability.)

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.