CH 10

Which of the following examples of elimination periods provides the lowest benefit:

6 months

Jay receives an annual disability benefit of $10,000. His employer contributed 75% of the premium. How much of Jay's benefit is subject to income tax?

$7,500 Jay is covered under a contributory plan in which the employer is contributing 75% of the premium, so 75% of the $10,000 benefit ($7,500) is subject to income tax.

Which of the following is a typical benefit period for a group long-term disability benefit?

2 years Group long-term disability is characterized by benefit periods of at least 2 years and as long as the lifetime of the insured.

The waiting period from the start of a disability to be eligible to apply for Social Security disability is:

5 months The waiting period to apply for Social Security is 5 full months from the start of a qualified disability.

If a disabled worker is eligible for a Social Security disability benefits, his or her spouse and children may each also be eligible for a benefit in the amount of ____% of the disabled worker's benefit.

50

Which of the following is a typical benefit period for a group short-term disability benefit?

52 weeks

Social Security uses which of the following definitions to determine total disability?

Any substantial gainful activity

Group long-term disability benefits are paid for

As long as the policy specifies

Group long-term disability benefits are paid for:

As long as the policy specifies

Attaching a(n) ___________ rider excludes coverage for a condition that would otherwise be covered.

Impairment

Which rider would eliminate coverage for a preexisting condition?

Impairment Rider

Own occupation is the:

Inability to perform all duties of one's own occupation

The purpose of the Social Insurance Supplement rider is to:

Provide benefits in case an insured is declined Social Security disability benefits

Which of the following would be considered a presumptive disability?

The loss of the ability to speak

Group Disability Income is usually offered only on a nonoccupational basis, which will not cover work-related disabilities, because:

Work related injuries are normally covered under Workers' Compensation

All of the following are possible business uses of Disability Income Insurance, except:

Workers' Compensation

Evelyn paid a $700 annual premium for a business overhead expense policy that paid a monthly benefit of up to $4,000 for a benefit period of 6 months. When Evelyn became disabled she used the entire benefit for 3 months, which covered $8,000 of employee salaries, as well as $3,000 in rent and utilities. This means that the amount of the benefits which was reported as income equaled:

$12,000

The Age Discrimination in Employment Act (ADEA) affects both the short- and long-term group disability benefits for people employed after age _______.

65

Which of the following should be put in place by two business partners who want to be assured that the business will not be lost should either one of them become disabled?

A Buy-Sell Agreement

Which of the following is needed to qualify for a Social Security Disability Benefit?

Be fully insured In addition to satisfying all other requirements, a person must be fully insured.

Stephen must be disabled 60 days before he will receive any benefits from his disability policy. This 60-day period is the:

Elimination Period The elimination period is the period of time between the onset of a disability, and the time the insured is eligible for benefits. It can be thought of as a deductible period for the policy.

To be eligible for social security disability the insured worker must be:

Fully insured

To be eligible for Social Security disability the insured worker must be:

Fully insured To be eligible for Social Security disability, the insured worker must be fully insured. Some Social Security benefits are payable to a worker that is currently insured, but the other choices do not apply to Social Security.

Which of the following statements is true regarding group short term disability benefits:

Benefits payable can be up to 100% of loss of income

The type of disability coverage purchased by a small business owner, to cover ongoing overhead in the event of the owner becoming disabled, would be called:

Business Overhead Expense Business Overhead Expense provides the funds to cover the overhead expenses of a business when the owner becomes disabled, such as office rent, employee labor, etc.

Under which business-related use of Disability Income Insurance would the premiums be tax-deductible?

Business Overhead Expense Coverage Business Overhead Expense Coverage is deductible as an ordinary business expense. Any benefits received would be taxable.

When disabled, which of the following would ensure payment for the wages of a business owner's employees?

Business overhead

Which of the following plans could generate a taxable event to the recipient?

Business overhead expense Since the premiums are deductible, the benefit is taxable.

Which of the following will be covered under a business owner expense (business overhead) policy?

Business property rental

Which of the following will be covered under a business overhead expense policy?

Business property rental The business overhead expense policy is designed to cover overhead such as rent, utilities, and employee's wages upon the disability of the owner. It will not cover the owner's wages, loss of profit, or disabled employee wages

What type of disability income insurance pays a lump sum enabling certain businesses to cover the cost of purchasing a disabled business owner's interest in the business?

Buy-sell

What type of policy pays weekly or monthly benefits for loss of income due to sickness or injury?

Disability Income Disability income pays benefits either weekly or monthly when an insured becomes disabled and unable to perform some or all of their job duties, due to a sickness or injury.

Which optional disability income insurance rider waives the elimination period if the insured is hospitalized and pays only when the insured is being treated as an inpatient.

Hospital confinement

Under a Key Employee Disability Income Policy, the employer is all of the following, except:

Insured

Pete is a valuable veteran of 21 years at Joe's Garage working with 24 people and filling in for Joe when he is not in. Joe wants to insure Pete to offset any losses and the costs of trying to find, recruit and train a replacement, should Pete become disabled. What type of policy should Joe purchase?

Key Employee Insurance Joe is after a policy that will pay the business a benefit to help pay for hiring a replacement, loss of revenue, etc., when a key employee (Pete) becomes disabled.

Which of the following disability income benefit periods will result in the highest premium?

Life

The two categories of Group Disability Income policies are:

Long-Term and Short-Term

Martha's Disability Income policy contains a definition of 'Presumptive Disability'. Each of the following situations would meet this definition, except:

Loss of a finger

Joan was told she could only expect about 70% of her weekly salary on a disability check if she was ever disabled. The reason for this is to reduce _________.

Malingering can be characterized as either a moral hazard (lying about one's disability) or a morale hazard (a person chooses not to work because they have some income available)

All of the following are 'statutory claims' for benefits under most states' Workers' Compensation laws, except:

Maternity

Between the ages of 19 and 65, a worker in America is more likely to be disabled rather than die. This is a comparison of:

Morbidity to Mortality

Which of the following is a limited form of medical expense coverage added to a disability income policy?

Non-disabling injury rider

Most group Disability Income contracts are offered on a/an:

Nonoccupational basis Workers' Compensation is designed to cover occupational or job related accidents and disease.

Most group Disability Income contracts are offered on a(n):

Nonoccupational basis Workers' Compensation is designed to cover occupational or job-related accidents and disease, so the group plan would be designed to cover nonoccupational disabilities.

Which statement is incorrect regarding Group Short-Term disability?

Normally, the waiver of premium feature on these disability plans applies after a disability is prolonged for a specified period

In Disability Income underwriting, the single most important rating factor from an underwriting standpoint is the applicant's:

Occupation

Ole Olson owns a Business Overhead Expense Policy whereby if he should become disabled, the policy will continue to cover most business expenses in his absence. The policy would cover all of the following, except:

Ole's personal lost income The intent of the policy is to offset expenses, not to replace the disabled owner's personal lost income. If Ole is concerned about his own personal lost income, he should own an individual Disability Income policy.

All of the following are correct concerning partial disability, except:

Partial disability payments are usually 75% of the total disability benefit Partial disability is an inability to perform one or more of the regular duties of an occupation. Partial disability benefits are referred to as "at-work" benefits, since the insured is still able to work and receive benefits. The benefit usually pays up to 50% of a total disability benefit for a period of 3 to 6 months.

Which of the following best describes the general tax rules regarding individual disability health insurance plans?

Premiums are not deductible, the benefits are not taxable While there are some exceptions to the general rule, premiums paid for individual disability health insurance plans are generally not deductible, and the benefits are not income taxable.

The following statement is true concerning the income received from an individually owned disability income policy:

Premiums paid with after tax dollars, Income benefit not taxable

Steve Borden, a kindergarten teacher, was in a boating accident and lost both legs. Although he will continue to teach, his disability policy pays full benefits because of this provision:

Presumptive Disability

Recurrent disability:

Protects an insured who becomes disabled for the same loss and does not have to meet a new waiting period Recurrent Disability occurs when a second disability is suffered due to the same cause within a certain period of time (usually 6 months), the elimination period will not apply and the disability will be considered continuous.

Which statement is false regarding Social Security Disability benefits?

Qualification for benefits is contingent only upon the employee's having 45 work credits and being unable to perform his or her usual job To be 'fully' insured for Social Security Disability benefits, an individual must have 40 quarters of credit and the disability must last 12 months, or be expected to result in death. In addition to satisfying the 5-month waiting period, the person must be unable to perform 'any substantial gainful activity.'

If a disability insurance applicant is insurable, but not at a standard rate, all of the following are actions an underwriter can take, except:

Reduce the dividends the policy is eligible for

What type of disability income insurance is designed to help a small business continue to make regular monthly payments on its long-term financial commitments in the event of the owner's disability?

Reducing term

Sam is totally disabled and receiving benefits while attending an insurer-approved vocational training program. What provision guarantees the continuation of benefits while Sam participates in the training program and remains totally disabled?

Rehabilitation

To reduce the risk of insuring a substandard disability applicant, an insurer may take all of the following actions, except:

Remove all of the exclusion riders

A court reporter develops arthritis making it impossible to continue this employment. The reporter now has other employment at a reduced salary and receives a monthly benefit from an insurance contract due to which of the following policy provisions?

Residual Disability

Which provision provides a loss of earnings benefit to an employee who returns to work after sustaining a total disability, if the insured's earnings are less than they were before the disability.

Residual Disability

Which statement is true regarding taxation of health insurance?

The benefits received from a group Disability Income Policy paid entirely by the employer are fully taxable as income to the employee When an employer pays the full cost of disability income insurance for the employee, any benefit received is fully taxable to the employee.

Which statement is false concerning Social Security disability benefits?

The employee must only be unable to engage in his/her own occupation to be considered disabled

In which of the following circumstances was the small business owner able to deduct the premiums they paid for insurance?

The sole proprietor of a small firm buys an overhead expense policy Business disability insurance premiums are not deductible if the business (or proprietor/partner) both pays the premium and directly receives the benefit. In the case of the business overhead expense policy, the benefit covers business expenses, not the owner's salary, and is therefore considered a cost of doing business.

Which of the following is not a reason that insurers limit disability income benefits to 70% or less of the insured's past earnings?

To keep their expenses down

Under what provision will a disability policy provide benefits if the insured is totally disabled because of donating an organ to another individual?

Transplant

A partial disability is defined as an individual:

Unable to perform one or more duties of his/her occupation Partial Disability is a disability resulting in an inability to perform 1 or more of the regular duties of an occupation. The benefit usually pays up to 50% of a total disability benefit for 3 to 6 months.

Under the Coordination of Benefits provision, if an insured is disabled due to a work-related loss, the primary payer is

Workers' Compensation

_______________ is insurance provided by an employer to cover injuries that occur on the job only.

Workers' Compensation is insurance provided by an employer to cover injuries that occur on the job only.