Chapter Quiz: Disability Income & Related Insurance

When an insurer combines two periods of disability into one, the insured must have suffered a A) recurrent disability B) partial disability C) residual disability D) presumptive disability

A) recurrent disability Recurrent disability is the period of time (usually within 3-6 months) during which the recurrence of an injury or illness will be considered as a continuation of a prior period of disability.

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters? A) 4 credits B) 6 credits C) 10 credits D) 40 credits

B) 6 credits To be considered currently (or partially) insured, an individual must have earned 6 credits during the last 13-quarter period. Anyone working in jobs covered by Social Security or operating their own business may earn up to a maximum of 4 credits for each year of work.

Which statement accurately describes group disability income insurance? A) in long-term plans, monthly benefits are limited to 75% of the insured's income B) there are no participation requirements for employees C) short-term plans provide benefits for up to 1 year D) the extent of benefits is determined by the insured's income

D) the extent of benefits is determined by the insured's income Group plans usually specify the benefits based on a percentage of the worker's income. Group long-term plans provide monthly benefits usually limited to 60% of the individual's income.

An insured is covered by a disability income policy that contains an accidental means clause. The insured exits a bus by jumping down the steps and breaks an ankle. What coverage will apply? A) coverage will apply, but will be reduced by 50% B) no coverage will apply, since the injury could have been foreseen C) no coverage will apply, since disability income policies cover sickness only D) coverage will apply since the break was accidental

B) no coverage will apply, since the injury could have been foreseen An accidental means clause states that if the insured meant to do whatever caused their injury, no coverage applies since the resulting injury should have been foreseen.

When does a person qualify to receive disability-related income? A) when an insured is hospitalized for more than one week B) when the insured is unable to perform their job duties C) when the disability reaches a designated state of severity D) when an injury is severe and the insured is not a dependent

B) when the insured is unable to perform their job duties A person must be unable to perform their occupation in order to be eligible for disability income benefits.

A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability? A) disability buy-sell B) business disability policy C) business overhead expense policy D) key person insurance

C) business overhead expense policy Business Overhead Expense (BOE) insurance is sold to small business owners for the purpose of reimbursing the policyholder for various business overhead expenses during a period of total disability. Expenses such as rent, utilities, and employee salaries are covered.

Under which of the following disability income plans would the benefits be subject to income tax? A) key person B) partnership buy-out C) group D) individual

C) group In group disability income policies, benefit payments that are attributed to employee contributions are not taxable, but benefits payments that are attributed to employer contributions are taxable to the employee.

Which of the following is an eligibility requirement for all Social Security Disability Income benefits? A) have permanent kidney failure B) be at least age 50 C) have attained fully insured status D) be disabled for at least 1 year

C) have attained fully insured status Although Social Security offers many benefits, such as retirement, survivors & Medicare, only those who have attained fully insured status are eligible for Disability Income benefits. Contributing to Social Security for 40 quarters (10 years) attains fully insured status.

If a business owner becomes totally disabled, a Business Overhead Expense policy will pay all of the following EXCEPT A) utilities B) employee payroll C) loss of the owner's income D) rent

C) loss of the owner's income If business owners want coverage for the loss of their income due to a total disability, they need to purchase a separate individual disability income policy.

In the event of a loss, business overhead insurance will pay for A) salary of the business owner B) medical bills of the business owner C) rent D) loss of profits

C) rent Business overhead insurance is designed to pay the ongoing business expenses of a small business owner while they are disabled and unable to work. It does not pay the salary of the business owner or their loss of profits. However, it will provide the funds needed to pay the salary of employees other than the owners and their other ongoing expenses, such as rent.

Benefit periods for individual short-term disability policies will usually continue from A) 2 years to age 65 B) 1 week to 4 weeks C) 3 months to 3 years D) 6 months to 2 years

D) 6 months to 2 years Short-term disability is defined as a disability lasting not more than 2 years

Which of the following would qualify someone for disability benefits? A) injury only B) intentionally self-inflicted injury C) losses arising from war D) both accident and sickness

D) both accident and sickness While disability eligibility requirements may vary from company to company, normally a person becomes eligible for disability benefits due to either a sickness or an injury (accident).

In disability income insurance, the time between the onset of an injury or sickness and when benefits begin is known as the: A) qualification period B) enrollment period C) probationary period D) elimination period

D) elimination period On disability income insurance, the time between the onset of an injury or sickness and the time benefits begin is known as the waiting or elimination period.

Certain conditions, such as dismemberment or total and permanent blindness, will automatically qualify the insured for full disability benefits. Which disability policy provision does this describe? A) dismemberment disability B) partial disability C) residual disability D) presumptive disability

D) presumptive disability Presumptive disability is a provision that is found in most disability income policies which specifies the conditions that will automatically qualify the insured for full disability benefits.

What is the elimination period for Social Security disability benefits? A) 12 months B) 3 months c) 5 months D) 6 months

c) 5 months The elimination period for Social Security disability benefits is five months. Benefits begin at the beginning of the sixth month and are not retroactive to the beginning of the disablity.