Unit 15 - Disability Income Insurance
Benefit periods for short-term disability income policies typically range from
6 MONTHS to 2 YEARS Benefit periods for short-term disability income policies typically range from 6 months to 2 years. In contrast, long-term disability policies carry benefit periods of 2 years and longer.
Which of the following statements pertaining to recurrent disabilities and disability income insurance is NOT correct?
A RECURRENT DISABILITY POLCIY PROVISION WOULD HAVE NO EFFECT ON THE PAYMENT OF BENEFITS. Policy provisions dealing with recurrent disabilities determine how and when benefits are payable.
Under Social Security, a worker's primary insurance amount (PIA) is
AN AMOUNT EQUAL TO THE WORKER'S FULL RETIREMENT BENFIT AT THE FULL RETIREMENT AGE OR DISABILITY BENEFIT The primary insurance amount (PIA) is calculated using the percentage of the person's income over her working years.
Assume a dentist is insured with a business overhead expense policy that pays maximum monthly benefits of $3,000. The dentist became disabled and had covered expenses fo 4th month totaling $1,500. The benefits payable would be
$1,500 Business overhead expense insurance reimburses businesses for actual overhead expenses int he even the business owner becomes disabled. In this case, the actual expenses totaled $1,500.
Lee has a Social Security PIA of $800 at the time of his death. How much is payable to his surviving spouse, who is caring for an unmarried child under the age of 16?
$400 The Social Security spouse benefit for a spouse caring for an unmarried child under age 16 or disabled before age 22 is 50% of the PIA.
Disability income benefits for partial disability typically are payable to eligible insureds for a maximum of
3 TO 6 MONTHS Disability income benefits for partial disability (an inability to perform 1 or more important job duties) typically are payable to eligible insureds for a maximum of 3 to 6 months.
To be considered currently insured, and therefore eligible for disability benefits under Social Security, a worker must have earned a minimum of
6 CREDITS IN THE LAST 13 QUARTERS To be eligible for disability benefits under Social Security, a worker must be currently insured. To qualify as currently insured, the worker must have earned at least 6 credits during the last 13 quarters.
Which of the following terms best describes the maximum length of time that disability income benefits will be paid to the disabled insured?
BENEFIT PERIOD The benefit period is the maximum length of time that disability income benefits will be paid to the disabled insured. The longer the benefit period, the higher the cost of the policy.
Which of the following statements regarding Social Security disability is NOT true?
BENEFITS ARE BASED ON THE US AVERAGE MONTLY INCOME, INDEXED FOR INFLATION. Benefits are based on the worker's primary insurance amount, which is a calculation using the percentage of the person's income over her working years.
Which statement regarding the return of premium rider for a disability income policy is NOT correct?
BENEFITS ARE PAID DURING THE TIME PERIOD THE RIDER IS IN EFFECT. The amount of any benefits paid during the period the return of premium rider is in effect is subtracted from the refund amount.
Monthly or weekly benefits payable under a disability income policy can be tied to changes in the Consumer Price Index through what type of rider?
COST-OF-LIVING ADJUSTMENT The cost-of-living adjustment (COLA) rider provides for indexing the monthly or weekly benefit payable under a disability income policy to changes in the Consumer Price Index (CPI). The benefit amount is usually adjusted on each disability anniversary date to reflect changes in the CPI, subject to a minimum change that triggers an increase in the benefit.
A waiver of premium provision may be included with which kind of health insurance policy?
DISABILITY INCOME A waiver of premium rider is generally included with guaranteed renewable and non cancelable individual disability income policies. It is a valuable provision because it exempts the policy owner from paying ht policy's premiums during periods of total disability.
A guaranteed insurability rider may be attached to which of the following policies?
DISABILTIY INCOME The guaranteed insurability rider may be attached to a disability income policy. This rider is sometimes also referred to as the future increase option or guaranteed purchase option.
A social insurance supplement (SIS) rider pays a monthly benefit
DURING THE POLICY'S BENEFIT PERIOD WHILE THE INSURED REMAINS DISABLED The social insurance supplement (SIS) rider pays benefits to an insured who is totally disabled while the insured remains disabled and only as long as regular benefits are payable. It does not pay in addition to Social Security or workers' compensation for the period the insured is disabled.
Harry, the owner of a convenience store, is the insured under a business overhead policy. Were Harry to become disabled, the policy would cover all of the following EXCEPT
HARRY's SALARY Business overheard expense policies doe not include any compensation for the disabled owner.
Eduardo has been back on the job for 2 weeks when he falls ill again and is unable to work. He is likely to receive benefits immediately for which of the following reasons?
HE IS COVERED UNDER HIS DISABILITY INCOME INSURANCE POLICY'S RECURRENT DISABILITY PROVISION Under a recurrent disability provision in a disability income policy, disabled individuals are encouraged to return to work on a part-time basis. If they become disabled again with the same disability, there is generally no second elimination period. AD&D policies generally do partial disability, when available, pays benefits only after a period fo full disability.
Which of the following statements best describes the purpose of key-person or key-executive disability insurance?
IT INDEMNIFIES THE BUSINESS TO COVER EXPENSES AND LOSSES INCURRED WHEN A KEY PERSON IS DISABLED. The purpose of key-person disability insurance is to indemnify a business for expenses and losses incurred while a key employee is disabled. it does not benefit the key person. Typically, these expenses are those incurred while finding, hiring, and training a replacement for the disabled key employee. As a disability policy, it insures against disability, not death.
Which of the following statements regarding the waiver of premium provision is NOT correct?
IT IS FREQUENTLY INCLUDED WITH BOTH INDIVIDUAL AND GROUP POLICIES A waiver of premium provision does not apply to group insurance.
Of the following workers, who would qualify for the most favorable terms and rates on disability income policy?
JEREMY, WHO IS 56 YEARS OLD AND IS A FINANCIAL ADVISOR Jeremy would most likely hav the lowest rates and most liberal definitions of disability on his policy based on his occupation. While the other people are younger, their jobs are considered more hazardous, including Eileen, who has more opportunity for injury or illness since she is constantly traveling.
Mark has worked for the past 20 years as a construction worker. However, 7 months ago he injured his back and has not been able to work since. Which of the following statements is CORRECT?
MARK WILL BE ELIGIBLE FOR SOCIAL SECURITY DISABILITY BENEFITS IF HE UNABLE TO ENGAGE IN ANY SUBSTANTIAL GAINFUL WORK AND HIS DISABILITY IS EXPECTED TO ALST AT LEAST 12 MONTHS. To be eligible for Social Security disability benefits, Mark must be unable to engage in any substantial gainful work. In addition, the disability must be expected to last at least 12 months or to result in his earlier death. Benefits begin only after he has satisfied a waiting period fo 5 consecutive months, during which he must be disabled. Benefits may be paid retroactively for as long as 12 months (excluding the waiting period) preceding the date an application for benefits is filed.
Which of the following is NOT a component of a basic total disability plan/
PROBATIONARY PERIOD A probationary period is not one of the 3 elements of a basic total disability plan.
A third-grade teacher with a congenital hip dislocation wishes to purchase a disability income policy, but she fears the will not be insurable. What option does she have to get coverage?
SHE MAY PURCHASE A POLICY WITH AN EXTRA PREMIUM TO COVER ANY DISABILITY THAT WOULD INVOLVE HER HIP Policy issuance alternatives may be employed to provide coverage to persons who ordinarily would be considered uninsurable. She may be issued a policy with an extra premium (rate-up) charge or with an exclusion rider that would eliminate coverage for any resulting disability related to her hip.
Which of the following statements regarding the medical reimbursement benefit available in some individual disability income policies is CORRECT?
THE BENEFIT IS A PERCENTAGE OF THE MONLY INCOME BENEFIT The medical reimbursement benefit is a percentage of the income benefit specified in the policy. It is only paid for injuries and in lieu of other benefits under the policy.
Which of the following statements regarding Social Security disability benefits is CORRECT?
THE DISABLED EMPLOYEE MSUT BE UNABLE TO PERFORM THE DUTIES OF ANY OCCUPATION Social Security was designed to provide benefits to individuals and their families in the event of death, disability, or retirement. It can cover all members of an eligible worker's family, whether or not they themselves have paid into the system. Social Security is funded by a tax on a worker's pay, which is shared equally by the worker and the employer. The amount paid is based on the primary insurance amount (PIA).
Which of the following statements regarding an accidental death and dismemberment rider for a disability insurance policy is NOT correct?
THE DISMEMBERMENT FEATURE PROVIDES INSUREDS WITH PERIODIC PAYMENTS TO HELP THEM DURIN GA REHABILITATION PERIOD. The intent of the dismemberment feature is to provide insureds with a lump-sum payment to assist them while they are going through any rehabilitation or other applicable training. This rider does not provide periodic benefit payments. All of the other statements are correct.
What is one of the primary considerations of a disability buyout policy?
THE ELIMINATION PERIOD Once the buyout begins, it cannot be stopped. If the elimination period begins too quickly, the disabled partner or owner may recover and no longer have a business interest or job.
Tanya has lost both legs as the result of complications caused by diabetes. Previously a horse trainer, she has taken a position as a computer programmer. nonetheless, her insurance company pays her benefits under her disability income insurance policy under which of the following provisions?
THE PRESUMPTIVE DISABILITY PROVISION Even though Tanya can work, she will receive her disability income benefits for the stated term because of the severity of her condition. The nature of her disability raises the presumption that she is totally disabled.
Social Security disability benefits are characterized by which of the following?
THE RECIPIENT MUST BE UNABLE TO ENGAGE IN ANY GAINFUL EMPLOYMENT If the individual is able to find any work, regardless of education or experience, she is not eligible to receive disability benefits under Social Security.
Which of the following statements pertaining to business key-person disability insurance is NOT correct?
THESE POLICIES ARE USED TO INDEMNIFY A BUSINESS IN THE CASE OF A MERGER WITH ANOTHER COMPANY. Business disability insurance is a form of key-person insurance used to indemnify a business for the loss of the services of key employee or partner who has become totally disabled. The business is the owner and the premium payor. The premium is not tax deductible, but when received the benefits are tax-free. It is not designed to address mergers.
Rachel added a Social Security rider to her individual disability income plan. This rider provides an additional monthly benefit for what purpose?
TO ENSURE THAT A PROJECTED LEVEL FO BENEFIT IS RECEIVED. The additional monthly benefit is paid when the insured is eligible for Social Security, but this benefits have not yet begun, have been denied, or have begun in an amount less than the benefit amount of the rider. After the actual Social Security benefit amount is determined, the difference between the actual benefit and the expected benefit in the rider is payable as an additional disability income benefit.
When does a surviving family have the greatest need for income?
WHILE THE CHILDREN ARE GROWING UP When a covered worker dies, a surviving spouse with small children usually will be eligible for Social Security benefits. However, Social Security cannot (nor was it designed to) meet all of the needs of the family when the breadwinner dies.
An example of a state-adminsitered disability program is
WORKERS' COMPENSATION Workers' compensation is an example of a state-administered disability program. Medicare is a federal social insurance program. Medigap, or Medicare supplement insurance, is a type of insurance policy offered by commercial insurers. Social Security is a federally administered program that provides retirement and disability benefits.