Chapter 15 - Disability Insurance

An example of a presumptive disability would be

deafness

The waiting period for a disability insurance policy

excludes payments for a short-term illness or injury

Loss of income insurance provides

an individual the means to replace wages

The factor used most often when underwriting a disability income policy is

annual earnings

The monthly benefit for an individual disability income policy is usually limited to a percentage of the insured's income in order to avoid

over insurance

A rehabilitation benefit is intended to

prepare the insured to return to employment

The waiver of premium does NOT include which provision?

All future premiums are waived if the insured recovers from the disability

A disability policyowner 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

Which disability policy provision would address any concerns of the value of the benefits decreasing over time?

Cost of living benefit

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 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

In what form do disability income policies typically pay benefits?

Periodic income

A disability elimination period is best described as

Time Deductible

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

Loss of income

Allen has a disability income policy with a $2,500 monthly benefit and a 30-day elimination period. He is unable to work 90 days following an automobile accident. What will the policy pay? $0 $2,5000 $5,000 $7,500

"$5,000" 90 days - 30 day elimination period is 60 days (2 months). 2 months X $2,500/month benefit =$5,000 total benefit paid.

Which of the following is a characteristic of the disability elimination period? -Benefits are optionally payable -Benefits are conditionally payable -Benefits are unconditionally payable -Benefits are not payable

"Benefits are not payable". The elimination period is the time immediately following the start of a disability when benefits are not payable. The elimination period in a disability income policy serves the same purpose as a deductible.

Which of the following is NOT a provision in a disability income policy? -Change of occupation provision -Recurrent disability provision -Deductible and coinsurance provision -Elimination period provision

"Deductible and coinsurance provision". Disability income policies do not contain deductible and coinsurance provisions.

Manuel is considered to be a disabled person as defined by the Americans with Disabilities Act (ADA). As such, he is unable to perform any of the following life activities EXCEPT -Communicating -Breathing -Driving -Hearing

"Driving" Major life activities include, but are not limited to, caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working.

Which of the following could lower the premium of a proposed disability income policy? -Increase in the elimination period -Decreasing the elimination period -Increasing the benefit period -Selecting an "own -occupation" clause instead of an "any-occupation" clause

"Increasing the elimination period". The elimination period is the time immediately following the start of a disability when benefitsare not payable. The longer the elimination period, the lower the premium for comparable disability benefits.

Dyan is considered partially disabled by her insurance company. Which of the following BEST describes her situation? -She is working part-time and receiving lost income under her long-term disability benefit -She has lost hearing in one ear because of an accident on the job -She is unable to work and receiving workers' compensation -Her employer pays half of her disability benefit

"She is working part-time and receiving lost income under her long-term disability benefit" Partial disability is the inability of the insured to perform one or more important duties of the job or the inability to work at that job on a full-time basis, either of which results in a decrease in income.

What are residual disability income insurance payments based on? -A flat benefit amount stated in the policy -50% of the full disability amount -The amount of the insured's income is reduced by the disability -The insured must be totally disabled

"The amount of the insured's income is reduced by the 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 isable to work and earn some income.

Under a disability income insurance policy, which criteria must be met for "bodily injury" to be classified as accidental? -Only the result need be of natural cause -Only the cause need be accidental -Both the injury and the cause need be accidental -The cause may be intentional, but the result must be accidental

"The cause may be intentional, but the result must be accidental" The term "accidental bodily injury~~ is defined as an unforeseen and unintended event that happens at a known place at a known time. While the cause may be intentional, the result must be accidental.

Tyler purchased a disability policy with a waiver of premium rider on April 1. He is disabled on May 1. On June 1, he receives proof of permanent and total disability, and submits a claim. He begins receiving benefits on June 15. When are his premiums waived?

May 1

The elimination period in a disability income policy serves the same purpose as -a deductible -coinsurance -an elective indemnity -waiver of premium

"a deductible" The elimination period is the time immediately following the start of a disability when benefits are not payable. The elimination period in a disability income policy serves the same purpose as a deductible

Kim is insured under a disability income insurance policy with an "own-occupation" clause. She was recently injured in an automobile accident and can no longer perform the tasks of her job. Kim is now considered to be -short-term disabled -temporarily disabled -partially disabled -totally disabled

"totally disabled" The own occupation definition of total disability requires that the insured be unable to perform the insured's current occupation as a result of an accident or sickness.

Frank is shopping for a disability income policy. Which of the following would have the HIGHEST premium?

14 day waiting period / 10 year benefit period

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

60%

Tom has a rider on his disability income policy that guarantees the right to increase his benefits without a medical exam. What kind of rider is this?

Guaranteed insurability rider

An individual covered under a disability income policy may be eligible for a partial disability benefit if

In insured can perform some of their job activities on a part-time basis

Which of the following statements regarding Group Disability Income insurance is TRUE?

It provides benefits for nonoccupational illnesses and injuries

Which of these would NOT be considered a presumptive disability?

Loss of a leg or arm

Chris is an insured bricklayer who severed his left hand in an automobile accident. Although his primary duty cannot be performed, Chris is also a substitute high school teacher. He collects a full disability income check every month. How does his policy define total disability?

Own occupation

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

Own occupation clause

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

Permanent partial disabilty

Claims payable to a Disability Income insured, even when the insured can continue to work, are the result of a

Presumptive disability

What is the purpose of a Disability Income Benefit?

Provide money for living expenses

Typically, Long-Term Disability benefits are coordinated with which benefit plan?

Social Security

Jonas has disability insurance through his employer. The employer pays 75% of the premium, and Jonas pays the other 25%. What is Jonas's tax liability for any benefits paid from the disability plan?

Taxes must be paid on 75% of the benefits received

Which of these statements is NOT true concerning recurrent disabilities? -The insurer continues coverage after a new elimination period -The recurrence of a disability must occur within a specified time period after the prior disability -Are current disability is considered to be a continuation of the prior disability- The recurrent disability must be caused from the original disability

The insurer continues coverage after a new elimination period" The recurrent disability insurance provision is designed to make sure that a person does not have to go through more than one elimination period within a certain period of time.

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

Wages

A disability income policy can prevent an insured from earning a higher income than if he/she were working by utilizing

benefit limits

what is the elimination period of an individual disability policy?

time period Aadisabled person must wait before benefits are paid