Disability Income
All of the following statements regarding 'own occupation' total disability are true, except: A. Own occupation is more restrictive than 'any occupation' and harder to qualify for benefits B. Requires the insured's inability to perform the main duties of own occupation C. Often applies for the first 2 years of a disability, then changes to any occupation D. Typically reserved for more skilled occupations and may result in a higher premium
A. Own occupation total disability is the least restrictive and is easier to qualify for benefits.
Josh is a concert pianist and earns a very good living with his talent. He was in a car accident and broke his arm. His disability is considered: A. Total, temporary B. Total, partial C. Partial, temporary D. Temporary only
A. Temporary Disability occurs when the insured suffers a disability and is expected to recover fully. Temporary disability may be total or partial, depending on the person's ability to work or not. A professional pianist with a broken arm would not be able to perform, and would be considered totally disabled for a temporary period of time.
Which of the following disability income benefit periods will result in the highest premium? A. Life B. Age 65 C. 5 years D. 2 years
A. The benefit period is the time period the insured is eligible to receive payments after the elimination period has been met. The benefit period may be written for a specified number of years (2, 5, or 10 years), to age 65, or for life. The longer the potential benefit period, the higher the premium.
The guaranteed purchase option (guaranteed insurability, future increase) rider guarantees that the insured may purchase additional monthly benefits without proof of insurability based on all of the following occasions, except: A. Specified holidays B. Specified dates C. Specified ages D. Specified occurrences
A. The guaranteed purchase option (guaranteed insurability, future increase) rider guarantees that on specified dates, ages, or occurrences, the insured may purchase additional monthly benefits without proof of insurability with any increases based on a percentage of income and rates based on attained age.
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. A. Hospital confinement B. Impairment C. Non-disabling injury D. Cost-of-living
A. The hospital confinement rider waives the elimination period if the insured is hospitalized and pays only when the insured is being treated as an inpatient.
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. A Buy-Sell Agreement B. An Errors & Omissions Policy C. A Business Overhead Expense Contract D. A Guaranteed Purchase Option
A. The partners should put in place a Buy-Sell Agreement funded by a Disability Policy that would provide the funds needed to buy out the interests of either partner should one of them become totally disabled.
The social insurance supplement (SIS) rider reduces overinsurance by matching Social Security as closely as possible and was developed by: A. Private insurers B. State government C. Federal government D. Non-profit organizations
A. The social insurance supplement (SIS) rider was developed by private insurers to reduce overinsurance by matching Social Security as closely as possible and is normally written for a specified period of time.
24-hour care coverage differs from a standard disability policy in that it: A. Covers both occupational and nonoccupational medical expense claims B. Covers nonoccupational injuries or illnesses C. Provides only 24 hours of medical treatment per covered injury or illness D. Includes a shorter pre-existing condition exclusion period and shorter elimination period
A. Unlike a standard disability policy that covers nonoccupational injuries or illnesses, only a 24-hour coverage plan is a program designed to cover both occupational and nonoccupational medical expense claims.
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? A. Business Overhead Insurance B. Key Employee Insurance C. Special Insurance Supplement D. Employee Impairment Insurance
B. 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 rider would eliminate coverage for a preexisting condition? A. Return of Premium Rider B. Impairment Rider C. Lifetime Benefit Rider D. Guaranteed Purchase Option
B. The Impairment Rider eliminates coverage for pre-existing conditions, but at the same time may make insurance available for an otherwise uninsurable person.
Which one of the following regarding the State Disability Insurance (SDI) program is true? A. The State Disability Insurance (SDI) program benefits received for a period of disability and benefits received for time off under the Paid Family Leave program are federally taxable as income B. The State Disability Insurance (SDI) program benefits received for a period of disability are not taxable as income, but benefits received for time off under the Paid Family Leave program are federally taxable as income C. The State Disability Insurance (SDI) program benefits received for a period of disability and benefits received for time off under the Paid Family Leave program are not federally taxable as income D. The State Disability Insurance (SDI) program benefits received for a period of disability are taxable as income, but benefits received for time off under the Paid Family Leave program are not federally taxable as income
B. The State Disability Insurance (SDI) program benefits received for a period of disability are not taxable as income, but benefits received for time off under the Paid Family Leave program are federally taxable as income.
The social insurance supplement (SIS) rider pays in addition to regular disability policies until: A. Retirement benefits begin B. Workers' Compensation or Social Security disability payments begin C. Unemployment benefits begin D. Supplemental Security Income begins
B. The social insurance supplement (SIS) rider pays in addition to regular disability policies until Workers' Compensation or Social Security disability payments begin and is designed to provide benefits if Social Security is declined or stops because if either benefit stops, the SIS will pay benefits.
Attaching a(n) ___________ rider excludes coverage for a condition that would otherwise be covered. A. Lifetime benefit B. Waiver C. Impairment D. Rehabilitation benefit
C. Attaching an impairment rider excludes coverage for a condition that would otherwise be covered.
Which measure could an underwriter use to reduce the risk when underwriting a Disability Income Policy? A. Increase the benefit period and shorten the elimination period B. Shorten the elimination period and increase the amount of the benefit C. Shorten the benefit period and increase the elimination period D. Increase the benefit period and increase the amount of the benefit
C. By making the benefit period shorter and the elimination period longer, total claims exposure is reduced. Each of the other choices includes actions that would expose the insurer to more claims payments.
A disability income policy would honor a covered claim submitted by an insured in which one of the following situations? A. Hazardous hobbies or occupations B. Active duty in the military C. Broken limbs during a recreational league sporting event D. War or act of war
C. Common exclusions and limitations that apply to disability income policies include attempted suicide and intentional self-inflicted injuries including intoxication or misuse of prescription medication, pre-existing conditions as defined in the contract, war or act of war, active duty in the military, aviation (pilots and crew), hazardous hobbies or occupations, and foreign travel.
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? A. Business overhead expense B. Key employee C. Buy-sell D. Reducing term
C. Disability Buy-Sell insurance pays a lump sum benefit that enables the insured's business partners to buy out his or her interest in the business.
Which statement is false regarding Social Security Disability benefits? A. The waiting period is 5 months B. To collect disability benefits, an employee must be unable to engage in any kind of gainful work because of a medically determined physical or mental condition that has lasted, or is expected to last, at least 12 months or to result in death C. Qualification for benefits is contingent only upon the employee's having 45 work credits and being unable to perform his or her usual job D. The benefit for a qualifying disabled worker is a percentage of the PIA
C. For Social Security Disability benefits, the proper insured status is either 'fully' insured (40 credits) or 'currently' insured (a sliding scale of credits based on age), 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: A. Charge a higher premium B. Increase the elimination period C. Reduce the dividends the policy is eligible for D. Reduce the benefit period and/or amount
C. If an applicant is substandard, the insurer may want to reduce the risk. This may be accomplished by charging an extra premium, increasing the elimination period, shortening the benefit period, reducing the amount of benefit and/or utilizing an exclusion rider when a condition appears certain to result in recurrent disabilities.
The additional monthly benefit (AMB) rider is offered by many insurance companies as a short-term additional benefit in the form of a rider which normally covers the first: A. 1 to 3 months B. 3 to 6 months C. 6 to 12 months D. 12 to 18 months
C. The additional monthly benefit (AMB) rider is offered by many insurance companies as a short-term additional benefit in the form of a rider which normally covers the first 6 to 12 months of a disability.
Which one of the following statements about occupations, hobbies, and avocations in regards to disability income insurance policies is false? A. The more hazardous the occupation the higher the premium B. The more hazardous the occupation the less benefits will be offered C. The less hazardous the occupation, hobby, or avocation the more likely a rating or an exclusion will be part of the policy D. The less hazardous the hobbies or avocations the lower the premium
C. The more hazardous the occupation, the less benefit and/or the higher the premium with consideration also given to any hazardous hobbies or avocations which would affect the rating or require an exclusion rider.
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. A. Recurrent Disability B. Presumptive Disability C. Residual Disability D. Restorative Disability
C. The question describes the Residual Disability provision.
Which of the following is a limited form of medical expense coverage added to a disability income policy? A. Additional monthly benefit rider B. Social insurance supplement rider C. Hospital confinement rider D. Non-disabling injury rider
D. A Non-Disabling Injury Rider does not pay disability income, but pays medical expenses related to an injury that does not result in total disability (emergency room, x-rays, durable medical equipment, etc.). It is a limited form of medical expense coverage added to a disability income policy.
24-Hour Care Coverage in California is designed to: A. Raise revenue for the California Department of Insurance B. Lower to the cost of health insurance provided to employees C. Increase the revenues of domestic insurers D. Lower the cost of Workers' Compensation and health insurance coverage for employers
D. The concept of 24-Hour Care Coverage is to lower the cost of Workers' Compensation and health insurance coverage for employers in California.
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: A. Ole's office rent B. Ole's employee payroll C. Ole's utility bills D. Ole's personal lost income
D. 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.
The type of disability that impairs an insured's ability to work but a full recovery is expected is considered: A. Permanent B. Total C. Partial D. Temporary
D. With a temporary disability an insured's ability to work is impaired, but a full recovery is expected.
