A&S: DISABILITY (till pg 49?) Flashcards
1
Q
Insurance needs pyramid (LCDLI)
A
TOP(least important) TO BOTTOM (most important):
- LTC
- CI
- DI
- LI
2
Q
DISABILITY: capitalization of income def + formula
A
def: how much capital req to replace income indefinitely
required annual income / expected investment return
3
Q
DISABILITY: job classifications risk class
A
top(best)…. bottom (worst/hiest risk)?:
4A (BEST): DOCTORS, LAWYERS, DENTISTS, SENIOR EXECUTIVES
3A
2A
A
B (WORST): MANUAL LABOURERS IN HIGH RISK JOBS, I.E CONSTRUCTION WORKERS
4
Q
DISABILITY:Definition of disability (3) for individual policies
A
- Any occupation: worst form of coverage
- regular occ
- own occ (best)
note: definitions can be mixed, i.e own occ for 1 year, then any occ
5
Q
DISABILITY: Any occupation definition of disability
A
disabled if unable to perform their OWN OCC or ANY OTHER OCC suited by education/experience
- ## offered to WORST risk class (B)– i.e construction
6
Q
DISABILITY: Regular occupation definition of disability
A
- similar to own occ
- disabled if unable to do ur regular occ
- can CHOOSE (not forced) to work if diff occ w reduced/eliminated bens.
7
Q
DISABILITY: Own occupation definition of disability
A
- similar to regular occ
- disabled if unable to do ur regular occ
- can CHOOSE (not forced) to work in diff occ, BENEFITS WILL CONTINUE
- Offered to BEST risk class (4A) – i.e doctors, lawyers
8
Q
DISABILITY Occupational clause
A
- if insured switches to riskier job: will adjust premium accordingly (more expensive)
- if switches to less risky job: request downward adjustment (cheaper)
9
Q
DISABILITY Elimination period (waiting period before benefits)
A
- time period insured must be disabled before receiving benefits
- shorter period= higher premium
10
Q
DISABILITY Benefits Period
A
- max time insured will receive benefits while disabled
11
Q
DISABILITY: Renewability options- 3 types (NGC)
A
- Non canelable– best
- guaranteed renewable
- cancelable —- worst
12
Q
Non cancelable (Non- Can)
A
- Insurer MUST RENEW policy to specific age as long as premium being paid
- cannot change premium, amend benefits, or cancel policy
- offered to BEST risk— 4A (doctors, lawyers)
13
Q
Guaranteed Renewable
A
- insurer CAN ALTER premium if doing so for entire class of policies
14
Q
Cancelable
A
- inurer can cancel or adjust premiums at any time
- worst policy, so offered to worst risk— class B (i.e construction workers)
15
Q
insurable income (for disability coverage)
A
- salary from work
- biz income
- Part time work income
16
Q
UNinsurable income
A
- pension income
- investment income!!!!! (but can reduce amt of coverage)
- trust fund income
17
Q
Waiver of premium
A
- standard in disability policies
- when disabled, insured pays premium for 1st 90 days, afterwards premium waived (and refund premiums colleted)
waivede till:
insured no longer disabled
certain age
certain number of years
18
Q
recurrent disability clause
A
- if insured OFF disability, returns to work and suffers same/related disability withing a time frame (i.e 6 months) ===== continuation of benefits (deduct time already used on previous claim)
- elimination period waived 2nd time and benefits restart right away
19
Q
presumptive disability clause
A
if:
- perm blind
- perm hearing
- loss of 2 limbs incl use of limbs
Assumes disbaled w/o proof
no elimination period
benefits start ASAP
no proof that stopped work
20
Q
Common Exclusions for disability coverage
A
- war/terrorism
- self inflicited wounds/ suicide attempt
- participating in illegal activities
- normal pregnancy/delivery
insurer could also add specific exclusions relevant to insureds health conditions or high risk sports
21
Q
disability Policy rider
A
an add on options added when policy purchased or adterwards
22
Q
disability rider: Future Purchase Option (FPO)
A
- Isured can add coverage in stated amounts on stated dates W/O MEDICAL underwriting but subject to FINANCIAL underwriting (need to proove income) + this increases premium
23
Q
Disability RIder: Cost of Living Adjustment (COLA)
A
- ADED TO DISABILITY POLICY
- BENEFITS INCREASE YEARLY TO COMBAT INFLATION
- 2 CALCULATION METHODS: SIMPLE METHOD OR COMPOUND METHOD
24
Q
COLA calculation : simple method
A
- benefit oncreases by SAME % annually
25
COLA calculation: Compound Method
- coverage increased by rate of inflation as measured by consumer price index (CPI) up to a max amount
- unused increase (less than max) can be carry fwd to future years
26
Accidental death + Dismemberment (AD+D)
- BENEFIT PAID IF DIES AS RESULT OF ACCIDENT (CAR ACCIDENT, FIRE, ETC) OR IF INSURED DISMEMBERED
- NO MEDICAL UNDERWRITING, BC ITS AN ACCIDENT, NOT HEALTH
- claim does not impact benefits to be received
27
AD+ D exclusions
- self inflicted injuries
- suicide (or attemtped suicide)
- Participation in dangerous sports
- Flying plane (except passengers/ commercial airline)
28
DISABILITY rider: partial and residual benefots
residual benefits: Income related
Partial benefits: job function related
29
DISABILITY residual benefits definition
- paid if: after being totally disabled, no work at all, insured can return to work at reduced capacity, making less then they were before
- pays portion of benefits if able ti work p/t
- reduftion of 20% pre- disability inc (cannot earn more than 80%) = partial benefits
- if esrns LESS than 20%= full benefits paid
- 20-80% = pro rated benefits
30
DISABILITY residual benefits calculation 4 steps
1. Income lost
2. % of income lost
3. 80/20 rule
4. end benefit X % inc lost (if 80/20 rule doesnt apply)
31
DISABILITY: residual benefits calculation (how to)
1. Income lost: original monthly income - current monthly income= lost $
2. % of income lost: lost $ / original monthly income= % lost
3. 80/20 rule:
lost more than 80%= full benefits
lost less than 80% ==NO benefits
4. full benefit X % inc lost = % of benefit he will receive
32
DISABILITY partial Benefits
- does not require period total disability
- pyas partial benefit ( i.e 50% of full benefit)
- pays if insured unable to do some substantial duties of job ORRRR can do all but only part time
33
DISABILITY Rider: Return of Premium (ROP)
- POLICY HOLDER receives part of premium back (tax free , W/O interest) under certain circumstances
- total claims must not exfeed total premiums paid (premiums - total claims)
34
DISABILITY RIDERS
- PARTIAL BENEFITS
- RESIDUAL BENEFITS
- RETURN OF PREMIUM (ROP)
35
Types of individual disability insurance policies (CNNGG)
- C: Cancellable
- N: non cancellable
- N: non traditional
- G: guaranteed renewal
- G: guaranteed issue
36
Mortgage insurance (vs individual DI ins) - Key word: less
- ensures monthly mortgage (only) will be paid if disabled
- less expensive
- less underwriting
- less flexible
37
Individual disability policies (vs mortgage insurance) - key word: MORE
- gets monthly pay outs, can use however u want incl pay mortgage
- more expensive $$$
- more underwriting
- more flexible
38
Guaranteed cacellable
- ins co cannot cancel
- premiums dont increase
- benefits cannot be reduced or modified
39
Guaranteed renewable
- insurance must renew every yesr
- insurer CAN change premiums
- changes must be made to entire class of policies
40
Canfellable policy
- insurer can modify policy themself
- insurer can cancel policy
- changes nust be to entire class of policies
- lower premoums
41
Guaranteed issue
- guaranteed standard risk or guaranteed issue
Restrictions based on sise of group, occupational class (i.e 4a)
- min annual premium
- min avg age group for group memebrr
42
Non traditional DI
- not just for employees, also for self employed
43
Individual DI policy premium factors
```
Age
Gender
Health
Smoker status
Occupation
Definition of disability
Claims history
Length if waiting and benefit period
```
44
Definition of disability for Adi
- own occ
- regukwr occ
- any occ
- total disability
45
DI riders
- future purchase option (FPO)
| - cost if living allowance (COLA)
46
Residual Disability ben. : loss of income as %
Pre disability inc - p/t income / predisability income
==
%
47
1st day hospitalization rider
- bridges gap btwn 1st day hospital mised abd 1st day of benefits (i.e 90 days later)
- no waiting period
- min hospital stay : 18-72 hrs
48
Hospitalization indemnity rider
- daily benefit btwn $50-250 to cover hopital exp like parking, child care, etc...
- stay of atleast 24hrs
- benefit: 3-4 mths max
49
Taxation of premiums and benefits
- premiums paid not tax defugtible, benefits not incl in taxable invome
- as long as emoloyer oays premiums + is beneficiary = valid biz exp, but not tax deductible
50
Groupd disabilty insuranfe common traits
Same:
- employer
- industry
- association
- alumni
- union
51
Tyoes of group disability insurance policies
- short rerm disability (STD)
| - long term disability (LTD)
52
Group DI: short term disability (STD)
- aka weekly indemnity
- short term disabilities (kess than 1 yr)
- benefits based on % of salary: 70-75%
- benefits start after 7 days
- Max ben: 12 mths
- own occ
53
Group DI: long term DI
- after STD
- benefits between 50-60% previous income
- benefits for : 2, 5,10 yrs or to age 65
- own occ 1st 12 mths, the any occ
54
Group DI: qualification period pg48
- # days betweeen date of employment and date employee qualifies for group olan
- usually 30-90 days (probation period?)
55
Group DI: premium pmt
Non participating: employer makes 1 pmt to ins co/ mth on behalf of all group members
Participatinng (employee pays part of premium) : enployer collects premiums from oayroll deduction and remits 1 pmt to ins co for both employer/employee portions
56
Group DI; terminsting membership pg49
May have optikn to convert to individual policy w/o medical, usually w/in 30 days
