Accident & Sickness

Question 1

One of the most common forms of coverage under A&S insurance is:

Answer 1

Correct Answer: Disability income protection

Rationale: Disability income protection: Although perhaps not immediately apparent from the title “accident and sickness insurance,” one of the most common forms of coverage is disability income protection. Disability income protection is insurance that will replace a percentage of a person’s regular income from employment or self-employment if the insured is ill or injured and unable to work.

Relevant section(s) of the textbook: 1.1.4.1 Protection for income

The correct answer is:
Disability income protection

Question 2

Risks that are common to the business environment itself are known as:

Answer 2

Your answer is correct.
Correct Answer: Systematic risks

Rationale: Systematic risks refers to risks that are common to the business environment itself.

Relevant section(s) of the textbook: 1.2.2 Business risk

The correct answer is: Systematic risks

Question 3

Once immediate needs (food, accommodation, clothing, means of travel, entertainment, etc.) have been provided for from current income, any surplus should first be allocated to setting up an emergency fund. How many months of current expenses should this fund cover?

Answer 3

Your answer is correct.
Correct Answer: 3-6 months

Rationale: 3-6 months of current expenses are usually allocated as an emergency fund.

Relevant section(s) of the textbook: 1.1.1.1 Wealth Accumulation
The correct answer is: 3-6 months

Question 4

Which of the following is NOT an option for an individual who wished to self-fund the cost of a loss associated with a risk?

Answer 4

Correct Answer: Increase insurance coverage

Rationale: Increase insurance coverage is not an option for an individual who wished to self-fund the cost of a loss associated with a risk, whereas the other options are relevant.

Relevant section(s) of the textbook: 1.2.3.1 Self-funding

The correct answer is:
Increase insurance coverage

Question 5

Some disability policies offer a survivor benefit, payable to the insured’s estate, should the insured die while on disability claim. The benefit is paid out in a lump sum, upon proof of death, and is usually equal to:

Answer 5

Correct Answer: Three times the monthly total disability benefit

Rationale: Three times the monthly total disability benefit: The survivor benefit is paid out in a lump sum, upon proof of death, and is usually equal to three times the monthly total disability benefit (e.g., if the monthly benefit was $3,000, the survivor benefit would be a lump sum of $9,000).

Relevant section(s) of the textbook: 2.2.2.9 Survivor benefit

The correct answer is: Three times the monthly total disability benefit

Question 6

This type of DI insurance policy guarantees to issue some form of coverage, but not necessarily exactly the coverage applied for:

Answer 6

Correct Answer: Guaranteed-to-issue

Rationale: A Guaranteed-to-issue policy guarantees to issue some form of coverage, but not necessarily exactly the coverage applied for. The insurer generally requires full medical underwriting and reserves the right to apply premium ratings or exclusion riders to accommodate non-standard risks.

Relevant section(s) of the textbook: 2.2.1.4 Guaranteed issue policy

The correct answer is: Guaranteed-to-issue