Ch. 3 - Disability Income Insurance

Question 1

Any Occupation

Answer 1

Any Occupation is total disability that requires that for disability income benefits to be payable, the insured must be unable to perform any job for which the insured is “reasonably suited by reason of education, training, or experience.”

Question 2

Own Occupation

Answer 2

Own Occupation is total disability that requires that in order to receive disability income benefits the insured must be unable to work at the insured’s own occupation.

Question 3

Nonoccupational Coverage

Answer 3

Nonoccupational coverage is coverage provided by a Disability Income policy that does not provide benefits for losses occurring as the result of the insured’s employment.

Question 4

Presumptive Disability

Answer 4

Presumptive Disability is a disability income policy benefit that provides that if an insured experiences a specified disability, such as blindness, the insured is presumed to be totally disabled and entitled to the full amount payable under policy, whether or not the insured is able to work. Presumptive disabilities include total blindness, total deafness, loss of speech, and loss of two or more limbs.

Question 5

Partial Disability

Answer 5

An Illness or injury preventing insured from performing at least one or more, but not all, of the insured’s occupational duties or the inability to work at that job on a full-time basis, either of which result in a decrease in income.

Question 6

Residual Amount Benefit

Answer 6

Residual Amount Benefit is a disability income payment based on the proportion of income the insured has actually lost, taking into account the fact that the insured is able to earn some income. For example of the insured suffered a 20% loss of income because of the partial disability, the residual benefit payable would be 20% of the benefit that the policy would provide for total disability.

Question 7

Accidental Means

Answer 7

Unforeseen, unexpected, unintended cause of an accident. Requirement of an accident-based policy that the cause of the mishap must be accidental for any claim to be payable.

Question 8

Accidental Results

Answer 8

Accidental Results are policies that use the accidental bodily injury provision (sometimes called the results provision) required that the result of the injury has to be unexpected and accidental. This is far less restrictive than the accidental means provision.

Question 9

Probationary Period

Answer 9

A specified number of days after an insurance policy’s issue date during which coverage is not afforded for sickness. Standard practice for group coverages as well as disability coverage. They probationary period typically does NOT apply to accidents. The real goal of this provision is to prohibit people from buying insurance only when they need it and immediately filling a claim, otherwise known as adverse selection.

Question 10

Elimination Period

Answer 10

A duration of time between the beginning of an insured’s disability and the commencement of the period for which benefits are payable. The elimination period is often considered the “deductible” for a disability policy and is directly correlated to the premiums of the policy. If an insured wants a lower premium, they will need to settle for a longer elimination period. If an insured want’s a shorter elimination period, they will have higher premiums.

Question 11

Benefit Period

Answer 11

Benefit Period is the maximum length of time during which a benefit is paid. The longer the benefit period, the higher the cost (premium) of the policy. Instead of charging additional premiums or excluding coverage when issuing a disability income policy to a substandard risk, an insurer may shorten the benefit period.

Question 12

Delayed Disability Provision

Answer 12

A disability income policy provision that allows a certain amount of time after an accident for a disability to result, and the insured remains eligible for benefits. Most policies allow a certain amount of time during which total disability may result from an accident and the insured will still be eligible for benefits.

Question 13

Recurrent Disability Provision

Answer 13

A disability income policy provision that specifies the period of time during which the reoccurrence of a disability is considered a continuation of a prior disability. Most policies provide for recurrent disabilities by specifying a period of time during which the recurrence of a disability is considered a continuation of the prior disability. During that time period, the insurer will then pay benefits without a new elimination period. If the recurrence takes place after that period it is considered a new disability. This means it will be subject to a new elimination period.

Question 14

Social Security Rider

Answer 14

The Social Security Rider provides for the payment of additional income when the insured is eligible for social insurance benefits but those benefits have not yet begun, have been denied, or have begun in an amount less than the benefit amount of the rider

Question 15

Cost of Living Adjustment Rider

Answer 15

Cost of Living Adjustment Rider is a rider available with some policies that provides for an automatic increase in benefits (typically tied to the Consumer Price Index), offsetting the effects of inflation.

Question 16

Guaranteed Insurability Rider

Answer 16

Guaranteed Insurability Rider is an arrangement, usually provided by rider, whereby additional insurance may be purchased at various times without evidence of insurability. This rider guarantees the insureds insurability giving them the right to purchase additional amounts of disability income coverage at predetermined times in the future without proof of good health.

Question 17

Rehabilitation Benefit

Answer 17

The Rehabilitation Benefit facilitates vocational training to prepare insured for a new occupation. With some disabilities, insureds may not be able to return to their normal occupation but still be able to work at some kind of job. Under the rehabilitation benefit the insurer will pay the approved cost of a rehabilitation program to help the disabled return to work.

Question 18

Percent-of-Earnings Approach

Answer 18

The Percent-of-Earnings Approach determines the benefit using a percentage of the insured’s pre-disability earnings and takes into account other sources of disability income.

Question 19

Flat Amount Approach

Answer 19

The Flat Amount Approach specifies a flat income benefit amount that will be paid if the insured becomes totally disabled. Normally, this amount is payable regardless of any other income benefits the insured may receive. This amount is usually 50% of the full disability benefit.

Question 20

Change of Occupation Provision

Answer 20

Change of Occupation Provision allows the insurer to reduce the maximum benefit payable under the policy if the insured switches to a more hazardous occupation or to reduce the premium rate charged if the insured changes to a less hazardous occupation. If the insured changes to a less hazardous job, the insurer will return any excess unearned premium.

Question 21

Nondisabling Injuries

Answer 21

Nondisabling Injuries are injuries that may have resulted from an accident but are not necessarily disabling. Many disability policies include a provision for medical expense benefits that pay the actual cost of medical treatment for nondisabling injuries that result from an accident.

Question 22

Elective Indemnity Options

Answer 22

Elective Indemnity Options may be selected by the insured when applying for a disability policy. These are typically for short-term disability income policies and provide for an optional lump sum payment for certain named injuries.

Question 23

Waiver of Premium Rider

Answer 23

The Waiver of Premium Rider allows the policyowner to waive premium payments during a disability and keeps the policy in force. It does not provide cash payments to the policyowner. The disability must be total and permanent (as defined by the policy) and have sustained through the waiting period (as defined by the policy but typically, 90 days or 6 months). After a certain age (usually 60 or 65), the waiver of premium rider is void. This is NOT a loan. The insurance company is “waiving” the premiums” it’s just as if the premiums were paid on time each month.