Chapter 10: Disability Income Insurance

Question 1

The purpose of ______ ________ insurance is to provide disabled individuals with periodic income while they cannot work. This insurance prevents individuals from depleting their personal savings to afford the normal costs of living in addition to the medical expenses associated with disability.

Answer 1

disability income

Question 2

TF: Disability income insurance covers individuals with earned income and their families

Answer 2

False - ONLY covers the income earning individual

Question 3

Four characteristics of disability income coverage?

Answer 3

Periodic income benefits are paid to the insured.
Benefits are a stated dollar amount based on a percentage of the insured’s lost income.
Most disability income policies are guaranteed renewable to age 65.
Benefits are paid after an elimination period or “time deductible.”

Question 4

Two most important factors in underwriting disability income policies?

Answer 4

The insured’s occupation
The insured’s earned income

Question 5

Premiums for disability income insurance are calculated using _______ _______ that predict the frequency and length of claims.

Answer 5

Morbidity tables

Question 6

5 factors affecting disability premiums? (gender and age matter two, but these 5 are different)

Answer 6

Insured’s occupation
Insured’s earned income
Policy’s definition of disability
Length of the benefit period
Length of the elimination period

Question 7

The amount of each disability income benefit is based on a percentage of the insured’s income earnings, usually around ____ to _____

Answer 7

60% to 70%

Question 8

TF: The benefits are not 100% of the income earnings because that would adversely motivate the insured to remain disabled.

Answer 8

True

Question 9

To be eligible for disability benefits, a person must be?

Answer 9

Unable to perform their work duties

Question 10

TF: To be eligible for disability benefits, a person must be under the care of a physician at the time the claim is made.

Answer 10

True

Question 11

TF: the insurer may reject a claim if the policy calls for “appropriate” care and the insurer finds that the care was not sufficiently appropriate for the disability.

Answer 11

True

Question 12

____ ____ of ______, or “income replacement contracts,” pays the insured a portion of their earned income while disabled.

Answer 12

Pure Loss of Income

Question 13

TF: Income replacement contracts require the insured to endure a period of total disability before benefits are paid.

Answer 13

false - they do NOT

Question 14

TF: Tom’s disability causes him to lose 20% of his income earnings for a month. The pure loss of income disability policy will compensate Tom for this 20% loss of income.

Answer 14

True

Question 15

______ _______ is a condition in a disability income policy that permits the insured to be automatically eligible for total disability income benefits, regardless of their ability to work.

Answer 15

Presumptive Disability

Question 16

These are all examples of ______ ______:
Loss of vision in both eyes,
Loss of use or dismemberment in any two limbs, or
Complete loss of hearing or speech.

Answer 16

Presumptive Disability

Question 17

Two terms used to establish total disability?

Answer 17

Own Occupation
Any Occupation

Question 18

_____ ______ disability income policies pay benefits when the insured cannot perform the duties of their own occupation. Coverage is limited to the first two years after the disability begins.

Answer 18

Own Occupation

Question 19

_____ ______ disability income policies are more restrictive, requiring the insured to be unable to perform the duties of any occupation for which they are qualified based on education, practical experience or training.

Answer 19

Any Occupation

Question 20

TF: Some disability income policies define total disability in terms of whether it came about due to an accidental injury or a sickness.

Answer 20

True

Question 21

TF: Disability income policies use the medical definition of total disability that requires the insured to be confined to their home and under a physician’s care.

Answer 21

True

Question 22

The amount of periodic disability income benefits is based on the insured’s:
Select one:
a. Medical conditions
b. Earned income
c. Place of residence
d. Dependents

Answer 22

B

Question 23

The percentage of disability income benefits to the insured’s income is:
Select one:
a. 30 to 40%
b. 50%
c. 60 to 70%
d. 100%

Answer 23

C

Question 24

Which of the following factors is not used to establish the cost (premiums) for disability income insurance?
Select one:
a. The insured’s occupation
b. The insured’s earned income
c. The policy’s benefit period
d. The insured’s sexual orientation

Answer 24

D

Question 25

Which definition of total disability is most restrictive?
Select one:
a. Own occupation
b. Any occupation
c. All occupations
d. They are equivalent.

Answer 25

B

Question 26

James is buying disability income insurance. This insurance will _________________.
Select one:
a. Pay death benefits
b. Pay medical providers
c. Pay medical expenses
d. Replace his income

Answer 26

D

Question 27

The purpose of disability income insurance is to:
Select one:
a. Replace the insured’s income
b. Pay medical expenses
c. Pay medical providers
d. Pay death benefits

Answer 27

A

Question 28

Which of the following definitions of total disability is most beneficial to the insured?
Select one:
a. Any occupation
b. Own occupation
c. Accidental means
d. Not enough information provided

Answer 28

B

Question 29

Benefits under a disability income policy are provided until the insured reaches the age of:
Select one:
a. 59 1/2
b. 61
c. 62
d. 65

Answer 29

D

Question 30

Susan receives income payments for a disability. Benefits are not based on Susan’s ability to perform work duties. Which policy does Susan have?
Select one:
a. Any occupation
b. Own occupation
c. Residual disability
d. Income replacement

Answer 30

D

Question 31

Which is not used to determine the premium an insured must pay for their disability income policy?
Select one:
a. Life insurance policies
b. Earned income
c. Length of elimination period
d. Occupation

Answer 31

A