Chapter 16

Question 1

Accidental Means

Answer 1

This describes an unforeseen, unexpected, or unintended event that results from an action that was not deliberately undertaken.

Question 2

Accidental Results (Accidental Bodily Injury)

Answer 2

This is an unintended consequence of an action that the insured takes, even if undertaken voluntarily. Policies that use the accidental bodily injury provision are referred to as ‘accidental results’ policies because they only require for the result of the injury to be unexpected and unintended.

Question 3

Additional Monthly Benefit (AMB)

Answer 3

The AMB rider can supplement employer-provided disability benefits, cover gaps in Social Security Disability Insurance (SSDI), or help pay for extra initial expenses if a person becomes disabled.

Question 4

Any Substantial Gainful Work

Answer 4

This phrase is an essential part of the Social Security definition of disability. The law defines disability as the inability to do any substantial gainful work due to any medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than 12 months.

Question 5

Any Occupation

Answer 5

For a policy to provide disability income benefits, the definition of total disability requires the insured to be unable to perform any job for which that insured is ‘reasonably suited by reason of education, training, or experience.’

Question 6

Benefit Period

Answer 6

This is the maximum length of time during which a benefit can be paid. The longer the benefit period, the higher the cost (premium) of the policy.

Question 7

Business Overhead Expense (BOE) Insurance

Answer 7

This form of insurance reimburses the insured company for business expenses and payroll costs if the business owner/operator becomes disabled.

Question 8

Capital Sum

Answer 8

This is the accidental death and dismemberment policy benefit that’s paid if the insured suffers a dismemberment.

Question 9

Cash Surrender Value Rider

Answer 9

This rider returns all premiums to the policy owner at age 65 if no claims have been made.

Question 10

Change of Occupation Provision

Answer 10

This provision allows the insurer to reduce the maximum benefit that’s payable under the policy if the insured switches to a more hazardous occupation without informing the insurer.

Question 11

Concurrent Disability

Answer 11

This applies when multiple events are involved in causing the same disability. A person may also experience a loss that fits more than one definition of disability.

Question 12

Confined Disability

Answer 12

Some disability policies may differentiate benefits based on whether the insured is confined at home or in a hospital.

Question 13

Coordination of Benefits

Answer 13

This is the process that’s used to determine the order in which insurance companies pay a claim.

Question 14

Cost of Living Adjustment (COLA) Rider

Answer 14

This rider provides an automatic increase in benefits (typically tied to the Consumer Price Index, or CPI) in order to offset the effects of inflation.

Question 15

Credit Disability Insurance

Answer 15

This type of policy makes payments on a loan when an insured borrower becomes disabled.

Question 16

Decreasing Term Disability Policy

Answer 16

These contracts cover a fixed period that starts on the date they’re issued. As the time elapses, the remaining number of potential monthly benefit payments also decreases until it reaches zero.

Question 17

Delayed Disability Provision

Answer 17

This provision applies to a disability income policy which allows a certain amount of time after an accident for a disability to result, during which the insured remains eligible for benefits.

Question 18

Disability Buyout Plan

Answer 18

This is a form of a buy-sell agreement that’s funded by insurance policies.

Question 19

Disability Income Rider

Answer 19

On a life insurance policy, this rider converts 1% of the policy face amount into a disability benefit, which is payable if the insured becomes totally disabled.

Question 20

Elimination Period

Answer 20

This is a duration of time between the beginning of an insured’s disability and the commencement of the period for which benefits are payable.

Question 21

Federal Insurance Contributions Act (FICA) Taxes

Answer 21

These are payroll taxes that are paid by both employees and their employers and are used to fund Social Security.

Question 22

Flat Amount Approach

Answer 22

With this approach, even if the insured’s earnings change, the policy benefit remains the same unless the insured purchases a rider that can be used to change the benefit.

Question 23

Fully Insured

Answer 23

This term is used by the Social Security Administration to describe individuals who are eligible for Social Security retirement and disability benefits.

Question 24

Guaranteed Insurability Rider

Answer 24

This rider guarantees an insured’s insurability and gives the insured the right to buy additional amounts of disability income coverage at predetermined times in the future without proof of good health.

Question 25

Guaranteed Renewable

Answer 25

This provision states that the insurer must renew an insurance policy up to the established termination age unless the insured fails to pay the premium.

Question 26

Hospital Confinement Rider

Answer 26

This rider pays an additional benefit for each day that an insured is in the hospital over and above the basic policy benefit.

Question 27

Impairment Waiver

Answer 27

This rider is also referred to as a waiver for impairments.

Question 28

Income Replacement Contract

Answer 28

This contract defines disability as a loss of income and uses that method to determine disability.

Question 29

Key Employee Insurance Policy

Answer 29

This type of policy indemnifies an employer if it loses a key employee’s services.

Question 30

Lifetime Extension Rider

Answer 30

This rider extends the benefit period beyond the age of 65.

Question 31

Long-Term Disability Insurance Policy

Answer 31

This is a disability income insurance policy that’s characterized by monthly benefit payments and a benefit period of two or more years.

Question 32

Loss of Earnings Test

Answer 32

This test requires a loss of income for there to be a compensable claim.

Question 33

Material Duties

Answer 33

This refers to the actual tasks or activities that a person must complete in the course of doing her job.

Question 34

Morbidity

Answer 34

This measures the risk of becoming disabled and can factor in personal as well as occupational circumstances.

Question 35

Natural Group

Answer 35

This is a group that’s formed for a legitimate purpose other than to purchase group insurance.

Question 36

Non-Cancelable

Answer 36

This provision states that the insurer must renew an insurance policy up to the established termination age unless the insured fails to pay the premium.

Question 37

Non-Disabling Injuries

Answer 37

This benefit applies to injuries, which may have been the result of an accident, but are not necessarily disabling.

Question 38

Non-Occupational Coverage

Answer 38

This is coverage that is provided by a disability income policy that doesn’t provide benefits for losses occurring due to the insured’s employment.

Question 39

Occupational Coverage

Answer 39

A disability income insurance policy that provides occupational coverage will pay a monthly benefit for job-related disabilities as well as non-occupational losses.

Question 40

Own Occupation

Answer 40

This term applies when determining a person’s disability.

Question 41

Partial Disability

Answer 41

This occurs when an illness or injury prevents an insured from performing one or more (but not all) of the key duties of the insured’s own occupation.

Question 42

Percentage of Earnings Approach

Answer 42

This approach is most commonly used in group insurance contracts.

Question 43

Permanent Disability

Answer 43

This term is used in Workers’ Compensation to describe a condition that’s considered to be permanent in nature.

Question 44

Presumptive Disability

Answer 44

This is a disability that provides for the payment of disability benefits if an insured experiences the level of direct physical harm that’s specified in the policy.

Question 45

Primary Insurance Amount (PIA)

Answer 45

This is the basic monthly benefit that’s available to covered individuals.

Question 46

Principal Sum

Answer 46

This is the accidental death and dismemberment policy benefit that’s paid if the insured dies due to a covered accident.

Question 47

Probationary Period

Answer 47

This is a specified number of days (typically from seven to 30) beginning on the effective date of an insurance policy.

Question 48

Pro-Rata

Answer 48

This refers to the ways that multiple insurers share responsibility for a claim they both cover.

Question 49

Recurrent Disability Provision

Answer 49

This is a disability income policy provision that specifies a period during which the reoccurrence of a disability is considered a continuation of a prior disability claim.

Question 50

Rehabilitation Benefit

Answer 50

This benefit facilitates vocational training to prepare an insured for a new occupation.

Question 51

Relation of Earnings to Insurance

Answer 51

This clause applies when a person has more than one policy that covers the same disability claim.

Question 52

Residual Disability

Answer 52

This is related to the proportional disability benefit that a person collects while working less than full time and suffering an income loss of at least 20%.

Question 53

Return of Premium Rider

Answer 53

This rider refunds the insured’s premiums (dollar for dollar without interest) if the insured doesn’t file a claim.

Question 54

Short-Term Disability Insurance

Answer 54

This is a disability income insurance policy that’s characterized by weekly benefit payments and a benefit period of no more than two years.

Question 55

Social Security Disability Income (SSDI)

Answer 55

This is available to individuals who meet the definition of being fully insured and qualify for Social Security Disability Income benefits.

Question 56

Social Security Rider (Social Insurance Supplement or Social Insurance Substitute)

Answer 56

This supplement pays a monthly disability benefit when the insured applies for social insurance, and the social insurance benefit is either delayed, denied, or less than the amount of the rider.

Question 57

Substantial Duties

Answer 57

This refers to a person’s essential capabilities which make it possible to do her job.

Question 58

Temporary Disability

Answer 58

This is used in Workers’ Compensation to describe a condition that’s considered to be potentially temporary in nature unless re-evaluated at the end of the prescribed temporary benefit period under state law.

Question 59

Waiver of Premium

Answer 59

This is activated when an insured is disabled and begins receiving benefits.

Question 60

Workers’ Compensation

Answer 60

This is a form of liability insurance that provides benefits to workers who are harmed by work-related occurrences.