Chapter 3: Disability Income

Question 1

Purpose of disability income insurance…

Answer 1

• Lesson impact of financial burden
• Provides specified income
• Available as individual or group plans

Question 2

Disability income benefits

Answer 2

• Payments come at a monthly basis
• Are based on insureds income at the time of purchase
• Uses a percentage of income of insured to calculate benefits
• Benefits for nonoccupational illness/injury

Question 3

Define Disability

Answer 3

Injury or illness that effects

• Caring for yourself
• Performing tasks
• Seeing
• Hearing
• Sleeping
• Walking/standing
• Lifting
• Bending
• Speaking
• Learning/reading/thinking

Question 4

Any occupation and own occupation

Answer 4

To qualify for disability benefits the person must not be able to perform any occupation or their own current occupation due to injury or sickness

“Own occupation” is more difficult to qualify for

Question 5

Nonoccupational Coverage

Answer 5

Does not provide benefits for losses occurring as a result of insureds employment

Question 6

Presumptive Disability

Answer 6

Includes total blindness, total deafness, loss of speech, loss of two or more limbs

Question 7

Partial Disability

Answer 7

The inability of the insured to perform one or more important duties of the job or the inability to work at the job full-time

Question 8

Flat Amount Benefit

Answer 8

• Set amount stated in policy

- usually 50% of full disability benefits

Question 9

Residual Amount Benefit

Answer 9

• Based on a proportion of income actually lost due to the partial disability
• Percentage of lost income X The stated monthly benefit for total disability

Question 10

AMB

Answer 10

Additional Monthly Benefits

• Come in the form of riders

Question 11

Accidental Means Provision

Answer 11

The cause of injury must have been unexpected or accidental

• Most use accidental bodily injury today which is less restrictive than accidental means provision

Question 12

Probationary Period

Answer 12

• Ends 15 to 30 days after policy’s effective date
• The purpose is to exclude preexisting sickness from coverage and provide a guidepost in borderline cases
• Protects insurer from adverse selection

Question 13

Elimination Period

Answer 13

The time immediately following the start of a disability when benefits are not payable

The longer the period the lower premium

Question 14

Benefit period

Answer 14

Maximum length of time that income benefits will be paid

The longer the period the higher the cost of the policy

Short-term: 6 months to 2 years
Long-term: more than 2 years

Question 15

Delayed Disability Provision

Answer 15

• Benefits start days or weeks later

- May be delayed up to 30, 60 or 90 days

Question 16

Recurrent Disability Provision

Answer 16

Most policies provide a period of time during which recurrence of a disability is considered still apart of the policy

After this period it is a new disability

Question 17

Non disabling injury

Answer 17

Pays actual cost of medical treatment for non-disabling injuries that result from an accident

Question 18

Elective Indemnity

Answer 18

Some short term policies provide optional lump sum payments for certain injuries

Question 19

Change of Occupation Provision

Answer 19

If the insured switches jobs to something more hazardous the benefits level is reduced

If they switch to a less hazardous the benefits could increase

Question 20

Coverage after age 65

Answer 20

Insured must be actively working for a stated number of hours per week for coverage to continue after age 65

Question 21

Waiver of Premiums Rider

Answer 21

Policyowner does not have to pay premiums during periods of total disability

• disabled for more than 3-6 months

Question 22

COLA Rider

Answer 22

Cost of living

• Protects against inflation
• Benefits will automatically increase

Question 23

Guaranteed Insurability Rider

Answer 23

• Increase benefit level at certain ages
• Like 25, 28, 31, 34, 37 and 40

Or when the insured gets married or has children