Chapter 3: Disability Income Flashcards
Purpose of disability income insurance…
- Lesson impact of financial burden
- Provides specified income
- Available as individual or group plans
Disability income benefits
- 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
Define Disability
Injury or illness that effects
- Caring for yourself
- Performing tasks
- Seeing
- Hearing
- Sleeping
- Walking/standing
- Lifting
- Bending
- Speaking
- Learning/reading/thinking
Any occupation and own occupation
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
Nonoccupational Coverage
Does not provide benefits for losses occurring as a result of insureds employment
Presumptive Disability
Includes total blindness, total deafness, loss of speech, loss of two or more limbs
Partial Disability
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
Flat Amount Benefit
- Set amount stated in policy
- usually 50% of full disability benefits
Residual Amount Benefit
- 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
AMB
Additional Monthly Benefits
- Come in the form of riders
Accidental Means Provision
The cause of injury must have been unexpected or accidental
- Most use accidental bodily injury today which is less restrictive than accidental means provision
Probationary Period
- 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
Elimination Period
The time immediately following the start of a disability when benefits are not payable
The longer the period the lower premium
Benefit period
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
Delayed Disability Provision
- Benefits start days or weeks later
- May be delayed up to 30, 60 or 90 days
Recurrent Disability Provision
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
Non disabling injury
Pays actual cost of medical treatment for non-disabling injuries that result from an accident
Elective Indemnity
Some short term policies provide optional lump sum payments for certain injuries
Change of Occupation Provision
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
Coverage after age 65
Insured must be actively working for a stated number of hours per week for coverage to continue after age 65
Waiver of Premiums Rider
Policyowner does not have to pay premiums during periods of total disability
- disabled for more than 3-6 months
COLA Rider
Cost of living
- Protects against inflation
- Benefits will automatically increase
Guaranteed Insurability Rider
- Increase benefit level at certain ages
- Like 25, 28, 31, 34, 37 and 40
Or when the insured gets married or has children
