Chapter 8 Flashcards
1
Q
Define Mortality risk
A
the risk of a particular individual dying, at any given time, when compared to other individuals of the same age and sex.
2
Q
Define morbidity risk
A
the risk of a particular individual contracting a disease, or other disabling condition at any given time when compared to other individuals of the same age or sex.
3
Q
What are some examples of mortality data>
A
heigh, weight, BP, diabetes and smoking.
4
Q
would a living benefit underwriting manual be based on more factual data than a life insurance mannual?
A
no
5
Q
would assessment of a morbidity risk be more subjective than an assessment of a mortality risk?
A
Yes, and it requires different skills.
6
Q
True or False.
At any given time of an individuals working life, there is a far greater change of experiencing a disability than death?
A
true.
at the age of 37 the chance of suffering a disability of at least 90 days duration is 8x greater thant the chance of dying.
7
Q
True or False
the odds of a mortgage foreclosure due to a disability are 16x higher than the risk of foreclosure due to death?
A
true
8
Q
how is disability insurance paid out in the time of a claim?
A
paid under the terms of the policy if the insurable event occurs. When total disability occurs, a benefit is payable (monthly benefit) after a defined period of time (waiting period), for a defined lenght of time (the benefit period)
9
Q
What are the 3 types of renewabilikty provisions avialable on individual disability insurance policies?
A
- conditionally renewable
- guaranteed renewable
- non-cancerlable
10
Q
What do you consider a “non-traditional” vs a “traditional” disability insurance policy?
A
conditionally renewable policies are “non-traditional” while guarenteed renewable and non-cancelable are “traditional”/
11
Q
what are conditionally renewable disability plans? 1
A
- allows the insurance company the most flexability in making changes to an in force policy. Can cancel or change the plan without notice to specific policy holders.
- does not provide for any premium or policy provisionguarentees nor for the contribution of the policy
12
Q
Class is ordinary defined by what?
A
age gender, specific waiting period beneift period occupation policy type.
13
Q
Who would want a conditionally renewable policy?
A
individuals who are looking for a low-cost disability coverage and those who do not qualify for traditional disability insurance.
- high-risk or low-skilled occupations,
- seasonal or part-time work,
14
Q
What is a guaranteed renewable policy?
A
cant be canceled or changed, provided premium is paid to date.
- premium can increase by class if the company is experiencing poor claims hx,
- u/w is less restrictive
- can include benefit limitations, ie. periods, elimination periods, or reduced beenfit amount for certain claims.
- some impairements can be excluded from these plans
15
Q
What is a non-cancelable policy?
A
the most strictly u/w policy.
as long as premium is paid the company cannot:
1. increase the premiums, or make changes without aggreements
2. change or add provisions/restrictions to the policy
3.cancel the policy, regardless of insured’s change in occupation/health.
16
Q
Does the non-cancelable provision have a time period?
A
yes, usually age 65.
some insurance companies may allow the policy to conitnue s/t premiums being paid and the insured continues to work FT.
17
Q
What are some exceptions that are made to the policies when an insured is >65 yo.
A
- premiums are usually no longer guarantted and are based on the insurers age on renewable basis.
- the waiting period remains unchanged as per the original contract but the benefit period is changed to either 12 or 24 months.
- definition of disability is “total”
- any benefit riders are terminated.
18
Q
Disability insurance policies define the conditions that must be met in order for a benefit to be payable. What are the 3 definition categories?
A
- own occupation
- regular occupation
- any occupation.
19
Q
Define the term “own occupation” ?
A
referred to as “own occ” and provides disability coverage for the individual who cannot perform their specific job function. n
20
Q
What defines a total disibility for own occupation?
A
as the insurerd’s inability, due to injury or sickness, to preform the important duties of his/her current occupation.
- insured must be under the regular care and attendance of a legally qualified medical practitioner.
21
Q
some policies provide a limited own occupation period. What is this?
A
its where the insured would be protected in his own occupation for a shorter time period than the full length stated under the benefit period of the policy.
ie first 2, 5, 10 years of benefit period after which the definition should change to that of a regular or any occupation.
22
Q
What is the definition of total disability for a regular occupation?
A
same as own occ apart from the exception that the insurers is ineligible for disability beenfits, if able tto work an occpation for which he/she has been educated/trained, or has experience with respect to the duties required under that specific job.
23
Q
What is a limited regular occupation period mean ?
A
the regular occupation period would last for the first 2, 5, 10 years of the benefit period, with the definition changing to any occupation thereafter.
24
Q
what is the definition of any occupation disability?
A
the lest liberal type of disability.
definition is based on the insured’s ability to work in any reasonable occupation.
25
what happens when a claim is placed for an any occupation disability?
the adjudicator will determine the individuals' ability to work. Claims are adjudicated based on contract definitions in conjunction with all relevant medical, occupation and other information in support of the claim.
26
what are loss of income policies?
disability policies whom measure total disability in tems of income loss.
The proportion paid is based on loss of income rather than the loss of ability to preform duties.
if the insurers is unable to return to gainful employement due to disability, the Full benefit will be paid out.
27
How does the disability insurance policy structure differ form the life insurance policy structure?
in the manner in which the benefit payment is made and because the DI policy has a waiting period and a benefit period.
- also contains many various contractual exclusion riders.
- no cash value associated to a disability policy.
28
How are the benefit payments different with a disability policy?
payable on a monthly basis for the duration of the disability and upon recovery and continued premium payments, the policy remains in force.
29
What is the waiting period?
| AKA the elimination period?
designates the period of time one must be disabled prior to benefits becoming payable.
- usually 30 days, although this can vary.
30
What is the benefit period?
refers to the max period for which benefits will be paid during a disability.
usually 2, and 5 years up to 65 yo.
31
General exlusion riders and limitations are often applied to disability products. Various exclusion riders provide that benefits will not be payable if a disability occurs second to what?
1. an act or accident of war or military conflict.
2. committing or attempting to commit a felony or engaging in an illegal occupation
3. normal pregnancy or childbirth
4. transplant surgery where a part of the body is transplanted into another person while the policy is in force (usually 6 months)
5. comestic surgery, during the first 6 months the policy is in force.
32
What is the purpose of Key Person Insurance?
to product a business and replace lost profits in the event of a the loss of a key employee.
1.portion of the employees salary is taken into consideration when determining the faceamount.
33
Who is a key employee?
a person/employee who is considered a valuable asset to the organization and a necessity for its successful operation.
34
what is the purpose of office overhead expense policies?
to reimburse covered fixed business expenses during the disability of the insured owner.
- based on actual covered expenses incurred by the bussiness during each month of disability.,
35
What covered expenses are normally included in an office overhead expense policy?
1. rent
2. property tax
3. utilities
4. depreciation
5. leased and rented equipment
6. business liability insurance
7. dues for prefessional associations
8. interest on debt
9. accounting fees
10. certain employee wages
11. other fixed expenses customary in the operation of the business.
36
Which definition of total disability is seen with overhead policies?
typically own, or regular
waiting periods can be 30, 60, 90 dats, and benefit periods are 12, 15, 18, or 24 months.
Usually a 20K max per mon th benefit.
37
What are some criteria points in a Disability Buy-Sell policy?
1. funds a buy-sell agreement, which will detail the procedure to follow.
2. legally enforceable contract between >1 individual.
3. will define how long a TD must last befor a buy-sell is triggered, and how a TD is defined/determined.
4. agreement should specify how the business will be valued at any future point in time, and the terms of ownership transfer and payement.
38
What are 3 different forms of benefit payments in terms of a buy-sell disability poilicy?
1. lump sum that pays the benefit out all at once
2. monthly benefit payment
3. combination of a lump sum or monthly benefits.
39
Underwriting of a DI
| - medical assessment
1. more restrictive u/w
2. specific medical impairements are seen more risky.
3. APS and reports are very important to asses morbidity.
40
What are some medical impairement examples that increase the chance of disability but do not affect the mortality?
1. back and vision problems
2. mental/nervous
3. arthritis
4. CTS
41
What should be considered when u/w a DI in terms of avocation?
1. hazardous spots can warrent modifications to DI policies.
2. extream sports need to be reviewed carefully.
3. ^ risk of a disability injury due to avocation on DI policies are more conservative than those for other insurance products.
42
An individuals occupation and duties are important factors in determining what 4 u/w basic procedures
1. if they are eligible for DI
2. type of products available
3. amount of coverage
4. rates to be charged.
43
Actuarial rating tables segment the working population into how many occupational classifications and why
```
Typically 5-6, based on the incidence of disability for each occupation.
- some occupation require more thanone class d/t the variation within the duties .
```
44
using the illustration from the text how many classes are there in terms of occupational, risk and what is the order of the greatest to the lease
```
Class 1 > class 5
class 5: high level of education/training.
class 4: white-collar office workers
Class 3: non-hazordous occupations, not working FT at a desk and may be outside
Class 2: skilled or semi-skilled light mannual work for establoish business in non-hazordous industries
Class 1: moderate to heavy physical work, usual hazards, skilled or unskilled workers with light duties in stable companies and industries.
```
45
Some companies may offer a better occupation class to client if certain favourable criterias are met. What are these criterias?
1. income level
2. years of experience
3. number of employees supervised.
46
The duties of the job are fundamental to the considerations in establishing the occupation. Therefore class detailed insight into these duties is needed. What type of information is required?
1. type of industry
2. are or department where the individual works
3. materials handled
4. process engaged in
5. amount of time travelling
6. number of people supervised.
7. percentage of time spent in each duty
8. machines, vehicles and tools used
47
define insurable income
Earned income that would cease duirng a period of disability.
- includes bonuses, OT and contributions to pension and profit-sharing plans
48
In a self-employed occupation is the Owner's drawings looked upon as earned income?
No, Drawings are an advance or loan to the oawner from a company based on anticipated future profits and are not always a reflection of actual net earnings, nor are dividents if the company is incorporated.
49
What are dividends?
the disbursement of the retained earnings of the company, composed of profits from the current and prior years, therefore are not considered earned income.
50
What are the options available to the underwriter in arriving to a decision where there is an increased morbidity risk for either a medical or non-medical reason
1. premium ratings-
2. change of policy type.
3. benefit adjustments
4. exclusions.
51
What is the "contra proferentum" principal?
In canada if there is question as to the meaning of a term contained within an insuran ce contract and it can have more than one meaning/is unclear then the ambiguity will be resolved in the favour of the insured.
52
What is a long-term care (LTC) insurance product?
it provides payment for ongoing care of an individual who is unable to live independently, typically manifested by the inability to perform two or more acitvities of Daily Living, and/or presence of cognitive impairement.
53
What is a large difference beween LTC and other insurance products?
the higher average age of the insurerd at the time of U/W is 60 for LTC.
- target market are those approaching retirement
54
define a basic LTC policy.
1. guarenteed renewable
- some cases are time specific
2. IF a change were to occur on the policy then all policies issued within the same class, will need to be changes.
3. some companies offer limited pay options.
55
Same class is defined as what?
series, age, or region.
56
When are benefits on an LTC policy payable?
when the insured is confined in a LTC facility and receiving care based upon the loss of 2+ DALS/cognitive impairements
57
Define Facility Care
defined as health or personal care services required on a long-term basis in a long-term care dacility as dtermined by a physiciaon to be medically necessary.
- facility must be licensed as a convalescent hospital, skilled nusing facility, custodical carfe facility, retirement home, or home for the aged.
58
How are Home care benefits paid out?
when the insurerd is receiving home care based on the loss of two or more acitivities of daily living
59
What is the definition of home care?
as a program of servies provided in the insured's home by skilled caregivers,
- some contracts allow this to be family memeb ers.
- can be provided in own home, or private home, home for the aged, retirement home or place that provides residential care
60
How is the benefit payment structured, and what happens in the event of a claim?
```
on a daily, weekly or monthly fixed amount.
ITs paid out in 1/3 ways
1. indemnity method
2. expense incurred method
3. disability method
```
61
define the indemnity method of benefit payments
a set follar amount and is not based on the specific services required or the expenses incured.
- payment is made if the cx is eligible for benefits and the services recevied are covered by the policy
62
define the expense incurred method of benefit payouts
benefits are paid if the insured is eligible for benefits and the claim is folr eligible services,
- pays the lesser of the expense incurred or the dollar limit of the policy
63
define the diability method of benefit payouts
once the insured meets the benefits eligible criteria, the full daily benefit is paid even if the insured is not receiving any long-term care services
64
How long is the waiting period on LTC, and the benefit period?
0-180 days.
1 year to a lifetime.
most common options are 3-5 years.
65
General exclusion riders and limitations are applicable to long-term care products. Benefits are generally not payable if a claim is incurred as a results of what conditions? (8)
1. pariticaption in war/hostile action.
2. military or naval services
3. intentional self-inflicting injury or illness, while sane or insane
4. commiting or attempting to commit a felony or to engage in an illegal occupation
5. chronic alcoholism or drug dependency.
6. being legally intoxicated or under the influence of any narcotic unless being taken under supervision
7. nervous or mental disorders, without demonstrable organic cause
8. any tx paid for by the govenement
66
What is the best predictors of long-term care use?
is functional status, which includes the baility to perform the ADLS and the instrumental activities of daily living.
67
Name some examples of ADLS
1. bathing
2. cotinence
3. dressing
4. eating
5. toileting
6. transferring
68
What are Instrumental activities of daily living ( IADLs)
social survival skills that must be performed either for a household or on an individual.
- using the phone
- managing finances
- using transportation
- shopping
- laundry
- housework
- medication administration
- meal prep
69
What some some medical disorders that require careful consideration when evaluating LTC
1. osteoporosis + fall hx, fractures or frailty
2. cardiac disease
3. emphysema or COPD + SM
4. chronic illness
5. co-morbid conditions that in combination are more sig
6. polupharmacy or the use of multiple px medications
7. treatment protocols
8. chronological age vs. physiological age.
70
What are some factors that play an important role in maintaining an individuals personal independance?
1. working FT or PT
2. living with a spouse who is in good health or living with other familymembers
3. participating in hobbies and activities outside the home
4. Abillity to drive, travel, or visit wihtout accompaniment or assistance.
71
What is cognitive impairement?
refers to the problems with attention, affect, money or other loss of intellectual capacity that results in the need for personal supervision and/or assistance.
72
What are some commonly used tools in the assessment of Cognitive impairment of an . applicant.
1. Delayed word recall (DWR) memory exercise designed to be used as a screening instrument for ST memory loss.
2. Enhanced mental skill test (EMST) memmory processing test by docusing on the encoding and retrieval of information. Can also distinguish between cognitive impairement and lapses in attention d/t depression
3. Short Portable Mental Status Questionnaire (SPMSQ) includes 10 STD ? testing LT memory, PArtical survical skills, and mathamatical ability. - used for mdoerate and severe dementia.
4. tele-phone or in person interview -
73
What are the medical requirements for LTC?
rely on applications and APS and supplemental questions if required. Cognitive tests are usually used.
74
How would avocation and occupation affect LTC UW?
-possible consequences resulting from sport or hobby.
75
What are the financial considerations to review when u/w LTC?
1. premiums should be affordable to relative income
| 2. Most insurers have cap max
76
When u/w LTC, what are some examples of counteroffers one may see?
1. adding an extra premium rating
2. increasing the waiting period
3. decreasing the benefit period, decreasing the benefit amount
4. some combination of the above.
77
True or False:
| Exclusion riders are generally used for long-term care products?
No,
| there can be the option of removing home care form the policy contract.
78
What is the purpose of critical illness policies?
product designed to help the insured recover financially from burdens that could present themselves while suffering from a CI.
79
What happens to the CI plan once the benefit is paid out?
the policy is terminated unless only partial benefits were paid.
80
True or False: Individuals who do not qualify for disability insurance due to income, type of occupation, or certain non-critical illness related histories can qualify for CI insurance.
True
| -
81
What are the 10 most commonly covered conditions in a CI policy?
1. heart attack
2. stroke
3. MS
4. Kidney failure
5. blindness
6. Deafness
6. CAD
8. Life threatening cancer
9. paralysis
10. lost of limbs
some companies cover up to 40 conditions,
82
some CI policies contain a 90 day moratorium for cancer. what is this?
no benefit is payable for cancer dx wihtin 90 days of issue or reinstatgement of the policy.
83
Most CI insurance policies contain a general exlcusion rider. Benefits would not be payable for a covered condition incurred secondary to what?
1. self-inflicted injury while sane or insane
2. use of illegal or illicit drugs
3. commission of or the attempt to comimit a criminal offence
4. act of declared or undeclared war
84
The contract contains a definition for each of the covered conditions. What must be included in the definition?
1. clear and precise description of the event for which a benefit is payable
2. evidencfe required for claims validation
3. any exclusion specific to the definition for which benefits would not be payable.
85
What is u/w a CI more critical then LI or LTC?
UW must consider the special risk factors that increase the incidence of a CI.
neither death or disability has to occur, the pt is still living.
APS are very important here
86
What type of medical risk selection is more important when underwriting CI over LI/LTC?
Fx , CAD- risks, cancer risks,
CAD risks: BP, build, lipids, BS, and SM
Cancer risks: dysplastic nevi,
87
What are the most common avocations of concern to the u/w when assessing CI risk?
car racing, skydiving, scuba, mountain climbing.
Should also consider sport/hobby risk.
>> can accomodate risk assessment with ratings/exlcusions
88
What is an accelerated death benefit?
an advance cash payment made by a life insurance company to an insured who has been determined to be termanlly ill from a medical perspective.
-
89
When will an accelerated benefit payout option be made available?
when a cx is dx with a terminal illness with death expected in 12-24 months,.
- paid out in lump sum or monthly installments.
- some compnies do not charge for the option unless used.
90
terminology: Accelerated death benefit
an advanced cash payment of a life insurance death benefit paid by a life insurance company to an insured who is terminally ill
91
Terminology: ADLs
activites that people do independently every day including eating bathing, dressing, trasferring location, continence and toileting
92
terminology: Benefit period
the max length og time an insured is eligible to collect benefits while on a disability claim
93
terminology: cognitive impairement
problems with attention, affect, memory or other loss of intellectual capacity
94
Terminology: Collateral assignment
the legal transfer of one persons interest in a policy to a creditor as a security for a debt. the creditor is first entitled to be reimbured out of policy proceeds for the amount owned. The beneficiary is then entitled to the rest.
95
Terminology: conditionally renewable
policy type in which the company can change the premium, policy providison or cancel the policy as long as it does so for all insured within a specific class who own the contract.
96
Terminology: contractual exclusion riders
riders that are included in the wording of every policy of a particular type and outline situations where benefits would not be payable. No benefit would be payable if the claim resulted from the insured's participation in an illegal act
97
Terminology: death benfit
LI proceeds payable upon proff of the insureds death.
98
What is an exlusion rider?
a rider attachemnt to an insurance policy that excludes losses arissinf from certain conditions or avocations.
99
terminology: Guaranteed renewable
policy type in which the insurance company cannot cancel the policy, change any provision or add any restrictions as long as premiums are paid. They cannot be changed for an individual policy holder but can be changed for all poilicies of that type or in that specific class.
100
Terminology: Irrevocable beneficiary
beneficiart whose interest in an insurance policy cannot be revoked without the individuals written consent.
101
terminology: Legally competent
a person of legal age and sound mind who is recognized by law as being able to contract with others.
102
terminology:
1. morbidity
2. morbitidy risk
3. mortalikty
4. mortality risk
1. prevelance of disease or disability within a population
2. risk of a particular individual contracting a disease, or other disabling condition at any given time when . compared to others of the same age/sex
3. number of deaths that occur at any given time, in a given group or from a given cause
4. the risk of a particular individual dying, at any given time, compared to other individuals of the same sex and age.
103
terminology: motivation
for the purpose of disability insurance can be defined as the desire of the individual to work. some factors influencing an individuals motivation to work can include their work ethic, type of occupation, persona situation, work environment and income level.
104
terminology: non- cancelable
a policy type in which as long as premiums are paid on time, the company cannot cancel the policy, increase premiums add restrictive riders and change the policy provision.
105
What is office overhead expense insurance?
type of disability business insurance where the monthly benefit payable is contigent on the covered business expences incyrred by the b usiness during each month of disability.
106
Terminology: unearned income
income that would continue in the event of an insured's inability to work such as income from investments, alimony, rental income, royalties, pension income, trust income and capital gains
107
Terminology: viatication
purchasing insurance policies for cash from terminally ill policy holders
108
Terminology: waiting perdio
the amount of time that must elapse between the onset of a disability or loss of the ability to perform two or more activities of DAL, and when the proceeds of the policy become payable.
