Disability Income and Related Insurance

Question 1

Benefit Period

Answer 1

a period of time during which benefits are paid under the policy

Question 2

Capital Sum

Answer 2

a portion of the principal sum of a health insurance policy; paid for accidental dismemberment or loss of sight in one eye

Question 3

Earned Income

Answer 3

salary, wages, or commissions; but not income from investments, unemployment benefits, and similar sources of income

Question 4

Overinsurance

Answer 4

insurance that exceeds in amount the actual value of the person or property insured or insurance in a greater amount than the insured can afford

Question 5

Principal Sum

Answer 5

the amount of coverage paid for an accidental death under a health insurance policy

Question 6

Tax Deductible

Answer 6

a qualified expense that may reduce the amount of income subject to taxation

Question 7

Total Disability

Answer 7

inability of the insured to perform any occupation for which he or she is reasonably suited by reason of education, training or experience

Question 8

Taxable

Answer 8

subject to taxation

Question 9

Waiver

Answer 9

Relinquishment of a right or interest

Question 10

Disability Insurance Triggers

Answer 10

1. Total Disability
2. Partial Disability
3. Residual Disability
4. Presumptive Disability
5. Recurrent Disability
6. Permanent Disability
7. Loss of Income

Question 11

2 Definitions of Total Disability

Answer 11

1. Own occupation
2. Any occupation

Question 12

Any Occupation

Answer 12

relatively strict definition; requires the insured to be unable to perform any occupation for which the insured is reasonably suited by reason of education, training or experience

Question 13

Own Occupation

Answer 13

more liberal definition; defines total disability as the “inability to perform duties of one’s own occupation”

Question 14

Partial Disability

Answer 14

the inability to perform one or more of the regular duties of one’s own occupation or the inability to work on a full-time basis, which results in a decrease int he individual’s income.

Question 15

Residual Disability

Answer 15

type of disability income policy that provides benefits for loss of income when a person returns to work after a total disability, but us still not able to work as long or at the same level he/she worked before becoming disabled

Question 16

Presumptive Disability

Answer 16

a provision found in most disability income policies which specifies the conditions that will automatically qualify the insured for full disability benefits

Question 17

Recurrent Disability

Answer 17

is generally expressed in a policy provision that specifies the period of time (3-6 months) during which the recurrence of an injury or illness will be considered as a continuation of a prior period of disability.

Question 18

Permanent Disability

Answer 18

a mental or physical illness or a condition that affects a major life function long term

Question 19

Loss of Income

Answer 19

policies which replace a certain percentage of the insured’s income lost due to a covered accident or sickness, without first requiring a period of total disability

Question 20

Elements of a Total Disability Plan

Answer 20

1. Income Benefits (monthly indemnity)
2. Elimination and Benefit Periods
3. Injury vs. Sickness
4. Hospital Confinement Benefit (HCB)
5. Continuing Coverage after Age 65
6. Probationary Period
7. Waiver of Premium Feature

Question 21

Elimiination Period

Answer 21

a waiting period that is imposed on the insured from the onset of disability until benefit payments commence

Question 22

Benefit Period

Answer 22

the length of time over which the monthly disability benefit payments will last for each disability after the elimination period has been satisfied

Question 23

Injury

Answer 23

defined using either the accidental bodily injury definition, or the accidental means definition

Question 24

Accidental Bodily Injury

Answer 24

means the damage to the body is unexpected and unintended

Question 25

Accidental Means

Answer 25

indicated that the cause of the accident must be unexpected and unintended

Question 26

Sickness

Answer 26

or illness is defined as either a sickness or disease contracted after the policy has been in force at least 30 days; or a sickness or disease that first manifests itself after the policy is in force

Question 27

Probationary Period

Answer 27

another type of waiting period that is imposed under some disability income policies

Question 28

Provisions Affecting Income Benefits

Answer 28

1. Cost of Living Adjustment (COLA) Rider
2. Future Increase Option (FIO) Rider
3. Change of Occupation

Question 29

Cost of Living Adjustment (COLA) Rider

Answer 29

will help protect against inflation; insured monthly benefit will be increased automatically, once claim payments have begun.

Question 30

Future Increase Option (FIO) Rider

Answer 30

Guaranteed Insurability Rider; allows an insured to increase the benefit level to a specific predetermined amount at certain times or on certain occasions without proof of insurability

Question 31

Change of Occupation Rider

Answer 31

provides for a benefit or premium reduction if the insured changes his/her occupation

Question 32

Accidental Death and Dismemberment

Answer 32

a rider which pays for accidental losses only, and is thus considered a pure form of accident insurance

Question 33

Rehabilitation Benefit

Answer 33

will cover a portion of the cost for the insured to enroll in a formal retraining program that will help them return to work

Question 34

Medical Reimbursement Benefit (Nondisabling Injury)

Answer 34

benefit provides for the payment of medical expenses incurred due to an accidental bodily injury when the insured is not disabled.

Question 35

Refund Provisions

Answer 35

1. Return of Premium
2. Cash Surrender Value

Question 36

Unique Aspects of Individual Disability Income Underwriting

Answer 36

1. Occupational Considerations
2. Benefit Limits
3. Policy Issuance Alternatives

Question 37

Disability income disability benefits vary by company, but basic principles apply to all:

Answer 37

1. The benefit must be large enough to allow the insured to maintain a lifestyle similar to that prior to the disability
2. The benefit may not exceed the amount earned by the insured prior to the disability

Question 38

Difference between Group disability income and individual disability income plans

Answer 38

Group plans - usually specify the benefits based on a percentage of the worker’s income
Individual policies - usually specify a flat amount

Question 39

Difference between Short-term group plans and individual short-term plans

Answer 39

Short-term group plans - usually provide max benefit periods of 13-52 weeks (usually 26 weeks) with weekly benefits of 50-100% of the individuals income
Individual short-term plans - have max benefit period of 6 months to 2 years.
Short term plans are not renewable.

Question 40

Group long-term disability income plans provide

Answer 40

maximum benefit periods of more than 2 years, with monthly benefits usually limited to 60% of the individual’s income

Question 41

Minimum participation requirements in Group disability income plans

Answer 41

usually must have worked for 30-90 days before becoming eligible for coverage

Question 42

Social Insurance Supplement (SIS) rider

Answer 42

will pay a benefit in the approximate amount that Social Security would pay, but if Social Security pays, the SIS benefit is reduced dollar for dollar.

Question 43

Social Insurance Supplement (SIS) riders are

Answer 43

used to supplement or replace benefits that might be payable under Social Security Disability

Question 44

Health/disability insurance written on an occupational coverage provides

Answer 44

benefits for illness, injury, or disability resulting from accidents or sickness that occur n or off the job

Question 45

Health/disability insurance written on an nonoccupational coverage provides

Answer 45

only covers claims that result from accidents or sickness occurring off the job

Question 46

A buy-sell agreement

Answer 46

is a legal agreement prepared by an attorney; specifies how the business will pass between owners when one of the owners dies or becomes disabled

Question 47

Business overhead expense (BOE) insurance policies

Answer 47

sold to small business owners who must continue to meet overhead expenses following a disability

Question 48

Social Security definition of Disability is

Answer 48

defined as the inability to engage in any substantially gainful activity by reason of a medically determinable physical or mental impairment that has lasted or is expected to last 12 months or result in an early death