Disability Income and Related Insurance Flashcards
Benefit Period
a period of time during which benefits are paid under the policy
Capital Sum
a portion of the principal sum of a health insurance policy; paid for accidental dismemberment or loss of sight in one eye
Earned Income
salary, wages, or commissions; but not income from investments, unemployment benefits, and similar sources of income
Overinsurance
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
Principal Sum
the amount of coverage paid for an accidental death under a health insurance policy
Tax Deductible
a qualified expense that may reduce the amount of income subject to taxation
Total Disability
inability of the insured to perform any occupation for which he or she is reasonably suited by reason of education, training or experience
Taxable
subject to taxation
Waiver
Relinquishment of a right or interest
Disability Insurance Triggers
- Total Disability
- Partial Disability
- Residual Disability
- Presumptive Disability
- Recurrent Disability
- Permanent Disability
- Loss of Income
2 Definitions of Total Disability
- Own occupation
- Any occupation
Any Occupation
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
Own Occupation
more liberal definition; defines total disability as the “inability to perform duties of one’s own occupation”
Partial Disability
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.
Residual Disability
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
Presumptive Disability
a provision found in most disability income policies which specifies the conditions that will automatically qualify the insured for full disability benefits
Recurrent Disability
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.
Permanent Disability
a mental or physical illness or a condition that affects a major life function long term
Loss of Income
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
Elements of a Total Disability Plan
- Income Benefits (monthly indemnity)
- Elimination and Benefit Periods
- Injury vs. Sickness
- Hospital Confinement Benefit (HCB)
- Continuing Coverage after Age 65
- Probationary Period
- Waiver of Premium Feature
Elimiination Period
a waiting period that is imposed on the insured from the onset of disability until benefit payments commence
Benefit Period
the length of time over which the monthly disability benefit payments will last for each disability after the elimination period has been satisfied
Injury
defined using either the accidental bodily injury definition, or the accidental means definition
Accidental Bodily Injury
means the damage to the body is unexpected and unintended
Accidental Means
indicated that the cause of the accident must be unexpected and unintended
Sickness
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
Probationary Period
another type of waiting period that is imposed under some disability income policies
Provisions Affecting Income Benefits
- Cost of Living Adjustment (COLA) Rider
- Future Increase Option (FIO) Rider
- Change of Occupation
Cost of Living Adjustment (COLA) Rider
will help protect against inflation; insured monthly benefit will be increased automatically, once claim payments have begun.
Future Increase Option (FIO) Rider
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
Change of Occupation Rider
provides for a benefit or premium reduction if the insured changes his/her occupation
Accidental Death and Dismemberment
a rider which pays for accidental losses only, and is thus considered a pure form of accident insurance
Rehabilitation Benefit
will cover a portion of the cost for the insured to enroll in a formal retraining program that will help them return to work
Medical Reimbursement Benefit (Nondisabling Injury)
benefit provides for the payment of medical expenses incurred due to an accidental bodily injury when the insured is not disabled.
Refund Provisions
- Return of Premium
- Cash Surrender Value
Unique Aspects of Individual Disability Income Underwriting
- Occupational Considerations
- Benefit Limits
- Policy Issuance Alternatives
Disability income disability benefits vary by company, but basic principles apply to all:
- The benefit must be large enough to allow the insured to maintain a lifestyle similar to that prior to the disability
- The benefit may not exceed the amount earned by the insured prior to the disability
Difference between Group disability income and individual disability income plans
Group plans - usually specify the benefits based on a percentage of the worker’s income
Individual policies - usually specify a flat amount
Difference between Short-term group plans and individual short-term plans
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.
Group long-term disability income plans provide
maximum benefit periods of more than 2 years, with monthly benefits usually limited to 60% of the individual’s income
Minimum participation requirements in Group disability income plans
usually must have worked for 30-90 days before becoming eligible for coverage
Social Insurance Supplement (SIS) rider
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.
Social Insurance Supplement (SIS) riders are
used to supplement or replace benefits that might be payable under Social Security Disability
Health/disability insurance written on an occupational coverage provides
benefits for illness, injury, or disability resulting from accidents or sickness that occur n or off the job
Health/disability insurance written on an nonoccupational coverage provides
only covers claims that result from accidents or sickness occurring off the job
A buy-sell agreement
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
Business overhead expense (BOE) insurance policies
sold to small business owners who must continue to meet overhead expenses following a disability
Social Security definition of Disability is
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
