Disability Income and Related Insurance (CH 8) Flashcards
Accidental Means
The unexpected cause of an accidental bodily injury. under an accidental means definition, the mishap itself must be accidental. If a person does something to contribute to the accident, the claim would not be paid under this restrictive definition.
AD &D
Accidental Death and Dismemberment
Cash Surrender Value
The value reposing in a policy that is the legal property of the policy owner and that may be expected should the policy be surrendered for cash. Synonymous with cash value.
Disability Income Insurance
A form of Health Insurance that provides periodic payments to replace income, actually or presumptively lost, when the insured is unable to work as a result of sickness or injury.
Guaranteed Renewable
A contract that gives the insured continued coverage in return for the timely payment of premiums for a substantial period of time. During that period of time the insurer has no right to make any change in any provision of the contract other than a change in the premium rate for all insureds in the same class.
Indemnity
Insurance is designed to restore the policy owner to the same financial condition enjoyed prior to a loss. The intent is to cover the amount of the actual loss only; the insured should not profit from a loss situation.
Key Employee (Person) Disability Insurance
Insurance designed to protect a business against financial loss in the event that a specified important employee became disabled.
Long-Term Disability
A disability having duration longer than a short-term disability, which generally pays benefits from 13 weeks, 6 months, or 2 years. A 5 year payout would be called long term.
Non-cancelable
A contract of Health Insurance that the insured has a right to continue in force by payment of premiums, as set forth in the contract, for a substantial period of time, and the insurer has no right to change.
Non-occupational Clause
A Health policy that covers off-the job accident and sickness.
Partial Disability
A condition in which, as a result of injury or sickness, the insured cannot perform all of the duties of his occupation. Partial disability follows a period of total disability.
Permanent and Total Disability
Total disability from which the insured does not recover. When used as a definition of disability in a policy, permanent is presumed after a stated period of time.
Presumptive Disability
A disability involving loss of sight, hearing, speech, or any two limbs, which is presumed to be a permanent and total disability. The insured is not required to have periodic medical examinations to prove continuing disability.
Reducing Term Policy
Pays long-term fixed monthly business obligations by providing a specific amount of coverage each month if the insured suffers long term disability.
Relationship to Earnings
The connection between earnings and some other construct. In the case of DI insurance, the relationship is that as earnings increase, the DI coverage should also be increased. However, coverage should never be increased disproportionately to earnings.
Short-Term Disability (STD) Insurance
A type of insurance coverage that provides net income continuation for up to six months for any employee disabled by illness or accidental in a non-job situation.
Waiting Period
A period of time between the beginning of a disability and the date benefits begin.
Also known as the Elimination Period.
Disability policy exclusions
- injuries or illness resulting from work related injury
- act of war
- participation in a riot or insurrection
- drug addiction or alcoholism
- during the act of committing a felony or conviction for a felony
- an act of fraud or misrepresentation involving a disability
- not consulting a licensed practitioner for necessary treatment
ERISA
Employee Retirement Income Security Act
What policy rider allows the future purchase of insurance without evidence of insurability based on attained age when written?
Future increase option rider.
Which rider would pay the difference between the monthly benefit amount of the policy and any monthly benefit payable by Social Security or Workers Compensation?
Social Insurance Supplement Rider.
The Social Insurance Supplement Rider (SIS) will pay the monthly benefit selected LESS any monthly amount received from Social Security or Workers Comp.
Which of the following would provide benefits during the first year to supplement government or employment short term disability payments?
Additional Monthly Benefit Rider.
The Additional Monthly Benefit Rider (AMB) will pay additional benefits in the first year of a disability to supplement an employer disability plan that may be short term or government benefits that are low.
A plan that provides payment to a corporation for the disability of a principal stockholder after one year and is paid to the corporation so that it can purchase the stock of the disabled principal is
disability buy/sell insurance.
The disability buyout policy is designed with a relatively long elimination period to give the disabled owner an opportunity to recover. Most companies offer 12-, 18-, or 24-month elimination periods. The benefit is usually paid in a lump sum, so the non-disabled owners can buy out the disabled owner and end the relationship as easily as possible.
The own occupation definition of a total disability means you cannot perform any duties
of your own job for 2 years.
Own occupation means you cannot do any of the duties of your own job for at least 2 years. The other choices define the “any occupation” definition.
Which determines the amount of benefits you are entitled to under OASDI?
PIA.
Under FICA (Federal Insurance Contribution Act), our retirement benefits, survivor benefits, and disability income benefits from Social Security are all based on the PIA, which is your primary insurance amount. The PIA is what you would receive for your retirement benefit based on your AIME (average indexed monthly earnings) at your FRA (full retirement age), which is based on your date of birth and is currently increasing from the former full retirement age of 65 to 67.
Residual Disability Benefits
based on loss of earnings.The loss of earnings may be caused by the fact the insured is not able to work full-time, or may work full-time but is not be able to perform all normal job duties, or the insured may work full-time, but still suffer a loss of income due to her disability. Most companies pay residual benefits for a loss of earnings between 20% - 80%. Below 20%, the company will consider the insured totally disabled and pay 100% of the benefit; above 80%, the company considers the insured fully recovered and pays nothing. If the insured continues to suffer a loss of earnings, residual benefits may be paid for the policy’s benefit period.
What statement is true concerning waiver of premium on an accident and health contract?
waiting period is typically 90 days.
Under the waiver of premium provision of a disability income policy, when does the insured resume paying premiums?
When the insured returns to work and is no longer disabled.
Which of the following best follows the Social Security definition of a total disability?
Unable to perform any substantial gainful work and the disability will last for 1 year or result in an early death.
