Disability Income Insurance

Question 1

Work can be categorized as:

Answer 1

-one’s own occupation
-any occupation

Question 2

Under the own occupation definition, disability is defined as:

Answer 2

An insured’s inability to perform any or all of the duties of their occupation at the time the disability begins

Question 3

Under the any occupation definition, an insured is disabled if:

Answer 3

They are unable to perform the duties of any occupation for which they are reasonably qualified by education, training, or experience

Question 4

Pays a benefit if the insured experiences a loss of income as a result of suffering a covered illness or injury. The benefit trigger is the amount the insured is receiving at the time of the claim

Answer 4

Income replacement contract

Question 5

_________ ___________ is a condition that automatically qualifies insureds for disability benefits whether or not they can work

Answer 5

Presumptive disability

Question 6

Conditions generally considered to be presumptive disabilities include:

Answer 6

-loss of or loss of use of any 2 limbs
-total and permanent blindness in both eyes
-total loss of speech
-total loss of hearing in both ears

Question 7

The loss of earning test

Answer 7

The insured’s level of earnings before disability is compared to the level of earnings after disability. If post-disability earnings fall below pre-disability earnings by a given percentage, the insured is considered totally disabled and eligible for a full benefit even if he or she is earning some income

Question 8

Medically defined disability

Answer 8

-physician care requirement
-some older policies required that the insured be confined to the house and under treatment of a doctor

Question 9

Disability income plans pay a monthly amount to make up for lost earnings. The benefit is referred to as an __________-it returns the insured to to their original financial condition before the loss

Answer 9

Indemnity

Question 10

Th time the insured must be disabled before benefits begin

Answer 10

Elimination or waiting period. “Time deductible”

Question 11

Waiver of premium

Answer 11

-eliminates the need to pay premiums during any period of disability
-becomes effective after the waiting period is satisfied
-refunds any premiums paid during the waiting period (usually 90 days)

Question 12

Additional monthly benefit rider

Answer 12

-pays an additional benefit during first 6-12 months
-pays even if the insured receives government benefits

Question 13

Social insurance supplement (SIS) rider

Answer 13

-pays when social benefits are not being paid
-makes up the difference between the government benefit and the amount of the rider
-pays only during the policy benefit period

Question 14

The partial disability benefit is __% of the total disability benefit

Answer 14

50

Question 15

Partial disability benefits are usually no longer than:

Answer 15

3-6 months

Question 16

Residual disability

Answer 16

-paid whether insured is able to work full or part time
-benefit based on reduction of income
-pays as long as the reduction in income continues

Question 17

Recurrent disability

Answer 17

-condition recurs after returning to work
-doesn’t have to wait to start receiving benefits
-conditions must recur within a certain time frame after returning to work

Question 18

Typically, cost-of-living adjustments are made every ___ months for as long as the insured receives disability benefits

Answer 18

12

Question 19

Future Increase Option (FIO) Rider

Answer 19

-allows insured to increase policy benefits
-no evidence of insurability required
-the insured’s income must have increased

Question 20

Relation of earnings to insurance provision

Answer 20

-allows insurer to change policy benefit if insured’s income has decreased
-portion of the premium will be refunded

Question 21

Pays for vocational training to prepare insureds for a new occupation when they are totally disabled and unable to return to their normal occupation

Answer 21

Rehabilitation benefit

Question 22

Return of premium rider

Answer 22

Provides for the return of a percentage of premiums paid (usually 80%) for a stated time period (usually every 10 years). The amount of any benefits paid during that period is subtracted from the refund amount

Question 23

The common exclusions for disability income policies are:

Answer 23

-war or military service
-attempted suicide and other self-inflicted injury
-non-commercial aviation
-commission of a felony
-living overseas

Question 24

Short term disability: ___ to ___ months

Answer 24

6; 24

Question 25

Long term disability: ___ years to age ___

Answer 25

2; 65

Question 26

The purpose of a Business Overhead Expense policy is to:

Answer 26

Cover certain overhead expenses that continue when the business owner is disabled

Question 27

Business uses of disability insurance

Answer 27

-key person
-business overhead expense
-disability buy sell

Question 28

Currently insured status with Social Security disability benefits

Answer 28

Someone must have paid Social Security Payroll (FICA) taxes to earn at least 6 credits during the last 13 quarters

Question 29

Fully insured social security disability benefit status

Answer 29

Achieved when someone has paid into social security for 10 years, earning 40 credits

Question 30

Social security disability waiting period

Answer 30

5 months

Question 31

Social security’s definition of totally and permanently disabled:

Answer 31

-the person is unable to perform the duties of any occupation
-the disability is expected to last at least 12 months or end in death or total blindness

Question 32

Worker’s compensation benefits cover:

Answer 32

-medical treatment
-rehabilitation
-income lost due to disability
-income lost due to death