Disability Income Insurance & LTC

Question 1

Three primary definitions of disability used in underwriting

Answer 1

• Own occupation
• modified any (or own) occupation
• any occupation

Question 2

Social Security definition of disability

Answer 2

• commonly known as the inability to work in “any substantial gainful activity”
• this is the most restrictive definition
• qualifying to receive social security disability is not easy

Question 3

Own Occupation

Answer 3

• the most generous definition of disability
• the insured is eligible if he or she cannot work in his or her own occupation at the time of the onset of the disability
• makes no difference if they are making more money in another occupation, as long as they are unable to work in their previous occupation.

Question 4

Modified Any Occupation

Answer 4

-states that the insured cannot work his or her own occupation or any occupation for which he or she is suited by education, training, or experience

Question 5

Any Occupation

Answer 5

-states that the insured will receive benefits if they cannot work in their own occupation or any other occupation

Question 6

Elimination Period

Answer 6

• equivalent to a deductible in other types of insurance coverage
• it is the number of days or months following the onset of a disability that must pass before any benefits will be paid
• longer the elimination period, the lower the premium

Question 7

Disability Benefit Amount

Answer 7

• it is generally a fixed amount that is determined when the application for the policy is submitted.
• usually based on the income of the applicant at the time
• riders can be added to increase the amount paid.

Question 8

Guaranteed Renewable

Answer 8

-the right to renew the policy is guaranteed, but the insurance company is permitted to increase the policy premiums if they do so for all insureds of the same underwriting class.

Question 9

noncancellable

Answer 9

• the insurance company guarantees the renewal of the disability income policy for a stated period without an increase in future premiums.
• premiums are higher than a guaranteed renewable plan

Question 10

Conditionally renewable

Answer 10

• the policy cannot be cancelled during the policy term, but the company may refuse to renew the policy for a subsequent term, if for example the insured’s health declines.
• premium is less than the other two options.

Question 11

Are premiums deductible?

Answer 11

premiums paid for disability insurance are not deductible.

Question 12

Income Tax Considerations of Group Disability Insurance

Answer 12

-employer paid premiums are deductible to the employer
-if employer pays premiums, benefits are taxable to the beneficiary
-

Question 13

Activities of Daily Living (ADLs)

Answer 13

• dressing
• transferring
• toileting
• eating
• bathing
• and/or maintaining continence

Question 14

Maximum deductions for LTC premiums

Answer 14

• Age 40 or less - $410
• Ages 41-50 - $770
• Ages 51-60 - $1,530
• Ages 61-72 - $4,090
• Older than 70 - $5,110

Question 15

7 basic types of coverage afforded for LTC policies

Answer 15

• Skilled Nursing Care
• Intermediate Nursing Care
• Home Health Care
• Custodial Care
• Assisted Living
• Adult Day Care
• Hospice Care

Question 16

Alternatives to LTC Insurance

Answer 16

• self funding
• attempt to qualify for medicaid assistance
• accessing an accelerated benefits rider purchased with respect to an existing life insurance policy
• engage in a viatical settlement