Disability Study Deck Flashcards by Jamar Blackman

A disability buy-out agreement should be drawn up by:

a. the business owners themselves.
b. an attorney familiar with disability buy-sell agreements
c. the business owners and their families coordinated by the insurance advisor
d. Correct answer is B
e. the insurance advisor using a company prototype

b. an attorney familiar with disability buy-sell agreements

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A disabled person returns to work. Four months later the same illness makes her unable to work again. This is known as a:

a. contingent disability
b. concurrent disability
c. presumed disability
d. recurrent disability

d. recurrent disability

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According to the text, the best way to sell disability income insurance is to stress:

a. the strength of the company
b. the features of the policy
c. efficiency of the claims process
d. the needs of the prospect

d. the needs of the prospect

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An advantage of funding a salary continuation plan with disability income insurance is that it:

a. does not have to meet ERISA reporting requirements
b. assures that funds will be available when needed
c. provides the employee with benefits free of income taxation
d. will be approved automatically by the Department of Labor

b. assures that funds will be available when needed

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An advisor’s chief connection to the home office underwriting department is:

a. the Attending Physician’s Statement
b. a formal cover letter
c. copies of the applicant’s tax forms
d. the application

d. the application

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As an advisor,

a. you have a responsibility to get the desired insurance issued for your clients
b. you become a professional by following your company’s rules
c. you only to report facts that you deem relevant to your company’s underwriters
d. you have a clear, contractual responsibility to the company you represent.

d. you have a clear, contractual responsibility to the company you represent.

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An Attending Physician’s Statement (APS):

a. is provided by the applicant
b. is required for every disability application
c. verifies an applicant’s medical information
d. provides a second opinion on the nature of a disability

c. verifies an applicant’s medical information

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An occupation classification that may be uninsurable for disability coverage is:

a. attorney
b. computer network administrator
c. orthopedic surgeon
d. air traffic controller

d. air traffic controller

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Benefits under Workers Compensation plans:

a. cover only work-related accidents
b. vary widely from state to state
c. are available in only a few states
d. vary widely from state to state
e. cover all illnesses and injuries
f. vary widely from state to state

unknown

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Disability income insurance is appropriate coverage:

a. only for professional people with high income
b. for all people who depend on earned income
c. for people with no health problems, but not for others
d. only for people who already have sufficient life insurance since death is a greater threat

b. for all people who depend on earned income

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Earned income for sole proprietors is defined as:

a. salary
b. gross revenue minus normal business expenses
c. gross earnings
d. salary plus bonuses and commissions

b. gross revenue minus normal business expenses

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Generally, if an applicant pays the first premium at the time of application, he or she will be:

a. fully covered immediately
b. fully covered if he or she is eligible for coverage on the date the premium was paid
c. not covered until the policy is delivered
d. fully covered as soon as underwriting is completed and the policy is issued

b.fully covered if he or she is eligible for coverage on the date the premium was paid

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Generally, if policy provisions are in conflict with the laws of the state where the insured resides, the:

a. policy provisions will be honored
b. policy is automatically amended to conform to the law’s minimum provision
c. insured will have to sue to receive benefits
d. policy is null and void

b. policy is automatically amended to conform to the law’s minimum provision

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In a presumptive disability, benefits are paid:

a. only as long as the insured is under a doctor’s care
b. for the length of the benefit period in the basic policy
c. until the insured returns to work
d. until the insured returns to work in his or her regular occupation

b. for the length of the benefit period in the basic policy

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When an individual D. I. insurance premium that insures an employee and is owned by that employee and the payment is split between the employer and the employee

a. the entire benefit is subject to income taxation
b. the benefit attributed to the employee-paid premium is received income tax free
c. the entire benefit is received income tax free
d. only the benefit attributed to the employer is received free of income tax

b. the benefit attributed to the employee-paid premium is received income tax free

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In most group LTD policies, overtime pay and occasional bonuses are:

a. covered by the benefit amount
b. excluded from a computation of benefits
c. paid by the employer in addition to any benefits received
d. covered by a special overtime rider

b. excluded from a computation of benefits

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In regard to sick pay plans, ad hoc plans:

a. are not tax deductible to the employer and are taxable to the employee
b. can only make payments for 30 days
c. apply only to highly compensated employees
d. must apply to all employees.

a. are not tax deductible to the employer and are taxable to the employee

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In underwriting an application, if a person owns a rental property managed by a realty company, the income from that property will be:

a. treated as earned income
b. treated as unearned income
c. ignored
d. added to earned income

b. treated as unearned income

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In underwriting disability income coverage, employment stability is:

a. a minor factor since people change jobs frequently
b. a vital factor in issuing the policy
c. less important than in life insurance underwriting
d. a factor of the occupational classification system

b. a vital factor in issuing the policy

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In which of the following types of disability coverage can the scheduled premium not be changed?

a. Annually renewable policies.
b. Guaranteed renewable policies.
c. Noncancelable policies.
d. Provisionally renewable policies.

c. Noncancelable policies.

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Information about other disability insurance coverage is important in the underwriting process to:

a. replace existing coverage
b. identify potential group sales
c. avoid overinsurance
d. determine insurability

c. avoid overinsurance

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A conversion to long-term care insurance coverage option in an individual D. I. insurance policy

a. allows the insured to convert the D. I. insurance coverage at any age
b. does not require the insured to furnish evidence of insurability to the insurance company
c. allows the insured to convert the policy on an original-age basis
d. allows for less limited benefits than are typically found in most stand-alone long-term care insurance policies

b. does not require the insured to furnish evidence of insurability to the insurance company

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Notice of a disability income claim must be submitted to the insurer

a. only in writing
b. typically within 20 days after the occurrence
c. through an attorney
d. to the advisor

b. typically within 20 days after the occurrence

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Pre-existing conditions that are disclosed on the application:

a. will automatically be excluded from coverage
b. cannot be excluded from coverage
c. are often covered after 24 months
d. will automatically lead to an increase in premium

c. are often covered after 24 months

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25. Premiums paid for disability income insurance for a sole proprietor: a. are deductible as a business expense but benefits are subject to income taxation b. are deductible as a business expense and benefits are received free of income tax c. are not tax deductible but benefits are received free of income tax d. are not tax deductible and benefits are subject to income taxation

c. are not tax deductible but benefits are received free of income tax

26. Premiums for a business overhead expense policy are: a. tax deductible only once a disability has occurred b. deductible as a business expense c. not deductible as a business expense d. taxed as ordinary income to the business owner

b. deductible as a business expense

27. Premiums for individually owned disability insurance are: a. income tax deductible, but the benefits are received income tax free b. not income tax deductible, but the benefits are received income tax free c. not income tax deductible and the benefits are taxable d. income tax deductible and the benefits are taxable

b. not income tax deductible, but the benefits are received income tax free

28. Social Security's definition of disability: a. is the same as most group policies b. changes if an individual is covered by a personally owned policy c. is very restrictive making it difficult to qualify for benefits d. is relatively liberal to make benefits available to the largest number of people

c. is very restrictive making it difficult to qualify for benefits

29. The amount of available insurable income from D. I. insurance equals a. earned income plus unearned income b. earned income only c. earned income minus payroll taxes minus unearned income d. unearned income only

c. earned income minus payroll taxes minus unearned income

30. The cost of an executive bonus plan to the executive is: a. the cost of income and Social Security taxes on the bonus paid for premiums b. the cost of processing the application c. nothing since the premium payments are withheld from salary on a pre-tax basis d. 50% of the premium cost

a. the cost of income and Social Security taxes on the bonus paid for premiums

31. The initiation of a buy-out of a disabled owner's interest in a business within an insured disability buy-out plan is made by: a. a court referee if the owners cannot agree b. by the disabled owner when he or she decides not to return to the business c. by the healthy owners based on the business's needs d. at the expiration of the elimination period specified in the disability buyout insurance policy used for funding the agreement

d. at the expiration of the elimination period specified in the disability buyout insurance policy used for funding the agreement

32. The definition of disability used in most D. I. insurance policies: a. is consistent with Social Security's definition of disability b. is established by the individual states c. is defined by the Disability Board of Examiners d. varies from company to company

d. varies from company to company

33. The elimination period of an individually owned policy is: a. elected by the prospect to meet his or her individual needs b. always 90 days or less c. ignored in most policies if the disability is caused by an accident d. determined by the number of accrued sick days the insured has

a. elected by the prospect to meet his or her individual needs

34. The license required to sell disability income insurance is issued by: a. National Association of Insurance Commissioners (NAIC) b. National Health Insurance Association (NHIA) c. Social Security Administration d. the respective individual state insurance commissions

d. the respective individual state insurance commissions

35. The division of the MIB Group, Inc., that exchanges information between its members relevant to the underwriting of D. I. insurance applicants is identified with the initials: a. HOS b. AMA c. DIRS d. APS

c. DIRS

36. The value of a business for the purpose of a disability buyout agreement should be made: a. without regard to the assets owned or income generated by the business b. at the time of a claim c. before one of the owners becomes disabled d. when all the owners feel it is most appropriate

c. before one of the owners becomes disabled

37. The policy feature or rider that guarantees future insurability of a D. I. insured is the: a. automatic increase option b. return of premium rider c. future increase option d. cost-of-living rider

c. future increase option

38. The policy provision that reduces the insured amount by any amount received in Social Security benefits is the: a. all or nothing provision b. all, part, or nothing provision c. social insurance offset provision d. income reduction provision

c. social insurance offset provision

39. The purpose of an inspection report is to: a. verify applicant information b. underwrite E & O coverage c. check on the advisor's ethics d. approve the state insurance license

a. verify applicant information

40. The residual disability benefit: a. encourages the worker to return to work b. is unavailable of the worker returns part time c. pays partial benefits for presumptive disabilities d. encourages the worker to remain at home until fully recovered

a. encourages the worker to return to work

41. The shorter the benefit provided, the: a. the higher the premium for the policy b. less the amount of benefit available c. greater the amount of coverage available d. lower the premium for the policy

a. the higher the premium for the policy

42. The statistical probability of an individual becoming disabled is measured by the: a. mortality table b. probability table c. morbidity table d. disability incident table

c. morbidity table

43. To be qualified as tax-deductible, a salary continuation plan for selected employees must: a. be in place before the disability begins b. replace 60 % of lost income c. be offered on an ad hoc basis when the need arises d. be funded by insurance

a. be in place before the disability begins

44. In a key employee disability insurance policy, the key employee: a. is the owner b. is the premium payer c. receives the benefits d. is the insured

d. is the insured

45. To renew a noncancelable policy beyond age 65, generally the insured must: a. show evidence of insurability b. continue paying the premium with no other requirements c. be working at least 20 hours a week d. be working full-time

d. be working full-time

46. Exclusion riders or waivers are often used to allow favorable underwriting by excluding: a. self-inflicted injuries b. child birth c. a hazardous occupation d. pre-existing conditions

d. pre-existing conditions

47. When a disability buy-out plan is funded with disability buyout insurance, disability should be defined: a. in the written agreement b. by the disability buyout insurance policy c. in a legal hearing at the time of disability d. by the healthy owners when one becomes disabled

b. by the disability buyout insurance policy

48. When more high risk people buy insurance than low or average risk people, the insurance company experiences: a. adverse selection b. a mortality/morbidity ratio c. reverse selection d. inverse underwriting

a. adverse selection

49. Which of the following is a requirement for a qualified tax-deductible salary continuation plan under IRC Section 105? a. The plan must be in place before the disability begins b. The plan must be funded with group disability insurance c. Equal benefits must be offered to all employees d. The plan must be approved by the Social Security Administration

a. The plan must be in place before the disability begins

50. Which of the following statements is true regarding guaranteed renewable policies? a. Premiums may be changed on a case by case basis b. Premiums can be changed only for a class of policies with approval of the state c. Premiums cannot be changed d. Premiums cannot be changed as long as the insured meets underwriting standards

b. Premiums can be changed only for a class of policies with approval of the state

1. Disability income insurance was developed: (A) before the development of life insurance. (B) before the development of property and casualty insurance. (C) after both life and property and casualty insurance. (D) during the Great Depression of the 1930s.

The definition of "disability" is: a) standard in all products. b) one of the hardest insurance perils to define. c) subject to change according to each disability. d) changed every 3 years by the National Association of Insurance Commissioners.

b) one of the hardest insurance perils to define.

ln providing disability income coverage, an advisor should do which of the following? a) Offer it only to professional people who have the greatest need for it and have the highest ability to pay for it. b) Offer it only to prospects who are healthy and have the highest probability of qualifying for the coverage. c) Uncover the need for Dl insurance and attempt to sell an appropriate product that addresses that need. d) Offer it only to existing life clients, since they are the people most likely to qualify for it.

c) Uncover the need for Dl insurance and attempt to sell an appropriate product that addresses that need.

Which market would probably need disability income insurance? a) single people with no dependents b) single parents c) two-income families d) all of the above

d) all of the above

Disability income insurance and medical expense insurance are: a) often both needed in times of illness or injury. b) never sold to the same person since duplication of benefits would occur c) different names for the same kind of insurance coverage. d) both intended to provide income replacement if the insured is ill or injured

a) often both needed in times of illness or injury.

DI benefits payable under the partial disability benefit provision are a) based on 50 percent of the policy's total disability benefit b) proportional and based on a percentage of lost income c) unavailable if the insured is working part time d) payable for the 30-day period after the insured‘s return to work

a) based on 50 percent of the policy's total disability benefit

The social insurance supplement payment method that provides the insured with a proportionate payment of its face amount depending on what the insured receives from any SSA or other government benefits, and will pay the entire face amount of monthly DI benefits provided under the rider if the insured receives no DI benefits from any social insurance source is known as the a) dollar-for-dollar offset payment method b) primary payment method c) all-or-nothing payment method d) partial offset payment method

d) partial offset payment method

In determining the amount of monthly disability benefits available to an applicant, the primary focus of DI insurance‘s financial underwriting is a) earned income minus unearned income b) unearned income c) earned income d) earned income plus unearned income

c) earned income

For sole proprietors and general partners in a partnership, earned income is defined as a) the gross earnings of the business b) gross revenues minus his or her pro rata share of normal business operating expenses c) the maximum issue and participation limits available to business owners d) the proprietor's or partner's salary

b) gross revenues minus his or her pro rata share of normal business operating expenses

6. The period of time that an insured must be totally disabled before residual benefits are payable is known as the (A) elimination period (B) qualification period (C) waiting period (D) recovery period

(B) qualification period

``` 7. Which of the following statements regarding the income replacement ratio concept is (are) correct? ``` l. The respective percentage of maximum monthly indemnity that an insurance company will issue relative to the insured‘s net earned income is higher at the lower incomes. II. ‘The respective percentage of maximum monthly indemnity that an insurance company will issue relative to the insured's net earned income is lower at the higher incomes. (A) I only (B) Il only (C) Both l and ll (D) Neither l nor ll

8 All of the following are effective techniques for a reputation building strategy EXCEPT (A) Join a local organization that will have a positive impact on the community. (B) Educate key advisors such as attorneys and CPAs who work with your target markets. (C) Advertise in large metropolitan newspapers to reach a high volume of prospects. (D) Advertise on local radio stations on shows that appeal to your target market.

All of the following are examples of unearned income EXCEPT (A) rental income received by an owner who actively manages the property (B) alimony received by an ex-spouse as part of a divorce settlement (C) interest payments received by the owner of a money market account (D) dividend payments received by the owner of a mutual fund

(A) rental income received by an owner who actively manages the property

Each of the following is a component of an effective telephone approach strategy EXCEPT (A) Quote prices over the phone when it is necessary to make the sale. (B) Establish a system with clear expectations and a game plan for setting appointments. (C) Use a DI phone script that will enable you to project a confident phone personality. (D) Ask pre-qualification questions before the initial interview.

A) Quote prices over the phone when it is necessary to make the sale.

In which section of the DI fact-finder is the prospect's premium commitment obtained? a) the factual section b) the quantitative section c) the attitudinal section d) the feeling section

b) the quantitative section

If in the initial interview you discover that the prospect does not qualify for DI insurance, which of the following statements best describes what you should do? a) Exit the interview promptly before wasting any more of your time. b) Immediately call your company's underwriting department to verify your impression. c) Pivot to another product that may help to finance his or her DI or financial needs. d) Recommend that he or she apply for Social Security Disability Income benefits.

c) Pivot to another product that may help to finance his or her DI or financial needs.

Which of the following statements regarding the use of fact-finders in the initial interview is (are) correct? I. In a dominant need situation, you may preliminarily qualify the prospect using the Disability Income Resources Review form and the DI Prequalification Questionnaire, and then proceed to an abbreviated or modified DI fact-finder or company fact-finder. II. It is the advisor's professional and ethical responsibility always to complete every question in a comprehensive DI fact-finder during the initial interview in order to get a complete picture of the prospect's needs regardless of what they may want. a) I only b) ll only c) Both I and II d) Neither I nor II

a) I only

Which of the following statements regarding the risk of disability is/are correct? I. The average length of a disability for those disabled 3 months or more is more than 3 years II. Hypertension, heart disease, stroke, and diabetes are becoming less likely to cause death, and more likely to cause disability among Americans between ages 45 and 65. a) I only b) II only c) Both I and II d) Neither I nor II

c) Both I and II

Which of the following is (are) specific topics that should be addressed in the introductory phase of the initial interview? I. Establish an agenda II. Obtain referred leads a) I only b) ll only c) Both I and II d) Neither I nor II

a) I only

All the following are less-attractive potential alternative resources to DI insurance for financing a person's monthly expenses during disability EXCEPT a) personal financing alternatives b) Social Security disability income c) workers' compensation benefits d) personally owned DI policy

d) personally owned DI policy

During the "introducing yourself' to a new prospect segment of the initial interview, you should do all the following EXCEPT a) Assure the prospect that you stand behind the products you sell. b) Tout your sales achievements. c) Let Your Prospect know about your educational achievements. d) Describe the attributes of the company(ies) you represent

b) Tout your sales achievements.

All of the following are traits that an advisor should exhibit in the initial interview in order to communicate effectively with a prospect EXCEPT a) active listening b) empathy and trust c) authenticity d) lecturing

d) lecturing

All of the following are prospect social styles EXCEPT a) amiable b) consultative c) driver d) analytical

b) consultative

All of the following are objectives that should be accomplished by the advisor in the initial interview EXCEPT a) Establish rapport and credibility. b) Utilize effective communication techniques. c) Identify the prospect's qualifications, financial need, goals, and concerns. d) Begin establishing a relationship with the prospect and to make a sale.

d) Begin establishing a relationship with the prospect and to make a sale.

Which of the following statements regarding guaranteed renewable DI insurance policies is correct? a) The premium cannot be changed. b) Premiums may be changed unilaterally on an individual contract. c) Coverage is guaranteed to a specified age as long as premiums are paid. d) Coverage is guaranteed renewable as long as the insured is employed.

c) Coverage is guaranteed to a specified age as long as premiums are paid.

Which of the following statements regarding a noncancellable provision in a DI insurance policy is correct? a) Coverage cannot be cancelled by the insuring company if the premiums are paid. b) Premiums can be raised for a class of insureds. c) Coverage can be cancelled by the insurer only if a health problem arises. d) Benefits can be modified by the insurance company based on claims experience.

a) Coverage cannot be cancelled by the insuring company if the premiums are paid.

The effects of inflation are felt most strongly in which of the following DI insurance policies? a) policies with short-term benefits b) policies with benefits to age 65 or age 67 c) policies with a cost-effective endorsement d) group STD policies provided by employers

b) policies with benefits to age 65 or age 67

The future increase option rider found in some DI policies provides: a) a lengthened benefit period. b) a shorter elimination period. c) retroactive benefits for prior claims. d) guaranteed physical insurability.

d) guaranteed physical insurability

When a disabled person returns to work, then 4 months later becomes disabled due to the same illness or injury, this is defined as a (an) a) concurrent disability b) contingent disability c) recurrent disability d) incomplete disability

c) recurrent disability

If an insured's age is misstated on a DI insurance application, what amount of benefit will be payable to the insured? a) Fifty percent of the stated benefit amount b) The total benefit amount minus all premiums paid c) Nothing, because misstatement of age is considered material misconduct d) The benefit amount that would have been paid under a policy purchased by the same premium at the correct age

d) The benefit amount that would have been paid under a policy purchased by the same premium at the correct age

Which of the following statements regarding the insured's choice of benefit period in a DI policy is correct? a) The longer the benefit period chosen, the less select the risk. b) The longer the benefit period chosen, the more monthly coverage available. c) The longer the benefit period chosen, the lower the premium for coverage. d) The longer the benefit period chosen, the higher the premium for coverage.

d) The longer the benefit period chosen, the higher the premium for coverage.

Which of the following riders found in some DI policies typically pays a higher amount of monthly indemnity benefit during the first 12 months of a disability based upon the determination that the disabled person is unable to perform at least two of five or six activities of daily living (ADLs) as a result of accident or sickness? a) nursing facility confinement benefit b) catastrophic disability benefit c) transplant surgery benefit d) hospitalization benefits

b) catastrophic disability benefit

All the following are Optional Policy Provision in the Uniform Provisions Law found in DI policies EXCEPT a) change of occupation b) illegal operation c) grace periods d) unpaid premium

c) grace periods

An official notice of disability claim generally can be submitted to a DI insurer in all the following ways EXCEPT a) in some type of written form. b) by a notary public. c) over the telephone. d) online through the Internet.

b) by a notary public.

According to the text's discussion of using relevant features and benefits to present the DI insurance policy, which of the following statements correctly defines a benefit as used in this context? a) A benefit is a characteristic of a product. b) A benefit tells you what a particular aspect of a product is and what it does. c) A benefit is what the prospect gets as a result of a feature. d) A benefit is the amount payable to the insured.

c) A benefit is what the prospect gets as a result of a feature.

The objection, "It's too complicated/I just can't understand it," falls into which of the following general categories of objections? no need no money no hurry no confidence

no confidence

Examples of nonverbal buying signals include all the following EXCEPT a) leaning forward b) listening attentively c) speaking up and participating d) nodding, showing appreciation

c) speaking up and participating

All of the following are factors for insureds to consider when deciding between two competitors' DI insurance policies EXCEPT a) financial strength of the companies being considered b) respective cost of the policies being considered c) length of the free-look period offered by the policies d) potential rate stability of the policies being considered

c) length of the free-look period offered by the policies

``` Which of the following is an example of an occupation that may be uninsurable for DI insurance? surgeon air traffic controller computer technician electrician ```

air traffic controller

In DI insurance underwriting, a prospect's employment stability is a) a minor factor in evaluating eligibility for coverage b) less important than it is in life insurance c) determined by the Uniform Stability Scale d) a vital factor in evaluating eligibility for coverage

d) a vital factor in evaluating eligibility for coverage

Exclusion riders or waivers added to a DI insurance policy can be used by the DI insurance underwriter to exclude a potential loss from which of the following? a) a hazardous hobby b) accidental injuries c) self-inflicted injuries d) transplant surgery

a) a hazardous hobby

Which of the following is a technique that a DI insurance underwriter can use to modify coverage for an applicant who is a substandard risk? a) lengthen the elimination period b) shorten the benefit period c) reduce the benefit amount d) all of the above

d) all of the above

Questions on a DI application that involve asking a prospect about existing in-force DI coverage are important for which of the following reasons? a) to determine the applicant's insurability b) to determine if the applicant understands the need for disability c) to avoid overinsuring the applicant d) to find out what the competition is doing

c) to avoid overinsuring the applicant

Which of the following choices can be regarded as the chief connection in the partnership between the advisor and the underwriting department? a) the advisor's manager b) the telephone c) the underwriting manager d) the DI insurance application

d) the DI insurance application

All of the following are clauses found in a DI insurance policy that relate to the payment of DI claims EXCEPT a) payment of claims b) authorizations c) autopsy d) legal actions

c) autopsy

When completing the application, the advisor should do all of the following EXCEPT a) obtaining all the information requested, leaving no questions unanswered b) recording accurately all information provided by the applicant c) finish filling out the application after meeting with the applicant d) obtaining the necessary signatures from the applicant

c) finish filling out the application after meeting with the applicant

In order to conserve existing clients, advisors should attempt to do all the following EXCEPT a) exceed expectations b) be an expert speaker c) differentiate yourself d) reinforce relationships

b) be an expert speaker

All the following are objectives of the delivery interview EXCEPT a) reinforce the buying decision b) read the policy to the client c) build the advisor-client relationship d) develop other sales opportunities

b) read the policy to the client

Which of the following is an advantage of employer provided group long-term disability coverage? a) It usually meets the total disability needs of all employees. b) It allows owner-employees to insure up to 85 percent of their income. c) It provides some protection for people who might otherwise have none. d) It is portable and can follow the employee when he or she changes jobs.

c) It provides some protection for people who might otherwise have none.

Which of the following situations would cause disability income benefits to be subject to income taxation? a) when the premiums paid are not income tax deductible b) when the premiums are paid by employees through a voluntary payroll deduction plan c) when the premiums are paid exclusively by the employer in a group DI plan d) disability income benefits are never subject to income taxation

c) when the premiums are paid exclusively by the employer in a group DI plan

Which of the following statements regarding the inclusion of employees' overtime pay or occasional bonuses in determining group DI benefit amounts is correct? a) They are always factored into the calculation of long-term disability benefits. b) They covered separately by a bonus rider. c) They are usually not factored into the calculation of long-term disability benefits. d) They are sometimes paid instead of disability benefits.

c) They are usually not factored into the calculation of long-term disability benefits.

Which of the following statements regarding an executive bonus DI plan is correct? a) DI coverage must be offered to all employees. b) DI coverage can be offered only to the top 25 percent of the company's payroll. c) DI coverage can be offered only to stockholder-employees. d) DI coverage can be offered selectively.

d) DI coverage can be offered selectively.

Which of the following characteristics of voluntary payroll deduction (VPD) DI insurance is an advantage for the employees? a) The employer usually pays the premium. b) The insurance is guaranteed to be issued. c) The employee pays premiums directly to the insurance company. d) Its portability allows the employee to continue the coverage if he or she changes jobs.

d) Its portability allows the employee to continue the coverage if he or she changes jobs.

Which source for locating business DI prospects requires being approached with caution because many insurers are reluctant to insure them? a) businesses from lead generation databases b) businesses from various media sources c) businesses found in directories d) businesses that are newly established

d) businesses that are newly established

Which of the following statements regarding highly paid executives or owner-employees in a small corporation is (are) correct? I. They often require more DI benefits than a group plan can offer. II. They often require less flexible DI coverage than average wage-earning employees. a) I only b) II only c) Both I and II d) Neither I nor ll

a) I only

Which of the following statements regarding the establishment of an executive bonus DI plan is (are) correct? I. A formal resolution of the board of directors of the company is required. II. A written notification to the employee is required. a) I only b) II only c) Both I and II d) Neither I nor II

d) Neither I nor II

All of the following are legal requirements of an IRC Sec. 105 salary continuation plan EXCEPT a) The plan must be in effect before a disability begins. b) The plan benefits must be explained in writing in a corporate resolution or business memorandum. c) Equal benefits must be offered to all covered employees. d) ERISA requires that the plan be communicated to the employees in writing.

c) Equal benefits must be offered to all covered employees.

All the following statements regarding association DI insurance are correct EXCEPT a) This coverage is available to groups who have gathered with a common interest other than just obtaining insurance coverage. b) The insurance policy is generally issued to the insured individuals with coverage certificates issued to the association or organization. c) Underwriting is often done in a streamlined manner as compared to Individual coverage. d) Usually a brief medical questionnaire is all that is required. However, medical underwriting is required in some states.

b) The insurance policy is generally issued to the insured individuals with coverage certificates issued to the association or organization.

An insurance-funded disability buyout agreement benefits a) the disabled owner at the expense of the healthy owners b) the healthy owners at the expense of the disabled owner c) only a business organized as a corporation d) the disabled owner, the healthy owners, and the business itself

d) the disabled owner, the healthy owners, and the business itself

A disability buyout agreement should be drawn up by a) the financial advisor b) the business owners' attorney c) the business owners d) the business owners and the financial advisor

b) the business owners' attorney

An advisor's professional and ethical responsibility to prospects is to a) get the necessary coverage issued for his or her prospect b) help the prospect present medical information in the most favorable light c) help prospects determine and carry out the best solutions available to meet their financial needs d) keep information received from a prospect in confidence from the home office

c) help prospects determine and carry out the best solutions available to meet their financial needs

Disability benefits in a key employee disability policy are payable to a) the key employee b) the insured c) the business d) the key employee and the business jointly?

c) the business

A cross-purchase disability buyout agreement would be most practical to establish and be administered more easily when there are how many business owners involved? a) 3 owners or less. b) 6 owners or less. c) 8 owners or less. d) 12 owners or less.

a) 3 owners or less.

Which of the following business disability plans pays monthly indemnity benefits? I. key employee disability plans II. business overhead expense plans a) I only b) II only c) Both I and II d) Neither I nor II

a) I only

Which of the following statements regarding disability buyout insurance is (are) correct? I. The premiums paid for the policy are tax deductible by the business. II. The benefits received by the business owners are tax-free. a) I only b) II only c) Both I and II d) Neither I nor II

b) II only

Which of the following statements regarding the probability of disability occurring when there are multiple owners of the same business is (are) correct? I. The greater the number of owners, the higher the probability of disability. II. The older the owners' ages, the higher the probability of disability. a) I only b) II only c) Both I and II d) Neither I nor II

a) I only

All of the following concepts are addressed in a disability buyout agreement EXCEPT a) The agreement should specify who pays the premiums on the policy. b) The buyout agreement may also contain a provision to provide for salary continuation in the event of a disability. c) The agreement should contain a clause that gives the owners the option to execute the disability buyout or not do it. d) The buy-sell agreement specifies whether the purchase price is to be paid in a lump sum or in a series of installments.

c) The agreement should contain a clause that gives the owners the option to execute the disability buyout or not do it.

Business overhead expense insurance will reimburse the business owner for all of the following expenses EXCEPT a) utilities b) rent or mortgage interest c) the cost of adding supplies to inventory d) employee salaries, fringe benefits, and payroll taxes

c) the cost of adding supplies to inventory

Which of the following definitions of disability found in today's Dl insurance products is correct? a) often quite subjective b) the same in every policy c) relatively unimportant in determining coverage in case of a claim d) usually determined by the courts after a disability occurs

a) often quite subjective

An advisor's legal and ethical responsibility to the underwriting department of the Dl insurer he or she represents is to: a) get the necessary Dl coverage issued for his or her client. b) help the prospect present medical information in the most favorable light. c) draw out the material facts in as much detail as possible and present them fully. d) keep information received from a prospect in confidence from the home office.

c) draw out the material facts in as much detail as possible and present them fully.

If no initial premium is collected with an application, coverage is effective: a) the day all underwriting requirements are satisfied. b) when all medical requirements have been completed. c) when the policy is issued and the first premium collected. d) no later than 30 days after the application is signed.

c) when the policy is issued and the first premium collected.

In an insured salary continuation Dl plan between and an employer and an employee, which of the following statements is correct when each one pays a share of the premiums? a) The entire benefit is received free of income tax. b) The proportion of the benefit paid by the employer is subject to income taxation. c) The entire benefit is subject to income taxation. d) The proportion of the benefit paid by the employer is received free of income taxation.

b) The proportion of the benefit paid by the employer is subject to income taxation.

The administrative procedure through which an insurance company provides a single bill for a group of policies is known as: a) worksite marketing. b) list billing. c) payroll deduction. d) workplace invoicing.

b) list billing.

Which of the following statements regarding the Social Security definition of disability is (are) correct? I. It is modified in each case according to the individual circumstances. II. It is quite strict, so it is difficult to qualify for benefits. a) I only b) II only c) Both I and II d) Neither I nor II

b) II only

Which of the following statements regarding federal income taxation of premiums for personally owned disability income insurance is (are) correct? I. Premiums are tax deductible and the benefits are tax free. II. Premiums are not tax deductible and the benefits are taxable income. a) I only b) II only c) Both I and II d) Neither I nor II

d) Neither I nor II

Which of the following is (are) a financial advisor's professional responsibilities in the context of the Dl selling planning process? I. It is the financial advisor's job to uncover the need for Dl insurance coverage and attempt to sell an appropriate product that addresses that need, II. It is the financial advisor's responsibility to help his or her clients understand disability as a threat to their financial security. a) I only b) II only c) Both I and II d) Neither I nor II

c) Both I and II

Which of the following statements concerning a Dl insurance applicant's problems with moral hazard is (are) correct? I. Moral hazards can affect all other areas of their eligibility for coverage. II. They are more prevalent in life insurance than in Dl insurance underwriting. a) I only b) II only c) Both I and II d) Neither I nor li

a) I only

Which of the following statement(s) regarding employer-paid group Dl insurance is (are) correct? I. The premiums paid by the employer are tax deductible as ordinary and necessary business expenses. II. The disability income benefits received by employees are subject to income taxation. a) I only b) II only c) Both I and II d) Neither I nor II

c) Both I and II

All the following are characteristics of a noncancelable individual Dl insurance , contract EXCEPT a) the insured has the right to continue coverage up to a specified age. b) the insurer can change the premium on a class basis only. c) the insurer cannot change the policy provisions. d) they often become conditionally renewable at age 65.

b) the insurer can change the premium on a class basis only.

A well-prepared sales presentation can reduce the number of objections encountered by doing all the following EXCEPT a) developing rapport and trust. b) getting an agreement at each step in the presentation. c) focusing on the benefits of your recommendations. d) pointing out to prospects objections that are not valid.

d) pointing out to prospects objections that are not valid.

All the following statements are true of a typical recurrent disability clause EXCEPT a) if the policy has a limited benefit period and this benefit period has elapsed, benefits will not be restored. b) for each recurrent disability, a new elimination period will have to be fulfilled c) it states that any disability that recurs within 6 months following cessation of benefits from the original disability will be considered a continuation of the original disability d) the policy may state that a separate disability, entirely unrelated to the cause of a prior loss, will be considered a new loss

b) for each recurrent disability, a new elimination period will have to be fulfilled

A business overhead expense insurance policy covers the ongoing expenses of a business EXCEPT a) the interest on business indebtedness b) the cost of equipment or merchandise c) employee salaries, fringe benefits, and payroll taxes d) lease payments

b) the cost of equipment or merchandise

All the following are true of a cross-purchase disability buyout agreement funded with insurance: EXCEPT a) The business owners' attorney should draft the agreement. b) The disabled owner's share is purchased by the business. c) Each owner owns disability buyout insurance on the other owners. d) The price of executing the buyout will be determined in the agreement.

b) The disabled owner's share is purchased by the business.

The inability of the insured to perform the substantial and material duties of his or her regular occupation refers to which of the following definitions of disability? I.Unrestricted own-occupation definition of disability II. Any-occupation reasonably suited definition of disability a) l only b) II only c) Both I and II d) Neither I nor II

a) l only

Which of the following statements concerning the recommendation of residual or partial disability benefits as part of the D I policy is (are) correct? I. Although residual and partial disability benefits are available in most D I insurance policies only as riders, these components of coverage constitute perhaps the most important aspect of basic policy design II. You need to make prospects aware of the possible risk of declining residual (or partial) disability benefits during the fact finding interview a) I only b) II only c) Both I and II d) Neither I nor II

c) Both I and II

What is the name of the organization that is a division of the MIB (Medical Information Bureau) Group Inc., and that exchanges medical information between its members relevant to the underwriting of D I applicants? a) AMA b) DIRS c) HOS d) APS

b) DIRS

The Disability Income Resources Review is a short, simple fact finder designed to: a) Quantify the need for D I insurance b) Take the place of the D I fact finder c) Uncover information and potential objections to purchasing DI insurance d) Persuade the prospect to make a buying decision when using it

c) Uncover information and potential objections to purchasing DI insurance

Which of the following statements concerning the preconceived notions about DI insurance that may inhibit advisors' DI insurance marketing activities is (are) correct? I. D I insurance is a difficult product to sell II. Life insurance is harder to sell than D I insurance a) I only b) II only c) Both I and II d) Neither I nor II

a) I only

Because the employer receives benefits from a key employee disability policy, which of the following statements concerning the premiums is correct? a) They are tax deductible by the employer b) they are not tax deductible by the employer c) They are discounted by the insurance company d) They are taxable as income to the key employee

b) they are not tax deductible by the employer

Which of the following statements concerning objections that prospects raise to the purchase of D I insurance is correct a) Objections to the sale of D I insurance are not a normal part of the selling/planning process b) Objections are liable to surface only at the last step of the D I selling/planning _ process c) Experience shows that many of the objections that prospects express tend to ' disguise the real reasons they fail to buy D I insurance d) If you ask the right questions during the sales process, and the prospect has answered them candidly, you should keep objections from occurring

c) Experience shows that many of the objections that prospects express tend to ' disguise the real reasons they fail to buy D I insurance

In a two-interview sale, what is the first component of the second or closing interview? a) Present D I insurance options b) Establish rapport c) Gather relevant information d) Reestablish the need

d) Reestablish the need

In a two-interview sale, what is the first component of the second or closing interview? a) Present D I insurance options b) Establish rapport c) Gather relevant information d) Reestablish the need

d) Reestablish the need

The following statements concerning the definition of total disability found in today’s individual D I insurance contracts is (are) correct: I. The current trend is towards a less restrictive definition of disability provisions II. The current language used to define total disability is standardized among insurance companies a) I only b) II only c) Both I and II d) Neither I nor II

d) Neither I nor II

Each of the following is a market segment for DI insurance identified in the text EXCEPT: a) Prospects aged 30 to 39 years old b) single parents c) homeowners d) business owners

c) homeowners

Each of the following is a market segment for DI insurance identified in the text EXCEPT: a) Prospects aged 30 to 39 years old b) single parents c) homeowners d) business owners

c) homeowners

Which of the following statements concerning group LTD insurance plans is (are) correct? I. A formal long-term D I plan is easy to install and to communicate to employees II. The benefits available in a long-term group D I plan provide complete coverage for all employees a) I only b) II only c) Both I and II d) Neither I nor II

a) I only

Which of the following statements concerning the history of disability income insurance is (are) correct? I. It was developed before property and casualty insurance II. It was developed after life insurance a) I only b) II only c) Both I and II d) Neither I nor II

b) II only

The two-interview selling/planning approach is recommended for the following reasons EXCEPT: a) Cements the advisor-prospect relationship because it demonstrates that the advisor understands the prospect’s need to discuss the information b) includes a discussion of the prospect’s desired Dl insurance policy benefits c) allows the advisor ample time to customize the solution for presentation in the second interview d) gives less experienced advisors time to analyze the situation and seek the advice of experienced advisors if necessary

b) includes a discussion of the prospect’s desired Dl insurance policy benefits

Which of the following statements concerning a D I underwriter’s evaluation of an applicant’s character and moral hazard is correct? a) The underwriter cannot rely on the advisor to furnish essential information about character b) Moral hazards can be broadly defined as personal characteristics that tend to increase the probability of severity and loss c) Assessing an applicant’s character and general attitude toward responsibility is relatively easy to verify d) Moral hazards are probably of less importance in the disability insurance underwriting than in any other insurance product line

b) Moral hazards can be broadly defined as personal characteristics that tend to increase the probability of severity and loss

All of the following statements concerning the effective use of direct mail to approach prospects for DI insurance are correct EXCEPT: a) Keep the letter short b) Use stamps rather than metered mail c) Try using postcards d) Send only one piece of mail to each prospect

d) Send only one piece of mail to each prospect

If an employee pays part of the premium for coverage under a group LTD plan, which of the following statements is correct? a) The entire benefit is received by the employee free of income taxation b) The proportion of the benefit paid for by the employer is subject to income taxation c) The entire benefit is subject to income taxation d) The proportion of the benefit paid for by the employer is received free of income taxation

b) The proportion of the benefit paid for by the employer is subject to income taxation

Suggested steps for presenting possible DI insurance solutions to a prospect include all the following EXCEPT: a) Outline the implementation procedure b) Summarize your observations c) Make your recommendations d) Obtain a dollar commitment

d) Obtain a dollar commitment

Which of the following statements concerning the waiver-of-premium benefit found in most DI insurance policies is (are) correct? I. Some policies waive only future premiums after the waiver-of-premium elimination period has been satisfied; other policies retroactively waive prior premium payments made after the onset of disability but before the waiver-of-premium eligibility requirements have been met II. Disability policies differ as to whether the waiver of premium requires consecutive days or allows aggregate nonconsecutive days from short disability periods to satisfy the elimination period a) I only b) II only c) Both I and II d) Neither I nor II

c) Both I and II

Which of the fottowmg statements concerning the return of premium benefit found in some DI insurance policies is correct? a) It provides a return of all premiums paid into the contract when tiie contract comes up for renewal b) It provides a monthly refund of premiums for ail yeas during which the policy pays no claims c) It provides an annual refund of premium for aM the years during which the policy pays no claims d) it provides partial or total refund of premiums based op-ttte insured’s daims experience over a specified period

d) it provides partial or total refund of premiums based op-ttte insured’s daims experience over a specified period

Ann owns and pays the premiums for a disability income insurance policy with a 90day elimination period and a monthly benefit of $5000.00 for 5 years of disability for accident or sickness. If Ann has a stroke and is disabled for 4 years, how much would she receive in total benefits? a) $45,000.00 b) $95,000.00 c) $225,000.00 d) $240,000.00

c) $225,000.00 48 months- 3 months (90 days)= 45 months 45 x $5,000= $225,000

The administrative procedure through which an insurance company provides a single bill for a group of individual Dl insurance policies is known as: a) worksite marketing b) list billing c) payroll deduction d) workplace invoicing

b) list billing

Which of the following statements concerning the elimination period of a D I insurance policy is (are) correct? I. The length of the elimination period chosen depends on the clients’ specific needs II. The longer the elimination period chosen, the less expensive the D I insurance premium will be a) I only b) II only c) Both I and II d) Neither I nor II

c) Both I and II

Which of the following statements concerning reimbursable expenses in a business overhead expense insurance policy is (are) correct? I. The cost of equipment or merchandise is an expense that will be reimbursed by the insurance company II. The salary of the business owner is an expense that will be reimbursed by the insurance company a) I only b) II only c) Both I and II d) Neither I nor II

d) Neither I nor II

In the process of assisting the prospect with the basic DI policy design, which of the following is the least practical method for dealing with the need for inflation protection? a) Purchasing a cost-of-living adjustment rider b) Purchasing additional insurance coverage when needed c) Purchasing an automatic benefits increase rider d) Purchasing a future increase option rider

b) Purchasing additional insurance coverage when needed

The approach to information gathering that uses a fact finding form that first broadly covers all the prospect's financial needs and then narrows the discussion to prioritized dominant needs is the: a) Deductive approach b) Inductive approach c) Single-need approach d) Dominant-need approach

a) Deductive approach

Which of the following statements concerning federal income taxation of premiums and benefits for personally owned DI insurance is (are) correct? I. premiums are tax deductible and the benefits are tax free II. premiums are not tax deductible and the benefits are taxable income a) I only b) II only c) Both I and II d) Neither I nor II

d) Neither I nor II

Which of the following statements concerning closing the sale is (are) correct? I. Your job is to provide objective information and assist the prospect in a cooperative way in making a decision that meets his or her needs II. Client-focused planning does not mean that you allow a prospect’s natural inclination to do nothing go unchallenged a) I only b) II only c) Both I and II d) Neither I nor II

c) Both I and II

All of the following are required in an IRC Sec. 105 formal salary continuation plan EXCEPT: a) Department of labor regulations state that the plan must be funded with D I insurance to ensure its financial solvency for the benefit of all plan participants b) ERISA regulations state that the summary plan description must be sufficiently detailed so that employees can determine their rights and benefits under the plan c) The plan must designate or more “named fiduciaries” who are authorized to control and manage the plan d) The plan must include a reasonable claims procedure which adheres to the requirements specified by regulations of the Secretary of Labor

a) Department of labor regulations state that the plan must be funded with D I insurance to ensure its financial solvency for the benefit of all plan participants

Which of the following statements concerning the amount of Social Security Disability Insurance benefits an eligible individual will receive is (are) correct? I. It is based on his or her gross income in the year of disability II. It is based on his or her primary insurance amount (PIA) a) I only b) II only c) Both I and II d) Neither I nor II

b) II only

A business overhead expense insurance policy covers the ongoing expenses of a business EXCEPT: a) the interest on business indebtedness b) the cost of equipment or merchandise c) employee salaries, fringe benefits and payroll taxes d) lease payments

b) the cost of equipment or merchandise

The typical D I application form contains all of the following types of questions EXCEPT: a) Questions about the applicant’s health b) Questions about the applicant’s occupation(s) c) Questions about the applicant’s finances d) Questions about the applicant’s level of education

d) Questions about the applicant’s level of education

Which of the following statement(s) regarding employer-paid group Dl insurance is (are) correct? I. The premiums paid by the employer are tax deductible as ordinary and necessary business expenses II. The disability income benefits received by employees are subject to income taxation a) I only b) II only c) Both I and II d) Neither I nor II

c) Both I and II

Which of the following is (are) a financial advisor's professional responsibilities in the context of the Dl selling planning process? I. It is the financial advisor’s job to uncover the need for Dl insurance coverage and attempt to sell an appropriate product that addresses that need. II. It is the financial advisor’s responsibility to help his or her clients understand disability as a threat to their financial security a) I only b) II only c) Both I and II d) Neither I nor II

c) Both I and II

All of the following are considered to be non-demographic market segments for disability income insurance EXCEPT: a) nontraditional family units b) single persons with no dependants c) career/professional working women d) business owners

a) nontraditional family units

Which of the following statements concerning the Estimate of Financial Need during disability is (are) correct? I. It was designed to be used in a dominant need situation II. It should take the place of the D I fact finder a) I only b) II only c) Both I and II d) Neither I nor II

a) I only

All of the following are exclusions commonly found in D I insurance policies EXCEPT: a) Disability caused by injury, while the insured is sane or insane b) Disability resulting from the commission of a felony c) Disability that begins before the coverage is in force d) Disability while incarcerated

a) Disability caused by injury, while the insured is sane or insane

Which of the following statements concerning the conditional receipt in a D I insurance application is (are) correct? I. It is a document given to an applicant for D I insurance at the time an application for coverage is completed and an initial premium is collected with the application II. Coverage is conditional on the applicant being insurable on the earlier of the day the initial premium deposit is made, or the completion date for all the initial medical underwriting requirements, assuming the policy is issued as applied for a) I only b) II only c) Both I and II d) Neither I nor II

a) I only

In an entity-purchase disability buyout plan, the disabled owner’s share is purchased by which of the following? a) The business entity b) Each healthy owner proportionately c) An outside party acceptable to the healthy owners d) The disabled owner’s family to maintain income

a) The business entity

All of the following are steps of the selling/planning process EXCEPT: a) gather information and establish goals b) meet with the prospect c) analyze the plan d) implement the plan

c) analyze the plan

Which of the following statements concerning a Dl insurance applicant’s problems with moral hazard is (are) correct? I. Moral hazards can affect all other areas of their eligibility for coverage. II. They are more prevalent in life insurance than in Dl insurance underwriting. a) I only b) II only c) Both I and II d) Neither I nor II

a) I only

All of the following are characteristics of a non-cancelable individual Dl insurance contract EXCEPT: a) The insured has the right to continue coverage up to a specified age b) the insurer can change the premium on a class basis only c) the insurer cannot change the policy provisions d) they often become conditionally renewable at age 65

b) the insurer can change the premium on a class basis only

The most important part of effective communication is: a) Talking b) Listening c) Understanding d) Responding

b) Listening

All of the following statements concerning presumptive disability is (are) correct: I. The contract benefits will last for the length of the policy’s basic benefit period regardless of whether or not the person is working or earning an income II. The provisions typically will not waive the regular elimination period required, and will not pay basic policy benefits as of the first day presumptive disability requirements have been met. a) I only b) II only c) Both I and II d) Neither I nor II

a) I only

Which of the following statements concerning the terms of a disability buyout agreement funded with disability buyout insurance is (are) correct? I. The definition of disability used in the agreement should be the same definition contained in the disability buyout insurance policy II. The decision on the elimination period for a buyout agreement should be made before a disability has occurred a) I only b) II only c) Both I and II d) Neither I nor II

c) Both I and II

Which of the following statements concerning workers' compensation benefits is correct? a) They cover work-related accidents only b) They cover all disabilities c) They vary widely from state to state d) They are available only in few states

c) They vary widely from state to state

Which of the following statements concerning DI insurance is (are) correct? I. D I insurance provides the income needed to prevent a disabling illness or injury from becoming a total financial disaster II. D I insurance replaces lost income that results from the insured’s becoming disabled a) I only b) II only c) Both I and II d) Neither I nor II

c) Both I and II

All of the following are among the 11 Optional Policy Provisions in the Uniform Individual policy Provisions Law EXCEPT: a) Grace periods b) Change of occupation c) Misstatement of age d) Unpaid premium

a) Grace periods

Which of the following statements concerning D I insurance is correct? a) It can protect people from having heart attacks and car accidents b) It provides benefits to replace income lost as a result of an accident or illness c) It increases a person’s economic value d) It can prevent disabilities from occurring

b) It provides benefits to replace income lost as a result of an accident or illness

In presenting the agenda for the initial interview, you should do all of the following EXCEPT: a) Communicate what you intend to accomplish during the meeting b) State a benefit for the prospect c) Check for acceptance d) Pave the way for getting referrals

d) Pave the way for getting referrals

A disability buyout agreement potentially will provide benefits to all the following parties EXCEPT: a) A disabled owner b) A nondisabled owner c) The business itself d) The insurance company

d) The insurance company