Insurance/Disability Insurance Flashcards
What is disability income insurance?
Provides income to the insured in the event they are unable to work because of illness or injury
What are the definitions of disability?
Any occupation: considered disabled if insured cannot perform the duties of any occupation, this definition provides for the least expensive premium
Modified any occupation:considered disabled if unable to perform duties of gainful occupation they’re reasonably fitted by education, experience, training and prior economic status
Own occupation: considered disabled if insured cannot perform the duties of his own occupation, more expensive, ideal for specialized high paying fields
Split definition: begins with o and moved any occupation after a year or two under the own occupation definition
What is the benefit period?
Short-term, coverage is for 2 years or less
long-term, coverage is until normal retirement age, death or for a specified. Of time
What is the elimination period?
Amount of time until benefits begin
During the elimination. Typically the premium as waived
The elimination. Serves as a deductible
How are disability benefits taxed if the employee pays the premium with after-tax dollars?
Premiums are not deductible
Benefits are tax-free
How are disability insurance benefits taxed if the employer pays the premium?
Premiums are deductible to employer
Benefits to employee are taxed
How are disability insurance benefits taxed if the employee pays premium with pre-tax dollars, cafeteria plan?
Benefits to employees are taxed
What is a cost-of-living rider?
Benefits received will adjust for inflation, which maintains the insured’s purchasing power
What are residual benefits?
If the insurer goes back to work at less pay then the policy will pay the differencebetween current income and income prior to disability
How is disability insurance integrated with social security?
Any disability benefits received by social security will reduce the amount of disability benefit paid by the insurer
What is a probation period?
The time the insured must wait after the policy is issued, before specific conditions are covered (typically 15 to 30 days after inception)
