Insurance5 Flashcards
Definition of Disability
■ Own occupation
–– Inability to perform any or all of the duties of insured’s normal occupation
–– More liberal definition for the insured
■ Any occupation for which the insured is qualified by training education and experience
–– More difficult to qualify
■ Income replacement
–– A reduction in income triggers payment
■ Presumptive disability
–– Automatic qualification
–– Loss of or loss of use of any two limbs
–– Total and permanent blindness in both eyes
–– Loss of speech
–– Total and permanent loss of hearing in both ears
■ Medically defined disability
–– House confinement and doctors care
Disability
Indemnity benefit-fixed benefit, no offsets
■ Elimination period
–– Must be disabled for this time length before payments begin
■ Benefit period
–– How long will the benefits pay
Waiver of Premium
Waives further premium payments after initial waiting period
■ Refunds any premiums paid during the waiting period
Coordination with government benefits
Additional monthly benefit rider
–– Pays an additional benefit during first 6 to 24 months
–– Pays even if the insured receives government benefits
■ Social insurance supplement
–– 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
At Work Benefits
Partial disability
–– Returns to work in a reduced capacity
–– Usually pays 50% of total benefit
–– Usually no longer than 3 to 6 months
■ Residual disability
–– 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
■ Recurrent disability
–– 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
Other Provisions Affecting Benefits
Cost of Living Rider (COLA)
–– Increases benefit while receiving disability
–– Based on the Consumer Price Index
–– Adjustments usually made every 12 months
Future Increase Option (FIO)
– Allows insured to increase policy benefits
–– No evidence of insurability required
–– The insured’s income must have increased
Relation of earnings to insurance
– Allows insurer to change policy benefit if insured’s income has decreased
–– Portion of the premium will be refunded
Other Cash Benefits
Accidental death & dismemberment
–– Amount of the rider is the principal sum
■ Paid if accidental death—usually a multiple of the monthly disability benefit
■ Loss of sight in both eyes or loses two limbs
–– Smaller benefit for one limb eye etc.—capital sum
■ A percentage of the principal sum
Rehabilitation benefit
Total disability
–– Helps insured train for a new occupation
–– Pays as long as insured is disabled and stays in the program
Medical reimbursement
– Helps pay medical bills for a non-disabling injury
Refund Provisions
Return of premium
–– Refunds a stated percentage of the premium after a stated time
–– Benefits paid are subtracted
■ Cash surrender value
–– Accumulates cash values that are ultimately equal to all premiums paid
–– If the policy is surrendered for its cash value any benefits are subtracted
Exclusions
Common exclusions found in disability income policies are losses arising from:
–– War or military service,
–– Suicide and other self-inflicted injury,
–– Non-commercial aviation (that is, other than a fare-paying airline passenger),
–– Commission of a felony, and
–– Living overseas.
Disability Underwriting
Occupation
■ Benefit limits
■ Policy issuance alternatives
–– Increased premium
–– Exclusion rider
Business Uses of Disability
Key person
■ Business overhead expense
■ Disability buy sell
