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42 Cards in this Set
- Front
- Back
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What is risk financing? |
Either Risk Sharing - insurance contract or Risk Retention - accepting risk of disability |
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What is Risk Control? |
Risk avoidance - avoiding activities or situations with risk of disability OR Risk Reduction - taking precautions when engaged in activities or situations with risk |
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What are the occupation classes for disability insurance? Give examples of occupations. |
Class 1 manual workers, drivers, factory Class 2 light manual work (barber)or qualified tradesperson Class 3 Surveyor, supervisors, not full time at a desk (must be strictly supervisory) Class 4 professional with some outside office role, office worker, executives* Class 5 Professionals (doctor, lawyer) involved only w office duties, executives* *depends on income, biz type & size |
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What is the objective of risk management? |
To enable family to maintain standard of living in the event of either partner being disabled |
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What are the 3 concepts of quantifying potential loss of disability? (Step 3: Clarify status and Identify Problems & Opportunities) |
1. After-tax income 2. Financial resources available 3. Medical/attendant care costs |
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What is the financial risk in terms of disability needs analysis? |
Potential financial loss or income at risk after-tax income if disability insurance tax free, pre-tax income if insurance subject to same tax as regular income |
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What is acceptable loss in terms of disability needs analysis? |
Amount of income that can be reduced without suffering a reduction in their standard of living |
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What are the risk severity categories in terms of disability needs analysis?? |
Critical: very serious financial consequences, possibly bankruptcy. Material: serious financial consequences, reduction in standard of living. Minor: little financial consequence, minor loss of income or manageable expenses (Q's Major is not a category) |
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What are risk control strategies in terms of disability needs analysis? |
risk avoidance, avoiding any activities or situations w risk of disability risk reduction, taking precautions when engaged in activities or situations that have a risk of disability |
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What are risk financing strategies in terms of disability needs analysis? If a person won't change their job or lifestyle, what risk management strategy would you suggest? |
1. risk sharing, insurance arrangement risk retention, accepting the risk of disability, rather than implementing one of the other three risk management strategies 2. Risk sharing (get insurance) |
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How often should disability risk and insurance be reviewed? |
at least every five years and more frequently if the client's situation change |
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What does morbidity rate mean? |
expected rate of sickness or injury within a specific population during a given period of time |
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Disability vs death stats |
obability of suffering a disability of 90 days or more before the age of 65 is considerably greater than the probability of death before that age. wice as likely as death before the age of 53 years round 40 years of age, this probably of disability is about 3.5 times the risk of death |
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What are the criteria for a person to be eligible for CPP disability ? |
Made CPP contributions for at least four of the last six years. Severe and prolonged physical or mental condition (continuing medical certification) (Q's will give examples of people contributing 3/5 yrsand with temp conditions) |
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How are CPP disability benefits paid? |
=flat rate + 75% of the retirement pension (to a maximum) Start fourth month following the month deemed disabled unless occurring within five years of an earlier disability |
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When are CPP benefits paid to child of CPP contributor who receives a disability pension |
-Child is under 18 years of age, or between 18 and 25 years of age, and attending school full-time -Benefits ceased at age 18 can restart if younger than 25 and begins attending school full-time -Marriage of a child does not interrupt payment of the benefit -can receive 2 benefits if both parents dis. |
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Which of the following are taxable/not taxable? |
** DO NOT HAVE THIS DOWN Taxable: EI, CPP disability benefit Not Taxable: WCB Private/group disability insurance depends on if it was a taxable benefit/employee paid |
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How do you become eligible to receive EI sickness benefits? |
-suffer a decrease in his or her weekly income in excess of 40% -min 600 insurable hrs during shorter of 52 weeks B4 claim AND period since start of previous EI claim -two-week waiting period |
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What is the basic sickness benefit rate? How is the benefit impacted by other income? |
-55% of the claimant's insured earnings up to a yearly maximum insurable amount -may have supplement if receiving CCTB -reduced $ for $ of earned income (still?)-2nd payer w CPP/WCB (income reduces $ for $) -not impacted by individual disability policy |
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What are the benefit periods for EI?
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-two-week waiting period
-Basic benefit (unemployment) is 15 weeks, -Basic combined w sickness benefits 50 weeks -Maternity 15 weeks -Parental 35 weeks -Maternity + Parental 50 weeks -Basic + Maternity + Parental 65 weeks |
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The maximum benefit is not automatic w WCB. What are the factors determining benefit? |
Max payable up to 90% of eligible earnings Province dependent factors: -not everyone receives the maximum benefit -monthly income or a lump sum -disability can be reassessed and the benefit increased or decreased -each province has different maximum |
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What are common exclusions |
-injuries that cause disability more than 90 days after the injury is sustained -injuries or sickness arising from pregnancy -psychoneurotic or behavioural disorders -injuries resulting from risky activities, such as flying an airplane or parachuting -loss caused by war or any act of war -pre-existing medical conditions |
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What is a presumptive clause? |
presumes total disability if, through sickness or accident, there is a complete and irrevocable loss of speech, hearing, sight, or the loss of use of two limbs. Full payments will continue until either the end of the benefit period or for life, regardless of what the claimant might be able to earn at his or her own or any other occupation. |
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How do policies define total disability? |
-unable to perform substantial & material duties of occupation & under care of a physician (comprehensive) -insured cannot perform any job (less comp) -loss of income of 80% or more |
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How do policies define partial disability? |
based upon TIME, unable to perform for at least 50% of the time or loss of capacity to perform the normal functions of employment ie -a loss of income of 20% - 80% -prevented from performing one or more important daily duties |
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How do policies define residual disability? |
based upon DOLLARS, specifically upon a loss of earnings of at least 20% period of partial disability, immediately following a period of total disability able to return to work in a reduced capacity. Benefits paid pro-rata basis, depending on the percentage of earnings loss |
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To whom is HIV disability benefit provided? |
Selected health care professional ONLY if following true -restricted from work by law or by regulations established by a medical regulatory body -compelled by law to disclose HIV status to patients, and as a result they refuse treatment |
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What is a recurrent disability clause? |
-if the same cause of disability recurs within a specified time period, typically six months, it is considered a continuation of the same claim and no elimination period is required |
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When should an own-occ rider be considered? |
Only to protect the earnings of an individual in a highly profitable specialty requiring special abilities, ie. dexterity of a heart surgeon or the mental prowess of a tax expert |
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What is the principle of indemnification? |
insured cannot profit from the loss - results in limits or caps to benefits to provide incentive to return to work -ie cap of 2/3rds of pre-tax income -unearned income (rent/interest) may reduce benefits |
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What is the difference between partial and residual disability? How is benefit calculated if an insured has both partial and residual disability? |
Partial is based on time whereas residual is based on dollar reduction of income. Usually partial is calculated as a flat percentage of the total disability benefit. Residual is a formula of (loss of income/prior income) * monthly total disability benefit. If both apply, insured can pick one or the other
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How could a non-indexed residual benefit result in no payment over time? |
Residual benefit = [(pretax income prior to disability - pretax income after disability)/prior pretax income) * monthly total disability benefit. If the prior pretax income is not indexed, over time the income after disability will exceed prior income resulting in zero monthly benefit. |
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when is a Workers' Compensation offset amendment not applicable? |
Policies issued to specific occupations (for example, attorneys, chartered accountants, dentists, and medical doctors), even if they are eligible for Workers' Compensation coverage. |
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Which disability plans tend to be second payors? |
-EI disability benefits are second payor to CPP/QPP and WCB -employer and association group plans also tend to be 2nd payor -individual plans are not second payor |
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How do you calculate the maximum benefit of an individual disability policy? |
Multiply pre-tax income by 2/3 Ind policy is not taxable and you cannot benefit from disability insurance, so must reduce to after-tax. BUT the insurance companies do not worry about your MTR, they use 2/3rds to calculate maximum benefit. |
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What may the insurer change on guaranteed renewable insurance policies? |
the premium payable for an entire class of insureds ex. raise the premium for all schoolteachers. |
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How are Key Person Disability Insurance and Disability Buy-out Insurance benefits paid? |
lump-sum disability policies that can be used to either buyout the shareholder or to find and replace key person |
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what is a franchise disability plan? |
individual contract available to members of an association in which the continued membership in an association is not necessary in order for coverage to be maintained. The cost of this insurance is generally close to that of individual insurance. |
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What terms or conditions does a guaranteed non-cancellable insurance policy protect? How does this differ from conditions of a guaranteed renewable insurance policy? |
guaranteed non-cancellable: cannot increase the premiums or decline to renew the policy. guaranteed renewable: as above except may change the premium payable for an entire class of insureds |
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What are common limitations of group disability plans? |
no own occ, benefit limited, cancellable, premiums increase, while benefits indexed predisability income for calculating partial disability benefit not, required membership or employment, no additional coverage, second payor to ind policies, inadequate for high income earners |
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How are premiums and benefits of disability benefits taxed if the premiums were paid with after-tax income? |
-personally owned and paid, the premiums are not tax deductible, there is no tax credit for the premiums and the benefits are tax free -personally owned, but premiums paid by an employer, the premiums are tax deductible to the company, the premiums are a taxable benefit, benefits are tax free. |
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Which of EI, CPP or WCB do you take into account when analzying disability income? |
Analyze disability income from all possible sources including CPP/QPP disability benefits, and group and individual plans WCB benefits are not usually included because of the uncertainty of eligibility to receive them |
