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32 Cards in this Set
- Front
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Jim has just received a lump-sum payment from his individual disability income policy provider. Which of the following is the best explanation for this payment? * A) His Social Security benefit has been terminated.* B) His policy includes a return-of-premium provision. * C) The definition of disability in his policy has been changed from any occupation to own occupation. * D) The elimination period has ended. |
B Some individual disability income policies include a partial refund of premium if no claims are made after a certain period of time. Termination of Social Security benefits will not result in a lump-sum benefit payment. Monthly benefits begin when a policy's elimination period ends. |
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From the insured's perspective, which of the following types of disability coverage would be the LEAST restrictive as to qualifying for benefit payments? * A) Workers' compensation.* B) Any occupation. * C) Social Security. * D) Own occupation. |
D From the insured's perspective, qualifying for disability benefits would be the least restrictive under an "own occupation" policy, which requires that the insured be unable to work at his or her own occupation, because of a disabling sickness or injury, from any cause. Such a policy is more expensive and difficult to qualify for. An "any occupation" definition requires that the insured be unable to work at any job for which he or she is qualified; Social Security requires that the insured be unable to perform at any gainful employment; and workers' compensation provides benefits only if the individual is disabled because of employment-related injury or illness. |
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Which of the following statements is CORRECT? * A) Disability income insurance benefits are paid out immediately following the disability.* B) Individual disability plans are only available on a short-term basis. * C) Group disability plans are only available on a long-term basis. * D) Disability income insurance does not provide a death benefit. |
D Disability income insurance provides a periodic income in the event the insured cannot work due to a disability. No death benefits are provided. Both individual and group insured disability income plans are available on short-term and long-term bases, meaning how long benefits are payable. Short-term plans generally provide benefits for 6 months to two years; long-term plans provide benefits longer than two years, often until the insured reaches age 65. Disability income insurance benefits are paid out after an elimination, or waiting, period has been satisfied. |
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A waiver of premium provision may be included with which kind of health insurance policy? * A) Hospital indemnity.* B) Basic medical. * C) Major medical. * D) Disability income. |
D A waiver of premium rider generally is included with guaranteed renewable and noncancellable individual disability income policies. It is a valuable provision because it exempts the policyowner from paying the policy's premiums during periods of total disability. |
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All of the following statements pertaining to disability income policies are correct EXCEPT: * A) some policies use an own occupation definition of total disability.* B) benefits may be payable for disabilities resulting from either accidental injury or sickness, and there are no exclusions. * C) benefits are payable as specified, weekly, or monthly. * D) in some policies, the (residual) benefit payments are tied directly to the percentage of actual earnings lost. |
B Disability income policies, like all insurance policies, have coverage exclusions. |
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Which of the following statements regarding the medical reimbursement benefit available in some individual disability income policies is CORRECT? * A) The benefit is paid in addition to other benefits under the policy.* B) The benefit is a percentage of the monthly income benefit. * C) The benefit is paid for a disabling illness. * D) The benefit is only paid if the insured is still able to continue working. |
B The medical reimbursement benefit is a percentage of the income benefit specified in the policy. It is only paid for injuries and in lieu of other benefits under the policy. |
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Dan is a young man with a bright future, and he expects his income to increase over the next ten years. Under the disability income insurance policy he is considering, why might he add a guaranteed insurability rider? * A) If he becomes disabled, the rider will pay benefits in addition to any Social Security benefits he might receive.* B) The rider will allow him to increase his benefit amount periodically without being required to show evidence of insurability. * C) The rider will allow him to increase his benefit amount every time his income increases. * D) The rider will increase his benefits to reflect increases in the cost of living. |
B The future increase option provided under a guaranteed insurability rider has 2 key features: (1) increases to coverage amounts can be made at predetermined times, and (2) no evidence of insurability is required. |
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The amount of the benefit payable under a disability income contract is generally dependent on the applicant's * A) sex.* B) income. * C) age. * D) education. |
B The amount of disability income protection a company will write on one individual is typically dependent on that person's salary or wages. For example, a person earning $2,000 a month may be limited by an insurance company to a monthly benefit of 60% of income, or $1,200. |
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An individual disability income policy is characterized by all of the following EXCEPT: * A) benefits begin when the insured's claim is accepted.* B) a rider may be added to adjust benefits for cost-of-living increases. * C) premiums paid are generally not deductible. * D) one of the bases used to set premiums is the monthly income benefit. |
A Premiums payable on an individual disability income contract are generally not tax deductible. Premium rates are determined per $100 of monthly income benefit; the waiting period selected; the length of the benefit period; the applicant's age, income, and occupation; and whether the applicant has any other current disability income policies in force. Disability income policies have waiting periods to eliminate claims for very short-term disabilities that the insured can manage without financial hardship. They may vary from one week to one year, though most policies specify 30 to 90 days. Benefits are not paid during this time. Riders are available to adjust benefits for cost-of-living increases. |
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Benefit periods for short-term disability income policies typically vary from: * A) six months to two years.* B) one to 12 months. * C) one to five years. * D) three months to three years. |
A Benefit periods for short-term disability income policies typically vary from six months to two years. In contrast, long-term disability policies carry benefit periods of two years and longer. |
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A business disability buy-out insurance plan may include an "elective indemnity." This feature can be used to: * A) reimburse other business owners or partners for the insured's loss of services to the business.* B) enable the business owners to add other owners to the policy. * C) postpone payment of the benefit to the insured. * D) pay a lump-sum death benefit to the insured's family. |
C Under the elective indemnity provision, the owners can elect to take either periodic payments or postpone the benefit until it is determined that the disabled owner will not recover sufficiently to return to work, thereby postponing the decision regarding the sale of the disabled owner's share of the business to the other owners. |
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Which of the following terms relates to disability income insurance? * A) Service basis.* B) Residual basis. * C) Coinsurance. * D) First dollar. |
B Disability income insurance contracts may be written on a residual basis, which means that they will provide benefits for loss of earnings without regard for occupational status and even if the insured is able to return to work on a full-time basis. The benefit is payable if the insured's earnings are reduced by a specified percentage below his or her predisability earnings. |
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Which of the following terms BEST describes the maximum length of time that disability income benefits will be paid to the disabled insured? * A) Elimination period.* B) Coverage period. * C) Benefit period. * D) Disability period. |
C The benefit period is the maximum length of time that disability income benefits will be paid to the disabled insured. The longer the benefit period, the higher the cost of the policy. |
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Mary has lost both legs as the result of complications caused by diabetes. Previously a horse trainer, she has taken a position as a computer programmer. Nonetheless, her insurance company pays her benefits under her disability income insurance policy under which of the following provisions? * A) The own occupation provision.* B) The flat amount benefit provision. * C) The presumptive disability provision. * D) The partial disability provision. |
C Even though Mary can work, she will receive her disability income benefits for the stated term because of the severity of her condition. The nature of her disability raises the presumption that she is totally disabled. |
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Harry, the owner of a convenience store, is the insured under a business overhead policy. Were Harry to become disabled, the policy would cover all of the following EXCEPT: * A) the store manager's salary.* B) utility bills. * C) the rent. * D) Harry's salary. |
D Business overhead expense policies do not include any compensation for the disabled owner. |
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What is the initial period of time specified in a disability income policy that must pass, after a policy is in force, before a loss due to sickness can be covered? * A) Temporary interval.* B) Preexisting term. * C) Elimination period. * D) Probationary period. |
D The probationary period is the initial period of time specified in a disability income policy that must pass, after a policy is in force, before a loss due to sickness can be covered. This provision is designed to protect the insurer against adverse selection. |
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Rachel added a Social Security rider to her individual disability income plan. This rider provides an additional monthly benefit for what purpose? * A) To pay benefits while her Social Security disability application is pending.* B) To assure that a projected level of benefit is received. * C) To assure that her Social Security benefits are not reduced once her disability benefits begin. * D) To assure that her total benefits remain level, even if her disability is determined not to be a total disability. |
B The additional monthly benefit is paid when the insured is eligible for Social Security, but those benefits have not yet begun, have been denied, or have begun in an amount less than the benefit amount of the rider. After the actual Social Security benefit amount is determined, the difference between the actual benefit and the expected benefit in the rider is payable as an additional disability income benefit |
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A guaranteed insurability rider may be attached to which of the following policies? * A) Accidental death and dismemberment.* B) Medical expense. * C) Group health. * D) Disability income. |
D The guaranteed insurability rider may be attached to a disability income policy. This rider is sometimes also referred to as the future increase option or guaranteed purchase option. |
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Which of the following terms best describes the policy provision for the payment of additional income when the insured is eligible for social insurance benefits but those benefits have not yet begun? * A) Social Security rider.* B) Interim benefit rider. * C) Guaranteed insurability rider. * D) Cost-of-living adjustment rider. |
A The Social Security rider, sometimes called the social insurance substitute rider, provides for the payment of additional income when the insured is eligible for social insurance benefits but those benefits have not yet begun, have been denied, or have begun in an amount less than the benefit amount of the rider. |
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Under many disability income insurance policies, which of the following is generally NOT considered a presumptive disability? * A) Loss of speech.* B) Loss of one arm and one leg. * C) Blindness. * D) Loss of a leg. |
D Presumptive disability generally requires the loss of two limbs to qualify automatically for full benefits. The loss of one leg would not qualify. |
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John suffers an injury that does not result in total disability. Which of the following disability riders would provide benefits to pay for the medical expenses incurred as a result of his injury? * A) Nondisabling injury rider.* B) Multiple indemnity rider. * C) Waiver of premium rider. * D) Hospital confinement rider. |
A The nondisabling injury rider does not pay a disability benefit, but is instead designed to provide for the payment of medical expenses incurred by the insured as a result of an injury that does not result in total disability. |
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The probationary period in disability income policies usually lasts: * A) two to five months.* B) two weeks to one month. * C) no more than one week. * D) six months to one year. |
B Most disability income policy probationary periods range from 15 to 30 days after the effective date. |
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Durwood is hospitalized with leukemia and, upon checking his disability income policy, learns that he will not be eligible for benefits for at least 60 days. That would indicate his policy probably has a 60-day: * A) benefit period.* B) elimination period. * C) disability period. * D) probationary period. |
B An elimination period is the time following an illness or disability during which benefits are not payable. |
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The only type of health insurance policy to which a guaranteed insurability rider may be attached is: * A) a basic medical expense policy.* B) a disability income policy. * C) a major medical policy. * D) a medicare supplement policy. |
B A disability income policy is the only type of health insurance policy to which a guaranteed insurability rider may be attached. This option guarantees the insured the right to buy additional amounts of disability income coverage at predetermined times in the future without evidence of insurability. |
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Sandy earns $2,000 each month as a reporter for a small-town newspaper. She is covered by two disability income insurance policies, one from Assured Insurance and the other from Ensurance Insurance. Assured Insurance limits her monthly benefit to 60% of income. Ensurance Insurance limits the monthly benefit to $400. If Sandy makes a claim on both policies, how much will she receive in benefits each month? * A) $400* B) $2,000 * C) $1,600 * D) $1,200 |
C Assured Insurance limits the monthly benefit to 60% of Sandy's income, or $1,200. Ensurance Insurance is also paying a monthly benefit of $400. Because the sum of the two benefits do not exceed Sandy's income of $2000 per month both policies pay their full benefit amount. |
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Which of the following statements regarding an accidental death and dismemberment rider for a disability insurance policy is NOT correct? * A) The sum payable under the dismemberment feature is typically expressed as a muliple of the disability policy’s weekly indemnity.* B) The life insurance feature of this rider does not pay a death benefit if the death is due to natural causes. * C) Once a sum has been paid under the dismemberment feature, the disability income payments stop. * D) The dismemberment feature provides insureds with periodic payments to help them during a rehabilitation period. |
D The intent of the dismemberment feature is to provide insureds with a lump sum payment to assist them during the time period they are going through any rehabilitation or other applicable training. This rider does not provide periodic benefit payments. All of the other statements are correct. |
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Sidney makes $3,000 a month as a machine shop supervisor. His disability income policy provides for a monthly payment of $2,500 in the event of total disability. If Sidney were to become partially disabled, but continued to work at 60% of his pay, what would the policy pay, assuming it had a residual disability provision? * A) $2,500 a month.* B) $0, since Sidney was not fully disabled. * C) $1,200 a month. * D) $1,000 a month. |
D A residual disability income policy ties the benefit payments directly to the proportion of actual earnings lost. In this problem, since Sidney is earning 60% of his predisability pay, the residual benefit would be 40% of the full benefit, or $1,000, calculated as .40 x $2,500. |
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Assume a dentist is insured with a business overhead expense policy that pays maximum monthly benefits of $3,000. The dentist became disabled and had covered expenses for the month totaling $1,500. Benefits payable would be: * A) $3,150.00* B) $4,500.00 * C) $3,000.00 * D) $1,500.00 |
D Business overhead expense insurance reimburses businesses for actual overhead expenses in the event the business owner becomes disabled. In this case, the actual expenses totaled $1,500. |
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Steve has an individual disability income policy that pays $600 a month if he becomes disabled. After he became disabled, he received a lump-sum payment of $10,000 in addition to his base benefit. Which of the following disabilities would result in this additional benefit? * A) His disability was caused by diabetes, and the additional benefit was paid under his medical insurance plan to cover the cost of special treatments.* B) His disability, which resulted in blindness, occurred in a car accident and is covered under the accidental death and dismemberment rider attached to his disability policy. * C) His disability resulted from a fall at home and is covered by his homeowners' insurance. * D) His disability involved a back injury that occurred while he was at work, and the additional benefit is paid under workers' compensation. |
B An AD&D rider can be added to some individual disability income policies. Because Steve was disabled in an accident that resulted in blindness, he is entitled to the capital sum, which in this case is paid in a lump sum of $10,000. This benefit will not be paid for a disability resulting from illness, nor would workers' compensation generally pay a lump-sum benefit. |
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With disability income insurance, a probationary period may NOT apply when the insured is disabled: * A) while at work.* B) by accidental injury. * C) by sickness. * D) while traveling. |
B With disability income insurance, the probationary period generally applies to sickness, but not to accidents. |
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Disability income benefits for partial disability typically are payable to eligible insureds for a MAXIMUM of: * A) one to three months.* B) three to six months. * C) one year. * D) two years. |
B Disability income benefits for partial disability (an inability to perform one or more important job duties) typically are payable to eligible insureds for a maximum of three to six months. |
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Will earns $4,000 a month and would be eligible for disability insurance to replace up to 60% of his income under a disability income policy he is interested in buying. He already has a disability income policy through his employer that will pay a fixed $200 monthly benefit. The new policy he is considering uses the percentage-of-earnings method to determine benefits. What is the maximum monthly benefit that Will will receive under the new policy? * A) $2,600.00* B) $2,200.00 * C) $2,400.00 * D) $200.00 |
B Will's maximum benefit (60% of his $4,000 predisability income) is $2,400. Because the percentage-of-earnings method is used to set benefits, his monthly benefit will be reduced by the $200 payable under his employer's policy. |
