Review Questions Show Which of the following statements is correct with respect to the probability of becoming disabled? IAt most ages before normal retirement age, the likelihood of becoming disabled is greater than the likelihood of death The likelihood of becoming disabled generally increases as an individual becomes older At certain ages the probability of becoming disabled may be as high as four times the probability of death at that age all of the above are true On average, how much of their income do U.S. residents normally save? 2% *4% 8% 10% Which of the following is NOT correct concerning borrowing to provide family income during a breadwinner's disability? The widespread use of credit cards increases the likelihood that a disabled individual may borrow during a period of disability The likelihood of borrowing from a bank may be adversely affected by an individual's disability *Borrowing during a period of disability is generally considered one of the more inexpensive and workable options for finding cash to pay family bills Borrowing during a period of disability may turn a financial problem into a catastrophic problem Which of the following is/are correct with respect to total disability in a traditional disability income policy? *Total disability is couched in terms of an insured's inability to work Income loss is required before total disability benefits are payable Both a and b Neither a nor b Jill Whitaker was a practicing cardiac surgeon when she purchased her $10,000 per month disability income insurance policy that contains an own occupation definition of disability. Shortly after purchasing the policy she developed a tremor in her hands that resulted in her being considered disabled, and she began receiving a monthly disability benefit of $10,000. Her tremor continued after six months of treatment and evaluation, so she decided to close her surgical practice and teach in a local medical school at one-half her former income. What, if any, continuing monthly disability benefit will Jill receive under her policy? zero $2,500 $5,000 *$10,000 What is "limited" in a limited own occupation definition of total disability? The permitted amount of income that may be earned during a period of total disability *The duration of the own occupation definition The amount of the total disability benefit The number of times in any calendar year that the own occupation definition may be used Which of the following definitions of total disability is the LEAST favorable to the insured? Own occupation *Any occupation Limited own occupation Modified own occupation In an income replacement policy whose maximum monthly benefit is $10,000, what benefit would an insured receive if he were able to perform all of the important duties of his regular job, but his income declined from $20,000 per month to $14,000 as a result of an accident or sickness? zero $10,000 $6,000 *$3,000 Paul Wilson's disability income insurance policy with a $1,000 monthly benefit for total disability contains a residual disability benefit. As a result of illness, Paul's monthly income reduces by 20%, however, he is able to work each day and perform all of his usual duties. What is his probable benefit in the first month of his residual disability? zero $250 *$500 $1,000 Jane Hoffman has been receiving residual disability benefits for several months as she attempts to return to her job. Her disability income policy provides a monthly benefit of $5,000 for total disability; her pre-disability monthly earnings were $10,000. Last month, her earnings were $2,000. What is her residual disability benefit? zero *$5,000 $8,000 $3,000 Under which of the following benefits is there normally no requirement for income loss? Residual disability *Partial disability Both a and b Neither a and b Which of the following are differences between the life insurance waiver of premium benefit and the disability insurance waiver of premium? I. Disability waiver may begin after 90 days of disability II. Disability waiver of premium of premium may be satisfied by residual disability III. Disability insurance premiums may be waived upon the earliest of the elimination period or 90 days I & II only I & III only II & III only *I, II & III Which of the following statements is NOT correct with respect to the non-disabling injuries benefit in a disability income insurance policy? The non-disabling injuries benefit provides benefits for medical treatment within 90 days of an accident The maximum non-disabling injuries benefit is usually 50% of the monthly total disability benefit *Payment of the non-disabling injuries benefit causes disability benefits to become immediately payable Non-disabling injuries benefits are payable in lieu of disability benefits John Peters purchased a disability income insurance policy when he opened his law practice. Because John was in the highest occupation class, his policy is noncancellable and guaranteed renewable and was issued at an extremely low premium. Five years later, John closed his law practice and became a professional racecar driver. His disability insurer's response with respect to his policy is likely to be to: increase the premium for the coverage refuse to renew the coverage Both a and b *Neither a nor b Which of the following statements about a disability Cost of Living rider is INCORRECT? Disability benefit adjustments may be based on the CPI-U A Cost of Living rider may generally cause disability benefits to increase or decrease *Adjustments to the disability income insurance benefit are made immediately upon the insured's becoming disabled Disability benefits may not be reduced below the amount shown in the policy as a result of COLA adjustments A disability Hospital Income Rider works by: paying an additional benefit when the insured is hospitalized waiving the policy's elimination period when the insured is hospitalized *Either a or b Neither a nor b How many disabilities are likely to occur by age 65 in a group of 10 men, all of whom are age 40? One *Three Four Five Which of the following affect the likelihood of any individual's becoming disabled? I. Age II. Occupation III. Lifestyle I & II only I & III only II & III only *I, II & III Which of the following is/are affected by a prospective disability insurance applicant's occupation? The cost of disability coverage The quality of disability coverage *Both a and b Neither a nor b Which of the following would NOT normally be considered a part of a disability insurance applicant's lifestyle? Smoking habits Avocation *Occupation Drinking habits What guarantee(s) is/are provided in disability insurance coverage that is noncancellable and guaranteed renewable? That the insurer will not increase the premium during the specified period That the insurer will not refuse to renew the policy during the specified period *Both a and b Neither a nor b Which of the following is NOT a renewability provision found in a disability income insurance policy? Noncancellable & Guaranteed Renewable Conditionally Renewable *Automatically Renewable Guaranteed Renewable Under what conditions would an insurer pay a disability income benefit for a pre-existing condition? I. When the condition was disclosed in the application for the policy and not excluded II. When the agent has accepted the pre-existing condition risk III. After the policy has been in force for two years I & II only *I & III only II & III only I, II & III The period of time beginning with the onset of disability describes the: *elimination period benefit period rehabilitation period probationary period What is the maximum benefit period that would normally apply to an insured under a disability income policy providing lifetime benefits if he became disabled from sickness at age 61? 2 years 5 years *age 65 lifetime Which of the following is a Social Insurance Benefit rider? Social Insurance Substitute rider Social Insurance Supplement rider *Both a and b Neither a nor b What type of underwriting is performed when a disability income policy is applied for under a disability Purchase Option Rider? Medical underwriting *Financial underwriting Both a and b Neither a nor b A COLA rider affects the benefit paid under which of the following provisions? The total disability benefit provision The residual disability benefit provision *Both a and b Neither a nor b Why are Return of Premium riders criticized? Its premiums are considered unnecessarily high Premiums are returned too infrequently *They may inhibit the submission of claims The provisions are too complex for many policyowners to understand Return of Premium riders may make payments under all of the following EXCEPT: Upon policy surrender At the insured's death At the insured's age 65 *Upon the insured's disability A proposed insured's occupation class may play a role in determining all of the following EXCEPT: The amount of benefit available The disability premium The maximum benefit period available *The minimum elimination period available Why do insurers often refuse to sell disability income policies to applicants that work at home? *It is difficult to determine if someone is unable to work Working from home presents a greater than normal hazard The policy's Incontestable provision is affected by employment from home Personal and business expenses are commingled, making financial underwriting of disability income less precise Which of the following is NOT a factor in financial underwriting of disability insurance: the insured will be financially motivated to return to work following a period of disability *the insured will be able to pay the premium the insured will be overinsured the insured will malinger What choices are generally available to a disability insurance underwriter in the case of an applicant who is a substandard risk? I. Reject the risk II. Increase the premium III. Exclude coverage for certain conditions I & II only I & III only II & III only *I, II & III Which of the following underwriting actions is generally considered the most favorable to the substandard disability income applicant? Reject the risk Exclude coverage *Increase the premium Issue the policy with a split elimination period The Social Security definition of disability can be characterized as: pure own occupation modified own occupation limited own occupation *any occupation Which of the following are requirements for a worker to be eligible to receive Social Security disability benefits? *The individual must have worked in a covered occupation The individual is currently insured Both a and b Neither a nor b Which of the following is a state program providing disability income benefits? Workers Compensation Non-occupation Disability program *Both a and b Neither a nor b Which of the following benefits would NOT normally be provided under Workers Compensation? Cash payments Medical services *Long term care services Hospital services Benefit periods of 26 weeks and zero-day elimination periods are generally characteristic of: franchise group disability plans *short-term group disability coverage long-term group disability coverage individual disability income insurance Which of the following is NOT normally an eligible overhead expense that is reimbursed in Overhead Expense policies? Rent Utilities *Inventory Office supplies Which of the following would be typical Overhead Expense benefit periods? 12 months 24 months 60 months I & II only *I & III only II & III only I, II & III Which of the following is a typical elimination period length in a disability buyout policy? 30 days 90 days 6 months *24 months How are disability buyout benefits paid? In a lump-sum In installments * Either a or b Neither a nor b What role does an employer NOT play in a Keyperson disability policy? Owner Insured Beneficiary Premium payor Which of the following statements is/are correct with respect to the tax treatment of individually purchased disability income policies? Premiums are not tax deductible Benefits are received tax-free *Both a and b Neither a nor b In which of the following situations would the employer's payment of disability income insurance policy premiums on policies owned by employees be tax deductible? A proprietorship's payment of premiums on the proprietor's disability policy A partnership's payment of premiums on the disability policy owned by a 10% partner An S corporation's payment of premiums on the disability policy owned by a 15% stockholder *A regular corporation's payment of premiums on the disability policy owned by its sole stockholder Carl Walters is a non-owner employee of Williams Paint Company. In which of the following situations would Williams Paint Company's payment of disability income insurance premiums on a policy owned by Carl be deductible to the company? If Williams Paint Company is a regular corporation If Williams Paint Company is a sole proprietorship If Williams Paint Company is a partnership *the form of business organization is irrelevant for tax deductibility For which of the following organizations would Disability Overhead Expense policy premiums be tax deductible? Robert Wilson, M.D., a sole practitioner Gorman & Winslow, a law partnership Columbia Foods, Inc., a food distributor organized as a regular corporation I & II only I & III only II & III only *I, II & III Which of the following is/are correct with respect to the tax treatment of disability keyperson and buyout policies? Premiums are tax deductible Benefits are taxable when received Both a and b *Neither a nor b What is the elimination period of an individual?Elimination period is a term used in insurance to refer to the time period between an injury and the receipt of benefit payments. In other words, it is the length of time between the beginning of an injury or illness and receiving benefit payments from an insurer.
What does a guaranteed insurability rider provide quizlet?A guaranteed insurability rider guarantees the insured the option of purchasing additional amounts of disability income coverage at predetermined times without requiring the insured to provide evidence of insurability.
What is disability insurance Canada?Disability insurance can help protect you and your family from an unexpected illness or accident that leaves you unable to work and earn an income. Generally, disability insurance replaces between 60% and 85% of your regular income, up to a maximum amount, for a specified time if you: temporarily can't work.
When a person returns to work after a period of total?When a person returns to work after a period of total disability but cannot earn as much as he or she did before the disability, this situation is called which of the following? Residual disability. A CEO's personal assistant suffered injuries at home and as a result, was unable to work for four months.
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