Chapter 4: Disability Income & Related Insurance
- 1.A corporation is the owner and beneficiary of a Key Person disability policy. If the corporation collects the policy benefit, then:
- A.
The amount is subject to an exclusionary rule
- B.
The amount received is tax free
- C.
IRS has no jurisdiction
- D.
The amount received is taxable income
- 2.Which of the following conditions would a Disability Income policy most likely NOT require in order to qualify for benefits?
- A.
The insured must be unable to work
- B.
A specified income status prior to the disability
- C.
The insured must provide proof of disability
- D.
The insured must be under a physician’s care
- 3.Which of the following methods is most commonly used in Individual Disability plans to determine the benefit amount?
- A.
Coordination of Benefits flat amount
- B.
Occupational rate
- C.
Earnings table
- D.
Annual earnings
- 4.What is the main reason for Ticket Back to Work Act?
- A.
To qualify for Buy Sell Benefits
- B.
To have an incentive to return to work
- C.
To have an incentive to qualify for the maximum benefits of Old Age Disability
- D.
To qualify for Quarter of Coverage
- 5.Disability Income Policies include certain conditions describing how the policy will respond. Which of the following conditions would NOT be required in order to qualify for benefits?
- A.
Be in a Convalescent Center
- B.
Under a Physicians Care
- C.
Have income prior to the disability
- D.
Proof of disability
- 6.Which Disability occupation definition has a more liberal definition, and therefore provides a better benefit for the insured?
- A.
Hazardous occupation
- B.
Any occupation
- C.
Own occupation
- D.
Liberal occupation
- 7.William is involved in a physical collision while playing Soccer. His injuries being of a serious nature also included loss of hearing, loss of sight in his left eye, in addition to permanent back disorders. Fortunately his sight returned as did his loss of hearing shortly after his accident. His disability policy includes a Presumptive Disability Ride. Under what is William entitled to receive?
- A.
No benefits
- B.
Double Indemnity
- C.
Short Term Disability
- D.
50% of his Income
- 8.Social Security sometimes only pays for partial benefits to survivors of those covered by Social Security. According to Social Security Regulations this insured was:
- A.
Partially insured
- B.
Not insured
- C.
PIA to Small
- D.
Totally covered
- 9.A Disability Income Benefit is intended to:
- A.
Provide cash payments for travel and educational expenses
- B.
Supplement individuals earned income
- C.
Provide an annuity
- D.
Pay for unreimbursed expenses
- 10.Carl owns a small craft store. He was involved in a car accident that rendered him totally disabled for half a year. Which type of insurance would help him pay for expenses from his store, during the time of his disability?
- A.
Business Employer Policy
- B.
Business Overhead Expense Policy
- C.
Business Disability Policy
- D.
Business Expense Policy
- 11.Why are Disability Income Benefits limited to a percentage of earned income?
- A.
To avoid extra services
- B.
To avoid an injury
- C.
To avoid malingering
- D.
To avoid extra expenses
- 12.George was involved in a serious Car Accident that left him paralyzed and confined to a wheelchair. He works as an Administrative Assistant so his disability has not affected his ability to return to the same job. What percentage of his disability benefits would George receive?
- A.
No benefits
- B.
Rehabilitation only
- C.
Presumptive Benefits
- D.
Loss of USE
- 13.From an insurance exposure prospective, which of the following is the primary risk associated with disability?
- A.
Interest rate risk
- B.
Reduced mobility
- C.
Loss of income
- D.
Loss of physical ability
- 14.The elimination period on an Individual Disability insurance policy refers to:
- A.
Period of time that benefits are still payable after an insurance company discontinues a policy
- B.
Amount of time a disabled person must wait before benefits are paid
- C.
Length of time a policy will continue to pay for specified disabilities
- D.
Point of time when benefits are exhausted
- 15.Under a disability income policy, the insurer does not pay a monthly benefit that is equal to the insured’s previous income. The reason for paying a benefit amount that is less than the insured’s income is to:
- A.
Enable the insurer to provide affordable coverage
- B.
Prevent the insured from obtaining excess insurance
- C.
Prevent over utilization and malingering
- D.
Enable the insurer to reduce variable costs
- 16.Josh is a concert pianistand earns a very good living with his talent. He was in a car accident and broke his arm. His disability is considered.
- A.
Total, temporary
- B.
Total, partial
- C.
Partial, temporary
- D.
Temporary, only
- 17.Kelly, a kindergarten teacher, was in a boating accident and lost both legs. Although he will continue to teach, his disability policy pays full benefits because of this provision.
- A.
Presumptive Disability
- B.
Total Disability
- C.
Partial Disability
- D.
Residual Disability
- 18.Which of the following definitions does not match the terms?
- A.
Guaranteed Purchase Option- guarantees that on specified dates, ages or occurrances, the insured may purchase additional monthly benefits, if income justifies it, without proof of insurabilty.
- B.
Cost of Living- automatically increases monthly benefits, after the onset of disability, often in accordance with increases in the Consumer Price Index.
- C.
Waiver of Premium- in the event of total disability continues beyond a specified period, the insurer will waive premiums for the duration of he diability.
- D.
Return of Premium Rider- a special provision that provides for refund of the cash value if disability occurs after a certain period.
- 19.Sam is a valuable veteran of 19 years at Casey's Garage working with 26 people and filling in for Casey when he is not in. Casey wants to insure Sam to offset any losses and the costs of trying to find, recruit and train a replacement should Sam become disabled. What type of policy should Casey purchase?
- A.
Business Overhead Insurance
- B.
Key Employee Insurance
- C.
Special Insurance Supplement
- D.
Employee Impairment Insurance
- 20.Two business partners wanting to be assured the business will not be lost should one of them become disabled, should purchase a Disability Policy to fund which of the following?
- A.
A Buy-Sell Agreement
- B.
A Business Continuation Plan
- C.
A Business Overhead Expense Contract
- D.
A Guaranteed Purchase Option
- 21.What statement is false regarding Social Security Disablilty benefits?
- A.
The waiting period is 5 months
- B.
To collect disability benefits, an employee must be unable to engage in any kind of gainful work because of a medically determined physical or mental condition that has lasted, or is expected to last, at least 12 months, or results in an early death.
- C.
Qualifications for benefits is contingent upon the employee's having the proper insured status (45 quarters) and satisfying the waiting period.
- D.
Higher average earnings will result in a larger absolute benefit, thus lower income workers receive a greater percentage of their pre-disability income than the higher wage earner does.
- 22.Kelly was told she could only expect about 70% of her weekly salary on a disability check if she was ever disabled. The reason for this is to reduce________.
- A.
Malfunctions
- B.
Malingering
- C.
Misalignment
- D.
Missions
- 23.Most Group Disability Income contracts are offered on a/an
- A.
Nonoccupational basis
- B.
Occupational basis
- C.
Contributory basis
- D.
Noncontributory basis
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