Chapter 4: Disability Income & Related Insurance

Disability Income Benefits are limited to a percentage of earned income to avoid malingering. Malingering refers to the act of exaggerating or feigning symptoms in order to receive disability benefits. By limiting the benefits to a percentage of earned income, it discourages individuals from falsely claiming disabilities or exaggerating their conditions for financial gain. This helps ensure that the benefits are provided to those who genuinely need them and prevents misuse of the system.

Casey should purchase Key Employee Insurance because Sam is a valuable veteran with 19 years of experience at Casey's Garage and fills in for Casey when he is not in. This type of insurance is specifically designed to offset any losses and the costs of finding, recruiting, and training a replacement for a key employee like Sam in the event that he becomes disabled.

The reason for reducing Kelly's disability check to only 70% of her weekly salary is to discourage malingering. Malingering refers to the act of exaggerating or faking symptoms of illness or disability in order to receive benefits or avoid work. By reducing the amount of money received on a disability check, it serves as a deterrent for individuals who may attempt to exploit the system by pretending to be disabled.

The main reason for the Ticket Back to Work Act is to provide an incentive for individuals to return to work. This act aims to encourage individuals who are receiving disability benefits to reenter the workforce by providing them with support and resources. By offering incentives, such as continued access to healthcare and other benefits, the act aims to motivate individuals to seek employment opportunities and regain financial independence.

A Disability Income Benefit is intended to supplement an individual's earned income. This means that it provides additional financial support to individuals who are unable to work due to a disability, helping them maintain their standard of living and cover their expenses. This benefit is not designed to provide cash payments for travel and educational expenses, provide an annuity, or pay for unreimbursed expenses. Its main purpose is to provide financial assistance to individuals who have lost their ability to earn income due to a disability.

The reason for paying a benefit amount that is less than the insured's income is to prevent over utilization and malingering. By providing a benefit amount that is less than the insured's income, the insurer discourages individuals from intentionally prolonging their disability or overusing the benefits. This helps to ensure that the benefits are used appropriately and only for the necessary duration of the disability.

A Buy-Sell Agreement is a legal contract between business partners that outlines the terms and conditions for the sale of a partner's share of the business in the event of their disability or death. By purchasing a Disability Policy, the partners can ensure that funds are available to buy out the disabled partner's share and maintain the continuity of the business. This agreement provides financial security and protects the interests of both partners in case of disability.

The elimination period on an Individual Disability insurance policy refers to the amount of time a disabled person must wait before benefits are paid. This means that once a person becomes disabled, they must wait for a specific period of time before they are eligible to receive benefits from the insurance policy. This waiting period is designed to prevent individuals from making fraudulent claims or seeking benefits for short-term disabilities. Once the elimination period has passed, the disabled person can start receiving the benefits they are entitled to.

According to the given information, Social Security sometimes only pays partial benefits to survivors of those covered by Social Security. Therefore, the insured individual in question is considered "partially insured" as they are eligible for partial benefits from Social Security.

A Business Overhead Expense Policy would help Carl pay for expenses from his store during the time of his disability. This type of insurance is specifically designed to cover the ongoing expenses of a business while the owner is unable to work due to a disability. It typically covers expenses such as rent, utilities, employee salaries, and other necessary costs to keep the business running. This policy ensures that the business can continue to operate and generate income even when the owner is unable to actively participate in its day-to-day operations.

The primary risk associated with disability from an insurance exposure perspective is the loss of income. When an individual becomes disabled and is unable to work, they may experience a significant reduction or complete loss of their income. This can have a severe financial impact on the individual and their dependents, making it difficult to meet their financial obligations and maintain their standard of living. Insurance coverage for disability aims to provide financial protection by replacing a portion of the individual's lost income during the period of disability.

The amount received from a Key Person disability policy by a corporation is tax-free. This means that the corporation does not have to pay taxes on the policy benefit.

In Individual Disability plans, the benefit amount is most commonly determined based on the individual's annual earnings. This means that the disability benefit will be calculated as a percentage of the individual's annual income. This method is commonly used because it takes into account the individual's specific earnings and provides a fair and accurate representation of their income replacement needs in the event of disability.

In order to qualify for benefits under a Disability Income Policy, certain conditions must be met. These conditions typically include being under a physician's care, having income prior to the disability, and providing proof of disability. However, being in a convalescent center is not a required condition to qualify for benefits. This means that an individual can still receive benefits even if they are not in a convalescent center.

A Disability Income policy would most likely NOT require a specified income status prior to the disability in order to qualify for benefits. This means that the insured does not need to have a specific level of income before becoming disabled in order to be eligible for benefits under the policy.

Own occupation has a more liberal definition compared to the other options mentioned. It provides a better benefit for the insured as it covers them if they are unable to perform the duties of their specific occupation, even if they are able to work in a different occupation. This allows the insured to receive benefits that are more tailored to their individual circumstances and ensures that they are adequately protected in case they can no longer work in their chosen profession.

George would receive no disability benefits because his disability has not affected his ability to return to the same job. Since he can still work as an Administrative Assistant, he does not qualify for any disability benefits.

The correct answer is "Temporary, only". This means that Josh's disability is not permanent and will eventually heal or improve over time. It suggests that his broken arm is a temporary setback that will not have a long-term impact on his ability to play the piano and earn a good living.

Presumptive Disability is the correct answer because it refers to a provision in a disability policy that automatically classifies certain injuries or conditions as total disabilities, regardless of the individual's ability to work. In this case, Kelly's loss of both legs qualifies as a presumptive disability, entitling him to full benefits under his policy.

The statement that is false regarding Social Security Disability benefits is that qualifications for benefits are contingent upon the employee's having the proper insured status (45 quarters) and satisfying the waiting period.

The definition of the Return of Premium Rider does not match the terms because it refers to a provision that provides a refund of the cash value if disability occurs after a certain period. However, the other definitions are related to different insurance terms such as Guaranteed Purchase Option, Cost of Living, and Waiver of Premium, which are not mentioned in the definition of the Return of Premium Rider.

William is entitled to receive Double Indemnity benefits under his disability policy with a Presumptive Disability Rider. A Presumptive Disability Rider is an insurance provision that automatically classifies certain severe injuries or impairments as total disabilities, regardless of whether the individual is able to work.

In this scenario, William's injuries, which initially included loss of hearing, loss of sight in his left eye, and permanent back disorders, would likely qualify as presumptive disabilities under the rider.

Since his sight returned and his hearing loss resolved shortly after the accident, he would not be considered permanently disabled. However, the Presumptive Disability Rider would still entitle him to receive benefits, typically in the form of double indemnity, for a specified period following the accident. Therefore, William is entitled to receive Double Indemnity benefits under his disability policy with a Presumptive Disability Rider.

Group Disability Income contracts are typically offered on a nonoccupational basis. This means that the coverage provided by the contract applies to disabilities that occur both on and off the job. In other words, the policyholder is eligible to receive benefits if they become disabled due to any cause, whether it is work-related or not. This type of coverage is generally more comprehensive and provides greater protection for individuals, as it covers disabilities that may occur outside of the workplace.