Disability Income Insurance Chapter 12/1

Questions and Answers

Which is not used to determine the premium an insured must pay for their disability income policy?

Life insurance policies (correct)

Insured's occupation

Policy's definition of disability

Insured's earned income

James is buying disability income insurance. This insurance will _________________.

Replace his income

Which policy does Susan have if her benefits are not based on her ability to perform work duties?

Income replacement

The amount of periodic disability income benefits is based on the insured's:

Earned income Signup and view all the answers

The percentage of disability income benefits to the insured's income is:

60 to 70% Signup and view all the answers

Which definition of total disability is most restrictive?

Any occupation Signup and view all the answers

Which of the following definitions of total disability is most beneficial to the insured?

Own occupation Signup and view all the answers

The purpose of disability income insurance is to:

Replace the insured's income Signup and view all the answers

Benefits under a disability income policy are provided until the insured reaches the age of:

65 Signup and view all the answers

Which of the following factors is not used to establish the cost (premiums) for disability income insurance?

The insured's sexual orientation Signup and view all the answers

What percentage of the insured's income is typically paid under disability income policies?

60 to 70% Signup and view all the answers

Most disability income benefits are paid:

In periodic benefits Signup and view all the answers

Which of the following is not a factor pertaining to qualifying for disability benefits?

Delayed disability Signup and view all the answers

Of the following definitions of total disability, which is the most beneficial to the insured?

Own occupation Signup and view all the answers

The cost of disability income policy coverage is based on all of the following, EXCEPT:

Insured's marital status and number of dependents Signup and view all the answers

All of the following statements are true regarding disability income policies, EXCEPT:

Most disability income policies are paid in a lump sum. Signup and view all the answers

Study Notes

Disability Income Insurance Overview

Premiums for disability income insurance are not determined by the insured's life insurance policies.
Benefits aim to replace lost income when the insured cannot work due to disability.

Types of Policies

Income Replacement Contracts: Provide benefits regardless of the insured's ability to perform work duties, based on lost earned income.
Disability policies typically pay 60% to 70% of the insured's income.

Definitions of Total Disability

Most Restrictive Definition: "Any occupation" requires an inability to perform any job, making it harder to qualify.
Most Beneficial Definition: "Own occupation" pays benefits if the insured cannot perform their specific job duties.

Benefits and Payments

Benefits under disability income policies are typically provided until age 65.
Benefits are generally paid on a monthly or bimonthly basis.

Factors Affecting Premium Costs

Five key factors determine premium costs:
- Insured's occupation
- Insured's earned income
- Definition of disability in the policy
- Length of the benefit period
- Length of the elimination period
Not considered: Insured's sexual orientation, marital status, or number of dependents.

Qualification for Benefits

Factors like delayed disability do not affect eligibility for benefits.
The own occupation definition is most favorable for the insured as it focuses on their specific job functions rather than any job opportunities.

Summary of Coverage Details

Most disability policies provide periodic income benefits based on a percentage of lost income and focus on the insured's earned income instead of total income or different variables.

Studying That Suits You

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Description

Test your knowledge of disability income insurance with these flashcards from Chapter 12/1. Focus on the key concepts, including how premiums are determined and the purpose of disability income insurance. Perfect for students preparing for their exams or anyone looking to brush up on their insurance knowledge.