Disability Income Insurance Overview

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Questions and Answers

What characterizes High Deductible Health Plans (HDHPs)?

Lower premiums but higher deductibles. (correct)

Neither premiums nor deductibles are affected.

Require a Health Reimbursement Account for eligibility.

Higher premiums but lower deductibles.

What does an Individual Disability Income Policy provide?

Coverage for business expenses during the owner's disability

Income replacement if the insured is disabled and unable to work (correct)

Funds for purchasing a disabled partner's share in a business

Payment for medical expenses incurred due to disability

Which statement is true regarding Health Savings Accounts (HSAs)?

HSAs must be used within the same year or funds are lost.

HSAs are employer-funded only.

HSAs have no minimum deductible requirements.

HSAs allow pre-tax savings that roll over year-to-year. (correct)

Which type of policy covers ongoing business expenses if the owner becomes disabled?

Business Overhead Expense Policy Signup and view all the answers

What are Health Reimbursement Accounts (HRAs) primarily funded by?

Employer funds. Signup and view all the answers

What is a common feature of Group Disability Income Policies?

They may offer both short-term and long-term disability options Signup and view all the answers

Which of the following best describes Medigap policies?

Insurance policies that cover additional costs excluding Original Medicare. Signup and view all the answers

Which type of policy pays a lump sum for accidental death or specific injuries?

Accidental Death and Dismemberment (AD&D) Policy Signup and view all the answers

What is a primary advantage of group insurance policies compared to individual policies?

Lower premiums due to risk spreading among individuals. Signup and view all the answers

In terms of medical expense insurance, what is true about Major Medical Policies?

They provide broad coverage for extensive medical costs Signup and view all the answers

What is the most accurate feature of COBRA coverage?

Employees pay the full premium plus fees. Signup and view all the answers

What does a Key Employee Policy primarily address?

Covers replacement costs for a key employee if they become disabled Signup and view all the answers

What is the primary purpose of Cancer insurance policies?

To offer a lump-sum benefit or periodic payments for treatments. Signup and view all the answers

Which health insurance model requires using a network of providers and PCP referrals?

Health Maintenance Organization (HMO) Signup and view all the answers

Which type of care falls under Intermediate Care in long-term care insurance?

Periodic medical assistance. Signup and view all the answers

What do Flexible Spending Accounts (FSAs) allow employees to do?

Use pre-tax dollars for medical expenses Signup and view all the answers

Study Notes

Disability Income Insurance

Individual Disability Income Policy: Replaces income if the insured is disabled and unable to work, typically covering a percentage (60-70%) of pre-disability income. Benefits can be short-term or long-term.
Business Overhead Expense Policy: Covers business expenses like rent, utilities, and employee salaries if the owner is disabled, but does NOT cover the owner's income. Premiums are tax-deductible, benefits are taxable.
Business Disability Buyout Policy: Provides funds for partners to buy out a disabled partner's share of the business, commonly paid as a lump sum or installments.
Group Disability Income Policy: Offered by employers as employee benefits, generally more affordable than individual policies, offers short-term and long-term disability options. Premiums paid by employers may lead to taxable benefits for employees.
Key Employee Policy: Provides benefits to a business if a key employee is disabled, covering costs of replacement and training. Benefits are paid to the business, not the employee.

Accidental Death and Dismemberment (AD&D)

Pays a lump sum for accidental death or specific bodily injuries (e.g., limb loss, vision loss). Often supplemental coverage. Benefits range from partial (loss of a limb) to full (death).

Medical Expense Insurance

Basic Hospital, Medical, and Surgical Policies: Primarily cover specified medical expenses like hospital stays or surgeries; limited compared to major medical.
Major Medical Policies: Cover extensive medical costs, offering broader coverage, high limits, deductibles, and coinsurance; covers catastrophic events and comprehensive care.
Health Maintenance Organizations (HMOs): Require using a network of providers; need a Primary Care Physician (PCP) referral for specialists; emphasize preventive care.
Preferred Provider Organizations (PPOs): Allow flexibility to use in-network or out-of-network providers; no referrals needed for specialists; out-of-network care is typically more expensive.
Point of Service (POS) Plans: Combine features of HMOs and PPOs; PCP referrals required for in-network care; out-of-network care allowed at a higher cost.
Flexible Spending Accounts (FSAs): Allow pre-tax savings for medical expenses; unused funds are generally lost.
High Deductible Health Plans (HDHPs) and Health Savings Accounts (HSAs): HDHPs have low premiums, high deductibles; HSAs allow pre-tax savings for medical expenses, and funds roll over yearly.
Health Reimbursement Accounts (HRAs): Employer-funded accounts for employee medical expenses; funds may carry over at the employer's discretion.

Medicare Supplement Policies (Medigap)

Supplement Original Medicare by covering costs not included, like copayments, coinsurance, and deductibles.
Standardized plans (A through N).

Group Insurance

Differences Between Individual and Group Contracts: Group policies cover multiple individuals under one contract (e.g., employees). Lower premiums are due to risk pooling.
General Characteristics: Employers often subsidize premiums; portability may be limited if employment ends.
COBRA (Consolidated Omnibus Budget Reconciliation Act): Allows employees to continue group coverage after employment ends, but employees must pay the full premium plus admin fees.

Individual/Group Long-Term Care (LTC)

Eligibility: Covers individuals needing help with daily activities, requiring specific medical or functional criteria.
Levels of Care:
- Skilled Nursing Care: Provided by licensed medical professionals.
- Intermediate Care: Periodic medical assistance.
- Custodial Care: Assistance with daily living activities.

Other Policies

Dental: Covers routine dental care, cleanings, procedures, potentially orthodontics and cosmetic options.
Vision: Covers eye exams, glasses, and contact lenses, occasionally with discounts for corrective surgery.
Cancer: Provides lump-sum or periodic payments for cancer treatments.
Critical Illness or Specified Disease: Pays a lump sum upon diagnosis of specific illnesses (e.g., heart attack, stroke).
Worksite (Employer-Sponsored): Voluntary benefits (accident, critical illness, hospital indemnity) deducted from paychecks.
Hospital Indemnity: Provides fixed payments for hospital stays, supplementing other coverage.
Short-Term Medical: Temporary coverage for gaps in insurance, limited duration and scope.
Accident: Covers medical costs and lost income due to accidents, often includes AD&D benefits.

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Description

Explore the various types of disability income insurance policies that can protect both individuals and businesses. Learn about individual plans, group policies, and coverage specifics like business overhead and key employee insurance. Understand how these policies can provide essential financial support during disabling events.