L1: Disability Income Flashcards
Disability Income Insurance
income protection insurance (replace proportion of income of policyholder if he/she is unable to work due to sickness or injury)
Premiums
level premiums payable at regular intervals during term of policy while insured is healthy. Purchased by employer
why might premiums be lower if purchased by employer?
may have smaller premiums than equivalent policies due to economies of scale, less risk from adverse selection or risk of non-payment
Waiting (Elimination) Period
amount of time that insured has to wait to receive benefit payment after they become disabled. Time is Beg of disability to Beg of benefit period etc 30,60,180 or 365 days
Benefits and paid to either of 3 scenarios:
payed at regular intervals while insured is disabled until earliest date of 1. recovery of policyholder to full health 2. end of policy term, 3. Death of policyholder
Benefit length and range of payment
2,5, to age 65 and usually 50-70% of annual salary
Factors Affecting Level and timing of payments:
Inflation
payment of disability insurance income can increase with inflation
Types of disability coverage (2)
own job and any job
Types of disability coverage - own job
person is disabled if individual cannot perform duties of their own job and not obligated to get a job where they could work
Types of disability coverage - any job
person is disabled if individual cannot perform duties of their own job and any other work at all
other sources of income that reduces benefit received
workers comp, government benefit
Extent to which insured can work after disability (2)
totally disabled or partially disabled
Extent to which insured can work after disability
- totally disabled
insured unable to perform any job and must provide medical evidence
Extent to which insured can work after disability
- partially disabled
policyholder can work but cannot earn full salary, reduced benefits will occur
Return to work assistance
benefits provided, retraining to help insured return to work smoothly
