Chapter 8 Flashcards
Define Mortality risk
the risk of a particular individual dying, at any given time, when compared to other individuals of the same age and sex.
Define morbidity risk
the risk of a particular individual contracting a disease, or other disabling condition at any given time when compared to other individuals of the same age or sex.
What are some examples of mortality data>
heigh, weight, BP, diabetes and smoking.
would a living benefit underwriting manual be based on more factual data than a life insurance mannual?
no
would assessment of a morbidity risk be more subjective than an assessment of a mortality risk?
Yes, and it requires different skills.
True or False.
At any given time of an individuals working life, there is a far greater change of experiencing a disability than death?
true.
at the age of 37 the chance of suffering a disability of at least 90 days duration is 8x greater thant the chance of dying.
True or False
the odds of a mortgage foreclosure due to a disability are 16x higher than the risk of foreclosure due to death?
true
how is disability insurance paid out in the time of a claim?
paid under the terms of the policy if the insurable event occurs. When total disability occurs, a benefit is payable (monthly benefit) after a defined period of time (waiting period), for a defined lenght of time (the benefit period)
What are the 3 types of renewabilikty provisions avialable on individual disability insurance policies?
- conditionally renewable
- guaranteed renewable
- non-cancerlable
What do you consider a “non-traditional” vs a “traditional” disability insurance policy?
conditionally renewable policies are “non-traditional” while guarenteed renewable and non-cancelable are “traditional”/
what are conditionally renewable disability plans? 1
- allows the insurance company the most flexability in making changes to an in force policy. Can cancel or change the plan without notice to specific policy holders.
- does not provide for any premium or policy provisionguarentees nor for the contribution of the policy
Class is ordinary defined by what?
age gender, specific waiting period beneift period occupation policy type.
Who would want a conditionally renewable policy?
individuals who are looking for a low-cost disability coverage and those who do not qualify for traditional disability insurance.
- high-risk or low-skilled occupations,
- seasonal or part-time work,
What is a guaranteed renewable policy?
cant be canceled or changed, provided premium is paid to date.
- premium can increase by class if the company is experiencing poor claims hx,
- u/w is less restrictive
- can include benefit limitations, ie. periods, elimination periods, or reduced beenfit amount for certain claims.
- some impairements can be excluded from these plans
What is a non-cancelable policy?
the most strictly u/w policy.
as long as premium is paid the company cannot:
1. increase the premiums, or make changes without aggreements
2. change or add provisions/restrictions to the policy
3.cancel the policy, regardless of insured’s change in occupation/health.
Does the non-cancelable provision have a time period?
yes, usually age 65.
some insurance companies may allow the policy to conitnue s/t premiums being paid and the insured continues to work FT.
What are some exceptions that are made to the policies when an insured is >65 yo.
- premiums are usually no longer guarantted and are based on the insurers age on renewable basis.
- the waiting period remains unchanged as per the original contract but the benefit period is changed to either 12 or 24 months.
- definition of disability is “total”
- any benefit riders are terminated.
Disability insurance policies define the conditions that must be met in order for a benefit to be payable. What are the 3 definition categories?
- own occupation
- regular occupation
- any occupation.
Define the term “own occupation” ?
referred to as “own occ” and provides disability coverage for the individual who cannot perform their specific job function. n
What defines a total disibility for own occupation?
as the insurerd’s inability, due to injury or sickness, to preform the important duties of his/her current occupation.
- insured must be under the regular care and attendance of a legally qualified medical practitioner.
some policies provide a limited own occupation period. What is this?
its where the insured would be protected in his own occupation for a shorter time period than the full length stated under the benefit period of the policy.
ie first 2, 5, 10 years of benefit period after which the definition should change to that of a regular or any occupation.
What is the definition of total disability for a regular occupation?
same as own occ apart from the exception that the insurers is ineligible for disability beenfits, if able tto work an occpation for which he/she has been educated/trained, or has experience with respect to the duties required under that specific job.
What is a limited regular occupation period mean ?
the regular occupation period would last for the first 2, 5, 10 years of the benefit period, with the definition changing to any occupation thereafter.
what is the definition of any occupation disability?
the lest liberal type of disability.
definition is based on the insured’s ability to work in any reasonable occupation.
what happens when a claim is placed for an any occupation disability?
the adjudicator will determine the individuals’ ability to work. Claims are adjudicated based on contract definitions in conjunction with all relevant medical, occupation and other information in support of the claim.
what are loss of income policies?
disability policies whom measure total disability in tems of income loss.
The proportion paid is based on loss of income rather than the loss of ability to preform duties.
if the insurers is unable to return to gainful employement due to disability, the Full benefit will be paid out.
How does the disability insurance policy structure differ form the life insurance policy structure?
in the manner in which the benefit payment is made and because the DI policy has a waiting period and a benefit period.
- also contains many various contractual exclusion riders.
- no cash value associated to a disability policy.
How are the benefit payments different with a disability policy?
payable on a monthly basis for the duration of the disability and upon recovery and continued premium payments, the policy remains in force.
What is the waiting period?
AKA the elimination period?
designates the period of time one must be disabled prior to benefits becoming payable.
- usually 30 days, although this can vary.
What is the benefit period?
refers to the max period for which benefits will be paid during a disability.
usually 2, and 5 years up to 65 yo.
General exlusion riders and limitations are often applied to disability products. Various exclusion riders provide that benefits will not be payable if a disability occurs second to what?
- an act or accident of war or military conflict.
- committing or attempting to commit a felony or engaging in an illegal occupation
- normal pregnancy or childbirth
- transplant surgery where a part of the body is transplanted into another person while the policy is in force (usually 6 months)
- comestic surgery, during the first 6 months the policy is in force.
What is the purpose of Key Person Insurance?
to product a business and replace lost profits in the event of a the loss of a key employee.
1.portion of the employees salary is taken into consideration when determining the faceamount.
Who is a key employee?
a person/employee who is considered a valuable asset to the organization and a necessity for its successful operation.
what is the purpose of office overhead expense policies?
to reimburse covered fixed business expenses during the disability of the insured owner.
- based on actual covered expenses incurred by the bussiness during each month of disability.,
What covered expenses are normally included in an office overhead expense policy?
- rent
- property tax
- utilities
- depreciation
- leased and rented equipment
- business liability insurance
- dues for prefessional associations
- interest on debt
- accounting fees
- certain employee wages
- other fixed expenses customary in the operation of the business.
Which definition of total disability is seen with overhead policies?
typically own, or regular
waiting periods can be 30, 60, 90 dats, and benefit periods are 12, 15, 18, or 24 months.
Usually a 20K max per mon th benefit.
What are some criteria points in a Disability Buy-Sell policy?
- funds a buy-sell agreement, which will detail the procedure to follow.
- legally enforceable contract between >1 individual.
- will define how long a TD must last befor a buy-sell is triggered, and how a TD is defined/determined.
- agreement should specify how the business will be valued at any future point in time, and the terms of ownership transfer and payement.
What are 3 different forms of benefit payments in terms of a buy-sell disability poilicy?
- lump sum that pays the benefit out all at once
- monthly benefit payment
- combination of a lump sum or monthly benefits.
Underwriting of a DI
- medical assessment
- more restrictive u/w
- specific medical impairements are seen more risky.
- APS and reports are very important to asses morbidity.
What are some medical impairement examples that increase the chance of disability but do not affect the mortality?
- back and vision problems
- mental/nervous
- arthritis
- CTS
What should be considered when u/w a DI in terms of avocation?
- hazardous spots can warrent modifications to DI policies.
- extream sports need to be reviewed carefully.
- ^ risk of a disability injury due to avocation on DI policies are more conservative than those for other insurance products.
An individuals occupation and duties are important factors in determining what 4 u/w basic procedures
- if they are eligible for DI
- type of products available
- amount of coverage
- rates to be charged.
Actuarial rating tables segment the working population into how many occupational classifications and why
Typically 5-6, based on the incidence of disability for each occupation. - some occupation require more thanone class d/t the variation within the duties .
