Unit 15: Disability Income Insurance Flashcards
(41 cards)
What is disability?
•inability to work
•work=one’s own occupation OR any occupation
Own occupation
Disability=insured’s inability to perform any or all duties of their occupation at the time disability begins
Ex. Lee is a page layout specialist & loses 3 fibers on each hand in an accident
—>under their own occupation definition, Lee is unable to use the keyboard
—>primary duty of this occupation & is disabled
Any occupation
Disability=insured’s inability to perform the duties of ANY occupation for which they’re reasonably qualified by training, education, & experience
What is an income replacement contract?
•pays a benefit if the insured experiences a loss of income as a result of suffering a covered illness or injury
•benefit trigger is the amount of income the insured is receiving at the time of the claim
•a reduction in income triggers payment
What is presumptive disability?
•condition that automatically qualifies insureds for disability benefits whether or not they can work, including:
-loss of/loss of use of any 2 limbs
-total & permanent blindness in both eyes
-total loss of speech
-total loss of hearing in both ears
•may also be determined using the loss of earnings test:
-insured’s level of earnings before disability is compared to the level of earnings after disability
-if post-disability earnings fall below pre-disability earnings by a given %, the insured is considered totally disabled & eligible for a full benefit even if he or she is earning some income
What is the physician care requirement?
•some older policies required that the insured be confined to the house & under the treatment of a doctor
—> called a “medically defined disability”
Benefits (monthly indemnity)
•when an individual qualifies for benefits, disability income plans pay a monthly amount to make up for lost earnings due to the insured’s inability to work
•benefit is referred to as an “indemnity”-it returns the insured to their original financial condition before the loss
What is the elimination period/waiting period?
•time period an insured must be disabled before benefits begin
•can be thought of as a kind of deduction-a time deductible rather than a dollar deductible
•keeps the insurance company from paying claims for short term or temporary disabilities
•when elimination period is satisfied, benefits begin & they are not paid retroactively
•may be 30, 60, 90, 180 days, or longer
•longer elimination period—>reduces the insurance premium & makes the disability income policy more affordable
Benefit period
•benefits are paid during the disability period or until the end of a specified periods of time called the benefit period
•typical benefit periods are 1 year, 2 years, 5 years, and to age 65
•longer benefit—>higher policy premium
What is the waiver of premium feature?
•eliminates the need to pay premiums during any period of disability
•becomes effective after the waiting period is satisfied
•refunds any premiums paid during the waiting period (usually 90 days)
Coordination with government benefits
•disabled insureds may also receive benefits from workers comp or other government programs
•during the planning process, the agent/producer must account for the possibility of an insured receiving too many benefits because this can encourage malingering
•the other possibility is receiving benefits that do not meet the individual’s income needs
What is the additional monthly benefit rider?
•pays an additional benefit during the first 6-12 months
•pays even if the insured receives government benefits
•gov programs have long waiting periods & take a long time to process disability claims
•AMB rider pays an additional benefit amount with the regular monthly benefit for a limited period of time, usually 6 or 12 months
What is the social insurance supplement (SIS) rider?
•monthly benefit
•pays when social benefits are not being paid
•makes up the difference between the government benefit & the amount of the rider
•pays only during the policy benefit period
•for those receiving a benefit for total disability this rider pays for additional benefits, less any legislated benefits like social security or workers comp for the same period of time
•the payment is in addition to other benefits payable under the insurance policy
•this rider benefits continue only as long as regular policy benefits are payable:
-during the policy’s benefit period
-while the insured remains disabled
What is occupational coverage?
Disability income insurance that covered both job-related & non-job-related disabilities
What is non-occupational coverage?
Covers disabilities that result from non-job-related illnesses or injuries
At-work benefits
Insurers offer reduced benefits for individuals who are impaired, but not totally disabled, & return to work
What are partial disability benefits?
•can perform some but not all essential duties of their occupation
•partial disability benefit is 50% of the total disability benefit
•partial disabilities benefits paid for a shorter period-usually 3-6 months
•may qualify for these benefits either as a result of suffering a partially disabling illness or injury & returns to work in a reduced capacity
What are residual disability benefits?
•alternative for partial disability
•benefits are paid when the insured cannot perform some of the duties of their occupation
•based on the amount of income lost rather than 50% of the total disability benefit
•to receive, insured’s earnings must be reduced by a stated % due to the disability
•loss is multiplied by the total disability benefit to determine the benefit payment
•can be paid whether the insured is working full-time or part-time
•paid throughout the benefit period as long as the insured’s income is reduced
What is recurrent disability?
•condition recurs after returning to work
•doesn’t have to wait to start receiving benefits if the condition recurs within a certain time frame after returning to work
What is the elimination period?
The amount of time an insured must be disabled before receiving benefits
The amount of time an insured must be disabled before receiving benefits is known as the _________.
Elimination period
What is the cost-of-living adjustment (COLA) rider?
•benefit received by a disabled insured is increased automatically to match increases in the consumer price index (CPI)
•typically, cost of living adjustments are made every 12 months for as long as the insured receives disability benefits
What is the future increase option (FIO) rider?
•allows insured to increase policy benefits
•no evidence of insurability required
•the insured’s income must have increased
•allows insureds to buy additional amounts of disability income insurance coverage at states future times without having to provide proof of insurability
•rate for additional coverage will be based on the insured’s attained age at the time of purchase
•only able to buy a predetermined amount of additional coverage at each option date
•insured’s income must have increased to the point that the additional coverage is needed
•number of purchase option dates is also limited
•usually only provides option dates every 3 years from ages 25-50
What is the relation of earnings to insurance provision?
•allows insurer to change policy benefit if insured’s income has decreased
•portion of the premium will be refunded to represent the decrease in coverage
