DISABILITY COVERAGE

 

CHAPTER ONE - INTRODUCTION

 

Please note in this text that in the descriptions of individuals, the masculine term is used (he, his, him) for simplicity purposes, and when the masculine term is used, it is intended to apply to the female gender terminology also.  “Key Employee” insurance is used interchangeably with “Key Person” in this text instead of the term that has been used since the inception of these plans, “Key employee” insurance.  Perhaps the more accurate depiction of “his/her” could be used, but it is much less clumsy to use the “gender-less” term of “he,” “his,” “him.”

 

DEFINITION AND OVERVIEW

 

Disability Income Insurance is health insurance that provides income payments to the insured wage earner when income is interrupted or terminated because of illness, sickness, or accident. (Dictionary of Insurance Terms, III Edition).  Basically, there are two types – Long-term and Short-term, the difference being the length of time that income can be paid.  There are other differences also, as will be discussed in this text, but most Long-term policies are sold on a Group basis, whereas Short-term policies are sold on an individual or Association Group insurance.

 

Disability Income policies are difficult to discuss in general terms and to compare with similar products.  Disability Income policies are specifically designed to allow for maximum flexibility and to provide for the maximum coverage of the individual needs of the insureds.  This flexibility is provided through the availability of benefits and optional coverages.  The benefit provisions must be related closely to each other, otherwise there could be unexpected claims.  Actuaries involved in policy designs for life and health insurance products agree that there is probably no other type of insurance that relies so much upon the differences and distinctions in the benefits and in the language that is used to describe the benefits.

 

To make it even more confusing, the designs of the contract itself and the language used in the contracts vary from insurer to insurer, and at time, from policy to policy within the same company’s portfolio.  One might hazard a guess that it should be simple, as a person is disabled or he is not, but nothing is simple in a highly-competitive world and Disability Income insurance is certainly competitive.  The difference between a definition in a policy can distinguish their policies from those issued by competitors.  Insurers even revise policies wherein they are restating old concepts in new and different ways. 

 

In today’s high-tech society, there are constant changes – some changes involving disability risks.  Remember carpal tunnel syndrome that was a result of computer terminal operators spending long hours at data entry?  The modern methods of medical treatment and diagnosis have changed the practical application of “disability” terminology and with the rapid development of treatment for many diseases and impairments, there is little doubt that benefits and provisions will continue to change.  Regardless, there are basic criteria that can be used for analyzing and evaluation of all health insurance policies.

 

Disability Income policies that are sold to individuals are issued either on a Guaranteed Renewable or Noncancellable basis, and in some cases, Conditionally Renewable. 

 

GUARANTEED RENEWABLE

 

A Guaranteed Renewable insurance policy (contract) is renewable at the option of the insured for a specified number of years, or to a stated age.  The company cannot refuse to renew the policy and it cannot change any of the policy provisions, except for the premium.  If the insurer wishes to change the premiums for the policy, it must do so for the entire policyholder classification, not just for one or a few insureds.  Usually the insured has the right to renew the policy to age 65 by paying the premiums on time. 

 

NONCANCELLABLE POLICIES

 

A noncancellable policy is a policy that the insurer cannot cancel, refuse to renew or unilaterally change the premium of the policy during the policy period.  Usually the insured has the right to renew the policy to age 65 by paying a stipulated premium when due.  The premium is set forth in the policy and cannot be changed by the insurance company.  This type of renewal provision is primarily limited to types of Disability Income insurance.

 

CONDITIONALLY RENEWABLE

 

This category is used for Disability Income and medical expense insurance.  It gives the insured a limited right to renew the policy to age 65 (or some later age) by the process of simply paying the correct premium on time.  The insurance company may refuse to renew coverage but only for reasons that are stated in the policy.  If the insurer is not going to renew under these provisions, the insured must be notified 30 days in advance of the due date of the premium.  The insurer retains the right to change premiums and benefits for all insureds of the same class. 

 

The reasons for not renewing the policy are clearly stated in the policy and vary according to the type of insurance.  However, the insurer cannot refuse to provide coverage because of a change in the health of the insured once the policy has been issued.  The company may refuse to renew a specific class of insureds (such all those insured under the policy form residing in the state) or may decide to discontinue a policy series for all insureds in a single jurisdiction. 

 

On an individual basis, the insurance company may refuse to renew the policy when/if the insured changes to a more hazardous occupation.  They may refuse to renew if the economic need for the policy changes, such as the insured becoming incorporated.  In particular, with Disability Income insurance, if the insured becomes over-insured through purchasing other insurance that will provide benefits in excess of the expected loss, the insurer may decline to renew.  This prevents “stacking” of policies, which could lead to an anti-selection situation where the insured would make more money on disability than by working.

 

The conditional Renewable provision is used mostly in specialized business disability income policies (other than overhead expense insurance).  In these specialized policies, the insurer retains the right not to renew on an individual basis when the covered business risk no longer exists, or when other specific and specified events occur.  In these policies, the insurer may retain the right to change benefits, but typically, it guarantees that the premium rates will not change.

 

This renewal provision is used traditionally in those noncancellable and guaranteed renewable Disability Income policies which provide continuous coverage from age 65 to age 75 while the insured continues to be employed full-time.  The premiums for this period are usually the renewal premiums for persons of the same attained age and risk classification (see later discussion of risk classifications).  During this period (called “conditional renewal period”) the monthly indemnity amounts are usually not reduced, however, the benefit period is usually limited to two years.

 

THE NEED FOR DISABILITY INCOME INSURANCE

 

The perception of the general public has been in the past and will probably continue in the future, that Disability Income insurance is not as useful or necessary to most individuals as Medical insurance or even, life insurance.  Most of the wage-earning population purchases, many times with the assistance of their employer, insurance that will provide medical coverage for themselves and their families.  Large proportions of the wage-earning population purchase group or individual life insurance.

 

A much smaller share of the wage-earning population has either individual or group Disability Income insurance.  In fact, only about one in four has any Disability Income insurance of any kind.  The attitude seems to be that there is little chance of one losing his income because of a disability, and anyway, if they do become disabled, they will recover completely in a short period of time. 

 

It is true that most disabilities are of the Short-term variety, usually lasting less than one month.  However, the probability of sustaining a disability that lasts for 3-months or more is high during the wage earning years.  The probabilities of Disability for periods of 90 days or more and Probabilities of Death prior to Age 65 (based on 1980 CSO Mortality Table) can be best illustrated by the following graph.

 

Probability of Disability and Death at various ages

 

It should be noted that the probability of a Long-term disability (90 days or more) is considerably greater than the likelihood of death until age 60, when they are about the same.

 

Also, it should be noted that if a person is disabled for at least three months, the average duration of disability ranged between five to seven years, as shown in the graph below.

 

Years                              Age at inception of disability (1985 Commissioners Disability Table)

 

The need for Disability Income insurance has increased for the same reasons that the need for Long Term Care insurance coverage has increased, which is basically the fact that as society develops economically, support for family members that was formerly provided by other family members, declines.  In many countries, the extremely high government social insurance costs have led to a shift in responsibility for disability income from the government to individuals.  In this country, there are very similar trends in benefit plans sponsored by employers, and particularly in the area of Disability Income insurance.  As indicated earlier, many medical advances have substituted disability for what would have previously been death.

 

From these basic statistics, it is obvious that the financial implications of disability can be a terrible burden for many people, and is even more financially difficult on the family than death.  A point missed by many in this discussion is that the expenses of a disabled person not only continues, but in most cases, increases.  With death, all expenses cease.  Medical expenses are generally covered by insurance, but only Disability Income insurance can cover the loss of the income stream.

 

DEFINITIONS

 

Definitions under the policy may be part of the benefit provisions, but usually they are separate.  The definitions are used to evaluate claims and control the benefit payments.  The most important definitions are those of injury, sickness, preexisting conditions and disability.

 

INJURY

 

Under a Disability Income policy, the word “injury” is defined as accidental bodily injury, occurring while the policy is in force.  Originally this definition used “accidental means,” but the latest wording uses “results” language.  This may seem like nit picking, but not all accidental bodily injuries result from accidental means.

 

ACCIDENTAL MEANS VS RESULTS

When “accidental means” is used regarding a bodily injury, there are two requirements that must be met if the loss is to be covered: Both the cause of the injury and the result (the injury) must be unexpected and unforeseen.  In addition, the event must not be under the control of the insured that results in the bodily injury.  Most states prohibit the use of the accidental means clause in any health insurance contract.  The following Consumer Application illustrates this difference.

 

 

 

SICKNESS

 

The definition of “sickness” is not entirely uniform among companies and their products, but generally it is defined to means sickness or disease that first manifests itself during the time that the policy is in force.  Some insurers extend the “first manifest” language to mean a sickness or disease that is first diagnosed and treated during the time that the policy is in force.  There is little difference, actually, and the intention in either case is to cover only sickness that is first contracted during the time that the policy is in force.

 

If the Disability Income policy contains either a “first manifested” or “first diagnosed” sickness definition, the policy will contain a preexisting condition limitation.

 

PREEXISTING CONDITION

 

Similar to preexisting condition clauses in other types of health insurance, it usually applies to the first two policy years and is used to exclude benefits for any loss that results from a (medical) condition – sickness or disability - that had not been acknowledged or reported by the insured, and that occurred prior to the policy date.

 

Preexisting condition provisions are tightly regulated in most states and therefore there are some variances from state to state.  Typically the definition would be similar to the following:

 

A pre-existing condition means a medical condition that exists on the Effective Date and during the past five years either (1) caused you to receive medical advice or treatment; or (2) caused symptoms for which an ordinarily prudent person would seek medical advice or treatment.

 

 

 

A more extensive definition of preexisting condition limitation may be stated similar to the following:

 

“Preexisting Condition Limitation. This policy does not pay benefits, which are based on a preexisting condition if:

1. The preexisting condition is not disclosed or is misrepresented in the application; and
2. The preexisting condition impairs the Insured or causes a loss of use or other loss during the first two years after the effective date of the coverage.  Benefits will not be paid if they are based on impairment or loss of use or other loss that began before the effective date of the coverage.
3. You are receiving medical care from someone other than yourself which is appropriate for the injury or sickness; and
4. Benefits under the Disability Benefit, the Recovery Benefit and the Loss of Use Benefit combined have not been paid for the Maximum Benefit Period.
5. After disability ceases, resumption of this Disability Benefit is subject to the preceding requirements and those stated in the Successive Disabilities provision.”

DEFINITION OF DISABILITY

 

Unquestionably, the most important definition on a Disability Income insurance policy is the definition of “disability.”  Individual Disability Income policies have been called “loss of time” insurance because of the definitions of occupational disability.  A disabled person insured under a Disability Income policy must have suffered a loss of income because they cannot perform the duties of their job.  The definitions of total disability and of partial disability depend upon the inability of the insured to perform certain occupational tasks. 

 

Partial Disability vs Residual Disability

(Permanent) partial disability is a disability in which a wage earner is forever prevented from working at full physical capability because of injury or illness.

 

Residual Disability is the inability to perform one or more important daily business duties or inability to perform the usual daily business duties for the time period usually required for the performance of such duties.

 

RESIDUAL DISABILITY INCOME INSURANCE

 

If Residual Disability Income coverage is provided, benefits are usually provided for the unused portion of the total disability benefit period, up to age 65.  If an individual is at least age 55 at the time of disablement, and total disability lasts less than a year, residual benefits are payable for the unusual portion of the benefit period for up to 18 months, but not beyond age 65. 

 

If there is at least a 25% loss in current earnings, the residual benefits will equal the percentage of loss times the monthly benefit for total disability. 

 

In most policies, the Residual Disability concept has replaced the partial disability provision as a means of paying a portion of the benefits to an insured who works at reduced earnings as a result of sickness or injury.  It should be noted that the residual concept differs from the usual indemnity plans as it stresses the protection of the income, rather than the protection of “occupational performance.” 

 

This benefit will be discussed in more detail later in this text.

 

TOTAL DISABILITY

There are two different definitions used by insurance companies to describe total disability.  The “any gainful occupation” definition, called “any occ” in the industry which is the most liberal coverage – and the most expensive.  The other is the “own occupation” definition, which is called “own occ” in the industry.

 

OWN OCCUPATION

The “own occupation” clause defines an insured as totally disabled if they cannot perform the major duties of their regular occupation, which is further defined as the occupation that the insured was performing when the disability began.  Under this definition, an insured could be working in some other capacity and still be entitled to policy benefits if they cannot perform the important tasks of their own occupations in the usual way.  In most cases, the own occupation coverage is limited to clients in the highest occupational classes, such as professionals and business executives. 

 

 

This definition can vary by policy and company.  Frequently the own occupation definition defines one as being totally disabled if

(a) they cannot perform the major duties of their regular occupation, or

(b)  are not at work in any other occupation.

 

Under this variance, if the insured is disabled and cannot perform his regular job, disability benefits can be terminated if he voluntarily chooses to work at some other occupation.  However, if this provision is used, the insurer cannot require the insured to resume work in another suitable occupation.  This coverage is also known as regular occupation coverage.

 

 

The most comprehensive definition as included in a few policies, would read:  “The inability to perform the major duties of your occupation; the insurance company will consider your occupation to be the occupation you are engaged in at the time you become disabled.”  They will pay the claim even if the insured is engaged in another occupation

 

The modern trend seems to be to include both definitions in the Disability Income insurance policy by using an “own occupation” definition for a specified period of time (usually two to ten years), and then thereafter, “any occupation” definition comes into play. 

 

Many insurers will offer own occupation coverage to age 65 for certain preferred classes of insureds, but this more liberal definition seems to be losing favor with insurers.

 

An example of an insurer’s Disability Income policy, which is sold to the category of risk just below “preferred”, is as follows:

 

“Total Disability, before age 55 or before benefits have been paid for five years for a period of disability, which ever is later, means that due to Injuries or Sickness:

1.  You are unable to perform the duties of your occupation; and

2.  You are under the care an attendance of a physician.

After you attain age 55 or after benefits have been paid for five years for a period of disability, whichever is later, Total Disability means that due to Injuries or Sickness:

1.  You are unable to engage in any gainful occupation in which you might reasonably be expected to engage because of education, training, of experience, with due regard to your vocation and earnings at the start of disability; and

2.  You are under the care and attendance of a physician.”

 

 

 

PHYSICIAN REQUIREMENT

 

Nearly all Disability Income insurance policies require that an insured must be under the care of a physician to qualify for disability benefits.  It might be said that this requirement is “taken with a grain of salt”, as obviously an insurer could not deny benefits if medical care is not essential to the recovery or well being of the insured.  Courts have frequently so stipulated also.  The insurance company simply cannot require that an insured maintain a doctor-patient relationship just for the purpose of certifying a disability.

 

PRESUMPTIVE DISABILITY

 

If a Disability Income policy provides benefits for total disability (as most do), it is quite common to also include a definition of presumptive disability.  Under this provision, an insured is presumed to be totally disabled (even if he is at work) if sickness/injury results in the loss of the sight of both eyes, the hearing from both ears, the power of speech, or the use of any two limbs.  Generally the insurer will waive the medical care requirement and will start paying benefits immediately upon the date of the loss.  The insured can work in any occupation and benefits will still be paid to the end of the policy benefit period, as long as the loss continues – which usually is always.  But, with modern miracles of medicine this can change also, for instance, those who lose their hearing can many times have it repaired.  As recently occurred with a well-known radio talk show host whose income depends upon give-and-take with listeners - after surgery and the implantation of newly developed hearing devices, his hearing has been nearly completely restored.  With the developments in new prosthetic devices, mechanical functions of the hands and legs can be restored so as in some cases, the individual can resume their regular occupation.

 

ANY GAINFUL OCCUPATION

 

If the policy definition were “any gainful occupation” (or "any occ”), the insured would be considered as totally disabled if he cannot perform the major duties of any gainful occupation for which he is reasonably suited because of education, training, or experience.  Since the insured can work at other jobs, this is obviously a more restrictive definition of disability than the “own occ” definition.  Primarily, it limits the benefits.  Used primarily in Group Disability Income insurance, this provision may read: “Because of sickness or injury, you are unable to perform the material and substantial duties or your occupation, or any occupation for which you are deemed reasonably qualified by education, training and experience.”

 

Throughout the years the “gainful occupation” provision has changed in definition, as originally many insurers would further define “regular occupation” as the recognized specialty in which a medical, dental, legal or accounting professional was engaged at the time of the disability. 

 

 

INCOME REPLACEMENT APPROACH

The above definitions of disability revolve around the insured’s ability (or inability) to perform certain tasks.  Several companies now use an income replacement approach to defining disability wherein insureds are reimbursed when they lose a percentage of their earned income, usually 20 or 25%.  The earned income must be lost due to an injury or sickness that requires a doctor’s care.

 

The following is an example of typical wording for policies using this approach.  Note that this approach not only affects the monthly benefit amount, it also affects payments of benefits during a “recovery” period. 

 

“Monthly Benefit Amount. If the Insured is totally disabled or if the Insured's loss of net income is 75% or more, we will pay the Maximum Disability Benefit for that month.  Whenever the loss of net income is less than 75% but at least 20%, the amount payable will be determined by the following formula:

 

Loss of net income   x   Maximum Disability

                                            Prior net income                   Benefit

 

During the first six months that we pay the Disability Benefit, we will pay one-half of the Maximum Disability Benefit rather than the amount due under the formula if the insured's loss of net income is from 20%, to 50%.

Recovery Benefit. We will pay the monthly benefit amount in any month after the Insured has satisfied the Elimination Period that:

1. the Insured is not entitled to the Disability Benefit but presently experiences a 20% loss of net income in his regular occupation as a result of the past injury or sickness which caused him to satisfy the Elimination Period;

2. benefits under the Disability Benefit, Recovery Benefit and Loss of Use Benefit combined have not been paid for the Maximum Benefit Period; and

3. the Insured is at work full time in his regular occupation.”

 

“Net earnings” are those earnings before personal taxes but after business expense deductions.  Companies vary on defining base earnings, such as “ the average for the 12 months just before the start of the elimination period.”  Another definition is “the average of the sum of the two highest consecutive year’s net earnings shown on the last five years tax returns.”

 

SUMMARY OF DISABILITY DEFINITION APPROACHES

 

In order to determine which is the “best” definition for an individual, the income replacement or the occupational definitions, the primary consideration to the insured is usually the cost involved.  In some companies, it is rather cut-and-dried” as “blue-collar” (or “gray-collar”) employees can qualify only for income replacement coverage.

 

Conversely, for those in the higher-income jobs, or “white-collar” workers or those in the top occupational classes (that is really what governs) and if they have the ability to pay, “own-occupation” definition provides the protection that is needed for their usual jobs.

 

 

DETERMINING APPROPRIATE DISABILITY INCOME COVERAGE

 

Now that the individual Disability Income insurance policy has been discussed, reviewed and dissected, exactly how they fit into the needs of the consumers.  Over the past few years, financial planning has become more and more important in today’s economic climate and many financial planners include insurance against the hazard of loss of income due to disability.  The methods used to program Disability Income insurance are very similar to those used for insurance programming and financial planning.  The procedure is still simple: First review the needs of the consumer for disability income, compare those needs with the financial resources of the consumer, and then provide the best available policies to fit those needs.

 

DETERMINING THE NEEDS

 

This is the most important step in “programming” for Disability Income insurance and starts with the consumer who must determine how they would maintain their present standard of living were they to become disabled.  This should always be a practical approach as a theoretical or unrealistic approach will, sooner or later, be discarded and many times not in favor of another plan.

 

Once the consumer recognizes that many of their needs will go unanswered if their income stops, then the determination of the type of Disability Income insurance best suited for their needs can be determined.

 

There are needs that continue after disability to be addressed, and these can fall into four categories:

 

SETTLEMENT FUND

 

Funds must be made available to pay such items as doctors and hospital bills that are not covered by insurance, as well as the ongoing premium for medical insurance.  Attorney’s fees may be involved – they very frequently are in disability cases – and must be paid.  Critical household expenses and other bills must also be considered, such as utilities and transportation.

 

MORTGAGE FUND

 

With most people, the home mortgage is their single largest obligation.  Additional homeowner costs must be considered also, such as homeowner’s insurance, taxes and interest.

 

EDUCATIONAL FUND

 

For those with children, or expected to have children, the cost of education is high and is skyrocketing.  A disabled individual would have a very difficult time in financing these costs, without making some preparation and taking these costs into consideration when considering a Disability Income insurance policy.

 

FAMILY INCOME FUND

 

The expenses necessary in providing for a family would be considered, such as the clothing, food and other such expenses.

 

 

 

NEEDS FACT-FINDER

 

 

The most effective method of determining the needs of the consumer in case of disability, it by using a “fact-finder.”  Financial and estate planners are familiar with this concept, which is simply to list the expenses that would have to be met in case of disability, as discussed above.  By completing such a form, many times an individual will be made aware of an expense that they would have in case of disability, but they had not otherwise considered.

 

These expenses would be offset by any income available if they became disabled.  These could include Social Security Disability benefits, Workers’ Compensation or Veterans’ Benefits and other income such as income from a working spouse and/or investments such as stocks, bonds, CDs, etc.  Often the consumer may have Group Disability Income insurance, and that would also be taken into consideration.

 

These forms may be either rather simple or more complex.  The difference is in the details. For instance, a simple form would lump together expenses and available disabled income into basic categories, whereas a more complex form would break out each individual expense or source of income.  Which method would depend upon the size of income, number and amounts of assets, etc?  Those who are wealthy would require more detail than those of moderate means.

 

The following Fact-Finder form (on the next page) is rather simple but contains most of the information necessary for a person of moderate means.

 

 

The difference between the existing resources and the total income requirements is the “gap” in coverage.  To reduce this to its simplest form, which may be the best method for those who are very knowledgeable in respect to their income and resources, the following three questions go straight to the heart of the situation: 

 

“If I should become disabled tomorrow,

1.  I would need $________ every month as a minimum without reducing my standard of living,

2.  I would want my disability payments to start after being disabled for _______ days,

3. I would want disability payments to continue until (age 65 or until __________).”

 

 

 

The above Consumer Application is an example of simple programming for disability, even though it is more complex than the usual situation.

 

NEEDS RECOMMENDATION

 

It cannot be stressed enough that working with a consumer to help solve their problems of unexpected disability must be performed on a professional basis.  In the minds of many, if not most individuals, preparing for disability is somewhere-in-the-future-maybe, as contrasted to life insurance where everyone knows they are going to die and health insurance where everyone will have some doctors or hospital bills sooner or later, etc.  Insurers are very much aware of this, and after an application has been submitted, it is the practice of most companies, and many agencies or brokers, to create a formal presentation which states in detail the proposal for individual Disability Income insurance.

 

These proposals are a necessity for business uses of Disability Income insurance, as discussed later in this text.  In respect to the present discussion of individual Disability Income insurance, usually there is an outline prepared which shows the Monthly Benefit Amount, the Elimination Period and the Benefit Period, and any optional features.  The premiums are shown by mode.  If there are maximum (potential) benefits, these are also shown on the proposal.

 

The cover sheet for the proposal is similar to a personal letter to the applicant.  It lists the financial situation of the insured (self-employed, employee, etc.) and a statement as to the need of additional income in case of disability.

 

How the proposed insurance would work in the individual situation of the insured, is briefly stated in “plain English” and options are also explained as to how they help the applicant with the problem of preparing for disability.

 

Many companies who write a lot of Disability Income insurance will also cover the provisions of the policy in layman’s terms, discuss the options and how they integrate with the policy and any riders are discussed in the same vein.

 

These proposals, while lengthy, are always written in such fashion that they are relatively easy to understand.  They must be closely read by the agent before presentation to the applicant, to verify and to make certain that what the applicant is expecting is what he is getting.  It can be very embarrassing if the applicant reads the proposal and finds something that they had not been told by the agent.

 

STUDY QUESTIONS

 

1.  The two types of Disability Income insurance are

     A.  Short Term and Long Term.

     B.  Participating and Non-participating.

     C.  Temporary and Permanent.

     D.  Contingent and Terminal.

 

2.  Disability Income insurance policies may be issued on 3 basis, but NOT

     A.  Guaranteed Renewable.

     B.  Non-cancellable.

     C.  Guaranteed issue.

     D.  Conditionally Renewable.

 

3.  During wage earner years, the probability of sustaining a disability for 3 months or more, is

     A.  no different than in later years.

     B.  undeterminable.

     C.  low.

     D.  high

 

4.  Accidental Bodily Injury occurring while the policy is in force, is the definition of

     A.  Injury.

     B.  Total Disability.

     C.  Sickness.

     D.  Residual Disability.

 

5.  A disability in which the wage earner is FOREVER prevented from working at full physical capability because of illness or injury, is

     A.  Permanent Partial Disability.

     B.  Temporary Disability.

     C.  Impartial Disability.

     D.  Residual Disability.

 

6.  The two different definitions of total disability are commonly known as

     A.  residual and partial.

     B.  permanent and temporary.

     C.  “own occ” and “any occ.”

     D.  Long-term and Short-term.

 

7.  If there is a loss of earnings of at least 25% of current earnings, the _________ __________ will equal the percentage of loss times the monthly benefit for total disability.

     A.  expanded benefits

     B.  non-payable benefits

     C.  policy deductible

     D.  residual disability.

 

8.  In nearly all Disability Income insurance policies, the disabled insured must

     A.  wait for 120 days before benefits start.

     B.  be under the care of a physician.

     C.  be confined to a hospital or nursing home.

     D.  pay a deductible.

 

9.  If an insured loses the sight of both eyes, he will receive benefits for total disability.  This is called

     A.  residual disability.

     B.  presumptive disability.

     C.  blindness disability.

     D.  neupathic disability.

 

 

10.  The most important step in programming for Disability Income insurance is

     A.  determining the policy options’ premiums.

     B.  execute the commission agreement.

     C.  determining the needs.

     D.  finding a Disability Income insurance carrier licensed in the state.

 

 

ANSWERS TO STUDY QUESTIONS

1B    2C    3D    4A    5A    6C    7D    8B    9B    10C