Chapter 3 Review

Riders attached to disability income policies can greatly expand the policy coverage.  Social Insurance Benefit riders can be added to increase the overall coverage while still enabling the insurer to avoid the problems associated with overinsurance in the event Social Security benefits are payable.  Available as supplements and substitutes, Social Insurance Benefits also permit policyowners to reduce the premiums for needed coverage.

Purchase Option and COLA riders both help to overcome the tendency of benefits to become less significant over time.  The Purchase Option Rider enables an insured to purchase additional coverage while COLA riders increase benefits while on disability.  Return of Premium riders offer disability income policyowners the opportunity to recover some or all of their disability income policy premiums.

Chapter 3 Review Questions

1.  Which of the following is a Social Insurance Benefit rider?

Social Insurance Substitute rider
Social Insurance Supplement rider
*Both a and b
Neither a nor b

2.  What type of underwriting is performed when a disability income policy is applied for under a disability Purchase Option Rider?

Medical underwriting
*Financial underwriting
Both a and b
Neither a nor b

3.  A COLA rider affects the benefit paid under which of the following provisions?

The total disability benefit provision
The residual disability benefit provision
*Both a and b
Neither a nor b

4.  Why are Return of Premium riders criticized?

Its premiums are considered unnecessarily high
Premiums are returned too infrequently
*They may inhibit the submission of claims
The provisions are too complex for many policyowners to understand

5.  Return of Premium riders may make payments under all of the following EXCEPT:

Upon policy surrender
At the insured's death
At the insured's age 65
*Upon the insured's disability