Review Questions
IAt most ages before normal retirement age, the likelihood of becoming disabled is greater than the likelihood of death
The likelihood of becoming disabled generally increases as an individual becomes older
At certain ages the probability of becoming disabled may be as high as four times the probability of death at that age
all of the above are true
2%
*4%
8%
10%
The widespread use of credit cards increases the likelihood that a disabled individual may borrow during a period of disability
The likelihood of borrowing from a bank may be adversely affected by an individual's disability
*Borrowing during a period of disability is generally considered one of the more inexpensive and workable options for finding cash to pay family bills
Borrowing during a period of disability may turn a financial problem into a catastrophic problem
*Total disability is couched in terms of an insured's inability to work
Income loss is required before total disability benefits are payable
Both a and b
Neither a nor b
zero
$2,500
$5,000
*$10,000
The permitted amount of income that may be earned during a period of total disability
*The duration of the own occupation definition
The amount of the total disability benefit
The number of times in any calendar year that the own occupation definition may be used
Own occupation
*Any occupation
Limited own occupation
Modified own occupation
zero
$10,000
$6,000
*$3,000
zero
$250
*$500
$1,000
zero
*$5,000
$8,000
$3,000
Residual disability
*Partial disability
Both a and b
Neither a and b
I. Disability waiver may begin after 90 days of disability
II. Disability waiver of premium of premium may be satisfied by residual disability
III. Disability insurance premiums may be waived upon the earliest of the elimination period or 90 days
I & II only
I & III only
II & III only
The non-disabling injuries benefit provides benefits for medical treatment within 90 days of an accident
The maximum non-disabling injuries benefit is usually 50% of the monthly total disability benefit
*Payment of the non-disabling injuries benefit causes disability benefits to become immediately payable
Non-disabling injuries benefits are payable in lieu of disability benefits
increase the premium for the coverage
refuse to renew the coverage
Both a and b
*Neither a nor b
Disability benefit adjustments may be based on the CPI-U
A Cost of Living rider may generally cause disability benefits to increase or decrease
*Adjustments to the disability income insurance benefit are made immediately upon the insured's becoming disabled
Disability benefits may not be reduced below the amount shown in the policy as a result of COLA adjustments
paying an additional benefit when the insured is hospitalized
waiving the policy's elimination period when the insured is hospitalized
*Either a or b
Neither a nor b
One
*Three
Four
Five
I. Age
II. Occupation
III. Lifestyle
I & II only
I & III only
II & III only
*I, II & III
The cost of disability coverage
The quality of disability coverage
*Both a and b
Neither a nor b
Smoking habits
Avocation
*Occupation
Drinking habits
That the insurer will not increase the premium during the specified period
That the insurer will not refuse to renew the policy during the specified period
*Both a and b
Neither a nor b
Noncancellable & Guaranteed Renewable
Conditionally Renewable
*Automatically Renewable
Guaranteed Renewable
I. When the condition was disclosed in the application for the policy and not excluded
II. When the agent has accepted the pre-existing condition risk
III. After the policy has been in force for two years
I & II only
*I & III only
II & III only
I, II & III
*elimination period
benefit period
rehabilitation period
probationary period
2 years
5 years
*age 65
lifetime
Social Insurance Substitute rider
Social Insurance Supplement rider
*Both a and b
Neither a nor b
Medical underwriting
*Financial underwriting
Both a and b
Neither a nor b
The total disability benefit provision
The residual disability benefit provision
*Both a and b
Neither a nor b
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
Upon policy surrender
At the insured's death
At the insured's age 65
*Upon the insured's disability
The amount of benefit available
The disability premium
The maximum benefit period available
*The minimum elimination period available
*It is difficult to determine if someone is unable to work
Working from home presents a greater than normal hazard
The policy's Incontestable provision is affected by employment from home
Personal and business expenses are commingled, making financial underwriting of disability income less precise
the insured will be financially motivated to return to work following a period of disability
*the insured will be able to pay the premium
the insured will be overinsured
the insured will malinger
I. Reject the risk
II. Increase the premium
III. Exclude coverage for certain conditions
I & II only
I & III only
II & III only
*I, II & III
Reject the risk
Exclude coverage
*Increase the premium
Issue the policy with a split elimination period
pure own occupation
modified own occupation
limited own occupation
*any occupation
*The individual must have worked in a covered occupation
The individual is currently insured
Both a and b
Neither a nor b
Workers Compensation
Non-occupation Disability program
*Both a and b
Neither a nor b
Cash payments
Medical services
*Long term care services
Hospital services
franchise group disability plans
*short-term group disability coverage
long-term group disability coverage
individual disability income insurance
Rent
Utilities
*Inventory
Office supplies
12 months
24 months
60 months
I & II only
*I & III only
II & III only
I, II & III
30 days
90 days
6 months
*24 months
In a lump-sum
In installments
* Either a or b
Neither a nor b
Owner
Insured
Beneficiary
Premium payor
Premiums are not tax deductible
Benefits are received tax-free
*Both a and b
Neither a nor b
A proprietorship's payment of premiums on the proprietor's disability policy
A partnership's payment of premiums on the disability policy owned by a 10% partner
An S corporation's payment of premiums on the disability policy owned by a 15% stockholder
*A regular corporation's payment of premiums on the disability policy owned by its sole stockholder
If Williams Paint Company is a regular corporation
If Williams Paint Company is a sole proprietorship
If Williams Paint Company is a partnership
*the form of business organization is irrelevant for tax deductibility
Robert Wilson, M.D., a sole practitioner
Gorman & Winslow, a law partnership
Columbia Foods, Inc., a food distributor organized as a regular corporation
I & II only
I & III only
II & III only
*I, II & III
Premiums are tax deductible
Benefits are taxable when received
Both a and b
*Neither a nor b
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