Final view - disability income

Chapter Recap

This chapter explained the key concepts and major types of disability income insurance, including group individual, group, and business disability policies. Let's recap the key features for each category:

DISABILITY INCOME
Disability Income Insurance	Replaces lost income in the event of disability Insured must be unable to perform occupational duties Presumptive disability – specifies condition that qualify insured for full disability benefits Recurrent disability – specifies period of time during with the recurrence of an injury or illness will be considered a continuation of a prior disability Elimination period – waiting period that lasts from the onset of disability until benefit payments starts  Probationary period – period after the policy starts during which benefits won’ t be paid for illness-related disabilities Benefit period – length of time monthly disability benefit payments last  Benefit limitations – maximum benefits an insurer is willing to accept for an individual risk; based on percentage of insured’s past earnings  Social Insurance Supplement (SIS) or Social Security Riders – supplement or replace benefits payable under Social Security Disability
Business Overhead Expense Policy	Reimburses small business owners for overhead expenses incurred while the business owner is totally disabled
Business Disability Buyout Policy	Specifies who will purchase a business partner's interest in case of disability
Key Person Disability	Covers the potential loss of business income and the expense of hiring and training a replacement for a key person  Business owns the contract, pays the premium, and is the beneficiary
Group Disability	Short-term disability (STD) - benefit period no longer than 2 years Long-term disability (LTD):  Elimination period may last as long as the benefit period for STD Benefit period may last until age 65 Usually reserved for management employees

9: Under which of the following disability income plans would the benefits be subject to income tax?

A Individual

B Key person

C Partnership buy-out

D Group

In group disability income policies, benefit payments that are attributed to employee contributions are not taxable, but benefits payments that are attributed to employer contributions are taxable to the employee.

12: Which of the following applies to partial disability benefits?

A An insured is entitled to a principal sum benefit for the partial loss of a limb.

B Payment is based on termination of employment.

C Benefits are reduced once an insured is no longer under a doctor's care.

D Payment is limited to a certain period of time.

The partial disability benefit is typically 50% of the total disability benefit, and is limited to a certain period of time.

15: An insured severely burns her hand, but is not classified as disabled. Which of the following types of coverage would cover at least a portion of the insured’s medical expenses?

A Accidental death & dismemberment

B Partial disability

C Medical reimbursement benefit

D Medical expense compensation

Medical reimbursement benefits help to pay medical costs for accidental injuries that are not considered to be disabling.