CEBS CEBS Disability & Life Insurance Benefits 2 — Questions and Answers
Question 1: What is the coordination of benefits (COB) rule in group disability and health insurance?
- A rule requiring employees to coordinate their own benefits elections
- A provision that prevents duplicate payments when a claimant has coverage under multiple group plans (Correct answer)
- A requirement to coordinate FMLA and disability leave concurrently
- A rule limiting total benefit payments to the employee's full salary
Correct answer: A provision that prevents duplicate payments when a claimant has coverage under multiple group plans
COB rules establish which plan pays first (primary) and which pays second (secondary) when an employee has coverage under multiple group plans, preventing total payments from exceeding 100% of the loss.
Question 2: What is 'integrated' short-term disability coverage in a group benefits context?
- A plan that combines medical and disability coverage into one premium
- A disability plan coordinated with sick pay or state disability so combined benefits don't exceed a set income percentage (Correct answer)
- A policy that integrates with Social Security from day one of disability
- A plan purchased jointly by multiple employers in a consortium
Correct answer: A disability plan coordinated with sick pay or state disability so combined benefits don't exceed a set income percentage
Integrated STD plans coordinate employer sick pay or salary continuation with the STD benefit so the combined income replacement does not exceed a defined percentage (commonly 100%) of pre-disability earnings.
Question 3: Which federal law requires employers with 50 or more employees to provide up to 12 weeks of unpaid, job-protected leave for serious health conditions, and how does this interact with disability benefits?
- ADA — all disability leave is covered under ADA accommodation
- FMLA — employers often run FMLA concurrently with STD/LTD to limit total leave duration (Correct answer)
- COBRA — employees on disability leave must be offered continuation coverage
- HIPAA — disability leave triggers special enrollment rights
Correct answer: FMLA — employers often run FMLA concurrently with STD/LTD to limit total leave duration
FMLA provides 12 weeks of job-protected leave, and employers commonly designate disability leave as FMLA-qualifying so both run concurrently, limiting the employer's total leave obligation.
Question 4: What is 'portability' in the context of group life insurance?
- The ability to transfer the insurance policy to a different insurer
- The right for a terminating employee to continue group life coverage at group rates without new underwriting (Correct answer)
- The ability to roll the cash value into an IRA
- The employer's right to transfer plan assets to a new carrier
Correct answer: The right for a terminating employee to continue group life coverage at group rates without new underwriting
Group life portability allows employees leaving the company to continue their group life coverage at group rates, without evidence of insurability, for a defined period after termination.
Question 5: What is the purpose of a 'living benefit' or accelerated death benefit (ADB) rider in group life insurance?
- It pays a monthly income while the insured is alive and retired
- It allows a terminally ill insured to receive a portion of the death benefit before death (Correct answer)
- It accelerates premium payments to build cash value faster
- It provides accelerated deposits to a 401(k) upon diagnosis of disability
Correct answer: It allows a terminally ill insured to receive a portion of the death benefit before death
An accelerated death benefit rider allows a terminally ill policyholder to access a portion of the life insurance death benefit while still living, typically when life expectancy is 12-24 months or less.
Question 6: In group disability plans, what does the term 'own-occupation to any-occupation conversion' mean?
- The plan automatically switches from STD to LTD after 6 months
- The disability definition changes from own-occupation to any-occupation after a specified benefit period (commonly 24 months) (Correct answer)
- The insured can switch to any occupation and still collect benefits
- Benefits convert from flat to percentage of income after 24 months
Correct answer: The disability definition changes from own-occupation to any-occupation after a specified benefit period (commonly 24 months)
Many LTD policies use an own-occupation definition for the first 24 months of disability, then switch to the stricter any-occupation definition, which may result in termination of benefits for partially recovered claimants.
CEBS CEBS Disability & Life Insurance Benefits 2
What is the coordination of benefits (COB) rule in group disability and health insurance?