CLU Disability Income Insurance 2

Question 1

Occupation classes in disability income underwriting are primarily used to:

Accepted Answer

Reflect the relative risk and physical demands of various occupations for rating and policy terms

Answer

Determine the geographic territory where coverage applies

Answer

Set the maximum benefit period available to the insured

Answer

Establish the waiting period before initial claims can be filed

Question 2

A 'presumptive disability' clause in a disability income policy typically provides:

Accepted Answer

Immediate full disability benefits—waiving the elimination period—for specified catastrophic losses such as total loss of sight, speech, hearing, or two limbs

Answer

A reduced benefit for conditions presumed to be pre-existing at policy issue

Answer

A benefit calculation presuming the insured will eventually recover and return to work

Answer

Coverage limited only to disabilities presumed to be permanent at onset

Question 3

The 'recurrent disability' provision in a disability income policy is designed to address a situation where:

Accepted Answer

The insured returns to work but becomes disabled again from the same or related cause within a specified period, allowing the new period to be treated as a continuation of the original claim

Answer

The insured suffers two different, unrelated disabilities at the same time

Answer

A subsequent disability from a completely unrelated cause begins after full recovery

Answer

Benefits automatically recur every year the insured remains totally disabled

Question 4

In a group long-term disability plan where the employer pays 100% of the premium, disability benefits received by an employee are:

Accepted Answer

Taxable as ordinary income to the employee, since the employer's premiums were paid with pre-tax dollars

Answer

Income tax-free because disability payments are always excluded from gross income

Answer

Subject to long-term capital gains tax rates

Answer

Tax-free up to $10,000 annually regardless of how premiums were paid

Question 5

A 'rehabilitation' provision in a disability income policy typically:

Accepted Answer

Provides continued or modified benefits to encourage and support the insured's participation in an approved vocational rehabilitation program

Answer

Requires the insured to attend rehabilitation or immediately forfeit all disability benefits

Answer

Reduces ongoing disability benefits dollar-for-dollar by the cost of rehabilitation services received

Answer

Converts the disability policy into a long-term care benefit during the rehabilitation period

Question 6

Which elimination period option in a disability income policy would result in the LOWEST premium for the insured?

Accepted Answer

180 days

Answer

30 days

Answer

60 days

Answer

90 days

Question 7

A 'cost of living adjustment' (COLA) rider in a disability income policy is specifically designed to:

Accepted Answer

Increase disability benefits periodically during a claim to help offset the impact of inflation on the insured's purchasing power

Answer

Adjust the policy premium each year in line with the Consumer Price Index

Answer

Allow the insured to purchase additional coverage as salary increases, without medical underwriting

Answer

Automatically reduce the elimination period during periods of high inflation