EXAMFX Workers Compensation and Disability Insurance 2 — Questions and Answers
Question 1: Which type of disability income policy provision prevents an insurer from canceling coverage as long as premiums are paid?
- Waiver of premium
- Noncancelable provision (Correct answer)
- Guaranteed renewable provision
- Elimination period clause
Correct answer: Noncancelable provision
A noncancelable policy guarantees the insurer cannot cancel the policy or raise premiums as long as the policyholder continues to pay the premium on time.
Question 2: In a disability income policy, what is the 'elimination period'?
- The period after which the policy terminates
- The time the insured must be disabled before benefits begin (Correct answer)
- The maximum benefit payment period
- The waiting period before the policy becomes effective
Correct answer: The time the insured must be disabled before benefits begin
The elimination period is a waiting period at the start of disability during which no benefits are paid; it functions like a deductible measured in time rather than dollars.
Question 3: Which definition of disability is more favorable to the insured under a disability income policy?
- Any occupation definition
- Own occupation definition (Correct answer)
- Residual disability definition
- Total disability definition
Correct answer: Own occupation definition
The own-occupation definition pays benefits if the insured cannot perform the duties of their specific occupation, even if they could work in a different job.
Question 4: Which provision in a disability income policy allows the insured to receive partial benefits when they return to work part-time after a total disability?
- Waiver of premium
- Residual disability benefit (Correct answer)
- Recurrent disability clause
- Rehabilitation benefit
Correct answer: Residual disability benefit
The residual disability benefit pays proportional benefits when an insured returns to work part-time or at reduced earnings after a period of total disability.
Question 5: Under a group short-term disability (STD) plan, what is the typical maximum benefit duration?
- Up to 26 weeks (Correct answer)
- Up to 5 years
- Up to age 65
- Up to 10 years
Correct answer: Up to 26 weeks
Group short-term disability plans typically provide benefits for up to 13 to 26 weeks, bridging the gap until long-term disability benefits begin.
Question 6: A disability income policy that the insurer can renew but may adjust premiums on is called:
- Noncancelable
- Conditionally renewable
- Guaranteed renewable (Correct answer)
- Optionally renewable
Correct answer: Guaranteed renewable
A guaranteed renewable policy ensures the insurer must renew coverage but allows the insurer to raise premiums on a class basis, unlike noncancelable policies.
EXAMFX Workers Compensation and Disability Insurance 2
Which type of disability income policy provision prevents an insurer from canceling coverage as long as premiums are paid?