Life & Health Insurance Exam Life & Health Insurance Disability Income Insurance 3

Question 1

What is 'presumptive disability' in a disability income policy?

Accepted Answer

An automatic total disability classification for specific severe losses such as loss of sight, hearing, speech, or limbs

Answer

A disability assumed to exist if the insured is over age 65

Answer

A disability declared by the insurer without a physician's report

Answer

A temporary disability lasting less than 30 days

Question 2

Under a recurrent disability provision, if an insured returns to work and becomes disabled again from the same cause, the policy will typically:

Accepted Answer

Treat the second disability as a continuation of the first if it recurs within a specified period

Answer

Require a new elimination period for every recurrence regardless of timing

Answer

Cancel coverage after the first recurrence

Answer

Reduce benefits by 50% for subsequent disabilities

Question 3

What is a Business Overhead Expense (BOE) disability policy designed to cover?

Accepted Answer

Business operating expenses such as rent, utilities, and employee salaries during the owner's disability

Answer

Personal living expenses of a disabled business owner

Answer

The cost of hiring a temporary employee to replace a key person

Answer

Long-term capital expenditures of a business

Question 4

A return of premium rider in a disability income policy provides that:

Accepted Answer

A portion of premiums paid is returned if the insured has few or no claims over a specified period

Answer

All premiums are returned if the insured dies before age 65

Answer

Premiums are waived during any period of disability

Answer

The insurer refunds premiums if the policy is canceled within 30 days

Question 5

How are individually owned disability income benefits taxed when the insured pays the premiums with after-tax dollars?

Accepted Answer

Benefits are received income-tax-free

Answer

Benefits are taxable as ordinary income

Answer

50% of benefits are taxable

Answer

Benefits are taxed as long-term capital gains

Question 6

What is the primary purpose of the rehabilitation benefit found in some disability income policies?

Accepted Answer

To cover the costs of vocational or physical rehabilitation programs that help the insured return to work

Answer

To pay for cosmetic surgery after a disabling accident

Answer

To reimburse the insured for home modifications after total disability

Answer

To provide a lump-sum payment upon the completion of disability

Question 7

Which of the following policies covers only disabilities caused by accidents and excludes illness-related disabilities?

Accepted Answer

Accident-only disability policy

Answer

Accident and Health (A&H) policy

Answer

Business Overhead Expense policy

Answer

Non-cancelable disability income policy