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

Presumptive disability provisions automatically consider the insured totally disabled—and waive the elimination period—upon certain severe losses like blindness or loss of both hands, regardless of work ability.

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

The recurrent disability provision allows a second disability from the same cause within a specified period (often 6 months) to be treated as a continuation, so the insured does not have to satisfy a new elimination period.

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

A BOE policy reimburses a business owner for fixed operating expenses—like lease payments, utilities, and staff salaries—that continue while the owner is disabled and unable to generate revenue.

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

A return of premium rider refunds a percentage of paid premiums—minus any claims paid—at the end of a specified period, rewarding policyholders who remain healthy.

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

When an individual pays disability premiums with after-tax money, the disability income benefits received are generally income-tax-free because the premiums were already taxed.

Life & Health Insurance Exam Practice Test

Life & Health Insurance Exam Practice Test

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