LLQP Accident and Sickness Insurance 2 — Questions and Answers

Question 1: What is the standard elimination period for most individual disability insurance policies in Canada?

7 days
30 days
90 days (Correct answer)
180 days

Correct answer: 90 days

The standard elimination period for most individual disability insurance policies is 90 days, which is the waiting period before benefits begin.

The elimination period is the time between the onset of disability and when benefit payments begin. While policies can offer elimination periods ranging from 0 to 720 days, 90 days is the industry standard for individual disability insurance in Canada. A longer elimination period results in lower premiums, as the insured bears more of the initial financial burden. Short-term disability plans may have shorter elimination periods of 7 to 14 days.

Question 2: Which type of disability definition provides the broadest coverage for the insured?

Any occupation
Regular occupation
Own occupation (Correct answer)
Gainful occupation

Correct answer: Own occupation

Own occupation provides the broadest coverage because it pays benefits if the insured cannot perform the duties of their specific occupation.

Under an 'own occupation' definition of disability, the insured is considered disabled if they cannot perform the material duties of their own specific occupation, even if they could work in another capacity. This is the most generous definition for the policyholder. 'Any occupation' is the most restrictive, requiring inability to perform duties of any occupation for which the insured is reasonably qualified. 'Regular occupation' is similar to own occupation but may have time limitations.

Question 3: What does the 'recurrent disability' provision in a disability insurance policy address?

Multiple disabilities occurring simultaneously
A disability that returns after a period of recovery (Correct answer)
Disabilities caused by pre-existing conditions
Progressive worsening of a disability

Correct answer: A disability that returns after a period of recovery

The recurrent disability provision addresses situations where the same disability returns after the insured has recovered and returned to work.

The recurrent disability provision determines whether a returning disability is treated as a continuation of the original claim or as a new claim. Typically, if the same disability recurs within 6 months of recovery, it is treated as a continuation, meaning no new elimination period is required. If it recurs after 6 months, it is treated as a new claim with a new elimination period. This provision protects insureds from having to satisfy multiple elimination periods for the same condition.

Question 4: In Canadian accident and sickness insurance, what is the purpose of a 'coordination of benefits' clause?

To ensure the insured receives benefits from multiple policies simultaneously
To prevent over-insurance by reducing benefits when other coverage exists (Correct answer)
To coordinate between provincial health plans and private insurance
To synchronize premium payment dates across policies

Correct answer: To prevent over-insurance by reducing benefits when other coverage exists

Coordination of benefits prevents over-insurance by reducing benefits when the insured has coverage under multiple policies, ensuring total benefits do not exceed actual income.

Coordination of benefits (COB) is a provision that prevents an insured from collecting more in disability benefits than their actual pre-disability earnings. When an individual has multiple sources of disability income (group plan, individual plan, CPP disability, workers' compensation), the COB clause allows the insurer to reduce its benefit payment so the total from all sources does not exceed a specified percentage (typically 85%) of the insured's pre-disability income. This prevents moral hazard where receiving more while disabled than while working could reduce motivation to recover.

Question 5: What is the key difference between non-cancellable and guaranteed renewable disability insurance policies?

Non-cancellable policies have lower premiums
Non-cancellable policies guarantee both renewability and premium rates (Correct answer)
Guaranteed renewable policies offer better coverage definitions
There is no practical difference between the two

Correct answer: Non-cancellable policies guarantee both renewability and premium rates

Non-cancellable policies guarantee both the right to renew and that premiums will remain the same, while guaranteed renewable policies only guarantee the right to renew but premiums can increase by class.

A non-cancellable policy guarantees two things: the insurer cannot cancel the policy, and premiums are locked in and cannot be increased for the duration of the contract. A guaranteed renewable policy only guarantees that the insurer cannot cancel the policy, but reserves the right to increase premiums for an entire class of policyholders (not individually). Non-cancellable policies carry higher initial premiums because the insurer assumes the risk of future cost increases. Both types protect the insured's right to maintain coverage regardless of changes in health.

Question 6: Under Canadian insurance law, which of the following conditions is typically excluded from standard accident and sickness coverage?

Heart disease
Self-inflicted injuries (Correct answer)
Cancer
Arthritis

Correct answer: Self-inflicted injuries

Self-inflicted injuries are a standard exclusion in accident and sickness insurance policies across Canada.

Standard accident and sickness insurance policies contain several common exclusions. Self-inflicted injuries are universally excluded because insurance is designed to cover fortuitous events, not intentional acts. Other typical exclusions include injuries sustained while committing a crime, war or acts of war, injuries covered by workers' compensation, and conditions arising from drug or alcohol abuse. Pre-existing condition limitations may also apply during the first one to two years of coverage, depending on provincial legislation and policy terms.

LLQP Accident and Sickness Insurance 2

What is the standard elimination period for most individual disability insurance policies in Canada?