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1. In general, the threshold for establishing disability is higher when a disability insurance policy requires an occupation loss and an earnings loss in order to qualify for benefits.
a. True
2. In general, the threshold for establishing disability is lower when a disability insurance policy requires that an individual be unable to perform all of the material duties of his or her occupation in order to qualify for benefits.
b. False
3. Coverage stops at age 65:
b. False (As long as policy holder is still working beyond age 65)
4. Benefits can continue when a claimant goes back to work and is no longer under a physicians care:
a. True
5. Future increase options, when exercised, can be paid for a current claim:
b. False
6. On-the-job injurie are not covered, if it is a Workmen's Compensation Claim:
b. False
7. Cost of Living Adjustment (COLA) will be paid at 6%, when so stated in the policy:
b. False (Only if the CPI or some other barometer has been satisfied)
8. Residual benefit will be paid at the 85% rate when loss of income is 85%:
b. False (will be paid at 100%)
9. Total Disability benefits will be reduced, if income at time of claim is less than it was at time of policy issue:
b. False
10. Ratings due to build, smoking, etc. can never be removed:
b. False
11. A person earning $4,000 a month and totally disabled during his birth month at age 30 would earn over $1,500,000 during his lifetime to age 65.
a. True
12. The odds that a person will become disabled for at least 90 days before they turn age 65 decrease as one gets older.
b. False
13. Most disabilities are short term. The statistics suggest that the majority of people disabled for 90 days will be back to work within 2 years of the disability.
b. False
14. The "Elimination Period" is defined as the number of days one must be disabled prior to benefits being payable.
a. True
15. The purpose of a "Cost of Living Freeze" is to index the monthly disability benefit by the CPI-U following 12 months of disability and is designed to keep the benefits sufficient to help the disabled person remain economically whole.
b. False
16. "Workplace Modification" is an important contractual feature since it is designed to force the employee back to work.
b. False
17. A Salary Continuation program must be insured with insurance policies.
b. False
18. Typical Drug, Alcohol, Mental, Nervous benefit durations are 24 months.
a. True
19. BME (Basic Monthly Earnings) includes salary, bonuses (averaged), and overtime?
b. False
20. Over 75% of all small employers provide both STD and LTD.
b. False
21. Size of company has no impact on whether the employer provides disability coverage as part of their benefit package.
b. False
22. Most worker injuries occur on the job.
b. False
23. Professional Athletes can not obtain disability income protection insurance.
b. False
24. It is possible write a disibility policy witha $500,000 per MONTH benefit.
a. True
25. It is impossible to amass $50,000,000.00 of Key Person Disability coverage.
b. False (companies have secured key person disability protection on individuals in excess of $100,000,000 with Lloyd's of London)
26. Most employees are aware of what their current group LTD coverage actually covers if they were to qualify for benefits.
b. False (Not many do until they have something go wrong and look into it)
27. Incentive compensation is almost always covered within a typical Group LTD program.
b. False
28. Group LTD benefit maximums typically do not impact higher wage earning executives' income replacement:
b. False (They do in almost every case)
29. Packaging group and individual disability programs together can be a strategy for mitigating rate volatility due to large claim reserves from high earners.
a. True
30. Employer sponsored Multi life Individual Disability programs most often still require medical nderwriting requirements like Blood/paramed etc.
b. False
1. The period for which benefits will be paid based upon an individual's age when he or she becomes disabled is:
a. Qualifying period
b. Maximum benefit duration
c. Elimination period
d. Schedule rating
2.Before retirement age, _________ individuals can expect to be disabled for five years or more.
a. 1 in 3
b. 1 in 5
c. 1 in 7
d. 1 in 10
3.The amount of time an individual must be disabled before benefits begin is called the:
a. Service requirement
b. Pre-ex period
c. Qualifying period or elimination period
d. Maximum benefit duration
4.A key advantage of being awarded Social Security Disability Benefits is:
a. If awarded, Social Security will provide a cost of living allowance (COLA) increase every year
b. After two years on Social Security disability, a claimant becomes eligible for Medicare
c. An insured can be eligible for Social Security benefits for his/her dependents
d. All of the above
5. Own-Occupation is determined from the one of the following:
a. At the time of the application.
b. At the time of the application, plus one year.
c. At the time of claim. (Correct Answer)
d. As long as there is a 20% loss of income.
6.The Cost of Living Adjustment Option (COLA) is paid:
a. Regardless of any exclusions
b. Beginning with the 13th month of a covered disability
c. At time of death
d. After the elimination period has been satisfied.
7. Non-Can policies can:
a. Never be cancelled
b. Can never have a rate increase, or a change of policy wording.
c. Are guaranteed isue contracts
d. Can be cancelled by the carrier before age 65
8. Guaranteed Renewable Policies:
a. Are Guaranteed isue
b. Can be cancelled by the carrier before age 65.
c. Must be renewed by the carrier up to a certain age.
d. Cannot have rate increases
9.Own-Occupation:
a. Allows the definition to be satisfied, while the claimant is unable to perform 20 % of his substantial and material duties.
b. Allows the definition to be satisfied, while the claimant is unable to perform 75 % of his substantial and material duties.
c. Allows the claimant to be paid, if unable to perform the duties of a recent new occupation.
d. Allows the claimant to be paid, if they are unable to perform all of the substantial duties of his occupation
10. Entertainers represent unique underwriting challenges for disability insurance underwriters for the following reasons:
a. Lifestyle
b. Income volatility
c. Career longevity
d. Privacy and the consistent use of "stage names" for medical file record keeping
e. All of the above.
11. At any given age, the chance of a person becoming disabled versus dying is:
a. Greater
b. Less than
c. Equal to
d. Impossible to determine
12. The number one cause of home foreclosure is:
a. Death of a primary breadwinner
b. Disability of a primary breadwinner
c. Unemployment of a primary breadwinner
d. None of above
13. What does the term "SSFRA" stand for?
a. Social Seniority Full Retirement Age
b. Special Security Full Reinstatement Age
c. Social Security Full Retirement Age
d. Social Security Female Retirement Age
14.What percent of claims are paid historically by the Social Security Administration for disability benefits?
a. >65%
b. 20-30%
c. 30-50%
d. <15%
15.The largest change in the American population between 2000 and 2005 was in which demographic group?
a. 35-44
b. 45-54
c. 25-34
d. 65 and over
16. The 'Chronic condition' that has caused the largest percentage increase in medical conditions include the following items:
a. Aging from 30 to 50
b. Living in the Midwest and Northeastern parts of the United States
c. Increased ingestion of wine
d. AIDs
17. The need for disability insurance is greater for all the following reasons except:
a. Shrinking workforce, more diverse workforce
b. Uncertainty over governmental programs
c. Loss of physical fitness classes in secondary schools
d. Aging baby boomers
e. Reduced savings rates
18. The primary cause of bankruptcies is:
a. People are wasteful with their earnings
b. Too much debt
c. Medical costs and loss of income
d. Lack of education
19. Most disabilities are caused by disabilities that are:
a. On-the-job injuries
b. Off-the-job illnesses
c. On-the-job illnesses
d. Off-the-job injuries
20. What percent of all home foreclosures are due to disability?
a. 35%
b. 48%
c. 61%
d. 75%
21. A "Pre-existing Condition" clause protects the insurance carrier by:
a. Letting the insured know what conditions that he or she currently exhibits are covered
b. Letting the carrier know what conditions the insured has so it can make a decision as to whether to cover the condition
c. Is not permitted by most state DOIs
d. Defining certain illnesses or injuries that occurred or manifested themselves prior to the pol cy effective date and for which benefits are not usually payable
22. Disability benefits payable under the Social Security Administration require the following waiting or eligibility period prior to filing for benefits:
a. 3 months of total disability
b. 5 months of total disability
c. 6 months of partial and/or total disability
d. 9 months of total disability
23. What participation is typically required for 'contributory' plans?
a. 50%
b. 60%
c. 75%
d. 25%
24. Which of the following is not a typical integration option available?
a. Family
b. Primary
c. All Sources
d. Government Sources
25. Most disability contracts require full-time employees to work a minimum of at least how many hours per week?
a. 40
b. 25
c. 30
d. The employees regularly scheduled number of hours
26.According to the readings, the average annual cost for one employee's share of their LTD coverage will cost the employer approximately . . .?
a. $414/year
b. $215/year
c. $311/year
d. Impossible to determine an average cost
27.Choose the leading cause of long-term disabilities from this list:
a. Musculoskeletal Diseases
b. Cancer
c. Mental Illness
d. All other causes of Disability
28.The most frequently offered voluntary product is:
a. STD
b. LTD
c. Term Life
d. LTC
29. Residual coverage allows a policyholder to:
a. Collect an extra benefit while on claim
b. Satisfy the elimination period by being partially, not totally disabled
c. Reinstate coverage if the policy should lapse
d. Add higher amounts of benefit in future years
30. When a policyholder turns 65, a Noncancellable Guaranteed Renewable DI contract typically:
a. Becomes conditionally renewable
b. Terminates
c. Pays a lump-sum benefit
d. Continues as is
31. The odds of becoming disabled during your working years are greater than the odds of:
I. Dying during your working years
II. A house fire
a. I only
b. II only
c. Both I and II
d. Neither I nor II
32. A DI policy with Cost of Living Allowance (COLA) Rider:
a. Goes up slightly in cost each year
b. Increases the benefit amount each year before a person goes on claim
c. Allows increases in the benefit amount after a person goes on claim
d. Bases any increases on the prime lending rate
33. A example of a self-funded disability program includes all of the following except:
a. Personal Days
b. Sick days
c. An informal salary continuation program
d. Family Medical Leave Act (FMLA)
34.The response given least often as a reason an employer offers voluntary products is:
a. Employee interest
b. The client's broker recommended
c. Ease of administration
d. Cost savings to the company
e. Aid in recruiting and retaining employees
35.All of the following have State Disability Plans except:
a. California
b. New York
c. New Jersey
d. Rhode Island
e. Hawaii
f. Puerto Rico
g. All of the above
36. All of the following are methods the underwriter uses to control the LTD risk except for:
a. The number of employees on the plan
b. The plan percent of covered income
c. The taxable status of the benefits
d. The plan maximum
The following four questions come from the JHA presentation material and review your understanding of the market conditions for group disability insurance.
37. The number one reason that employers do not offer LTD is that they:
a. Believe their employees don't need it
b. Believe it is too expensive
c. Believe their place of employment is very low risk
d. Believe their employees don't want the coverage
38. What are the odds that an employee will suffer a serious disability between the ages of 35 and 65 years of age?
a. 1 in 3
b. 1 in 4
c. 2 in 5
d. 1 in 10
39. The number one voluntary product as chosen by employees is:
a. VIsion
b. Dental
c. Disability
d. Life
40. Depression is more prevalent in:
a. Males
b. Females
c. It is the same for both genders
d. An example of a stereotype
For questions 1-3, match these IRS Codes with the proper tax treatment:
1. Section 162 -- c. Executive Bonus Plan
2. Section 105 -- b. Taxability of Disability Plans
3. Section 104 & 106 -- a. Three year look back
4. An investment banking firm is concerned that the loss of their top income generator to a long term disability could have extremely adverse effects on the firm's bottom line and ability to sustain the business. Which of the following is the best disability coverage option for the firm to ensure some form of benefit to mitigate the loss in revenue and to hire a replacement if the top salesperson becomes disabled?
a. Personal Disability Income Coverage
b. Key-Person Coverage
(Key-Person Coverage. Key-Person Coverage will be owned by the firm and the firm will also be the beneficiary; the firm can then hire a replacement and offset any losses in revenue with their benefit. Personal Disability Income Coverage will pay a benefit to the individual in order to replace his/her lost income; it will not provide a benefit to the company itself Business Overhead Expense Coverage is a shorter term fix that will allow the firm to maintain it's day-to-day activities, but is not the best option to provide for a replacement or offset long term losses. Buy/Sell Coverage is usually more appropriate for situations where there are one or more partners and the remaining partner(s) need to buy out the disabled partner; it does not necessarily leave enough benefit left to hire replacements, etc.
c. Business Overhead Expense Coverage
d. Buy / Sell Coverage