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Related Flashcards
Cards In This Set
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Drew used to earn $50,000 from his job and $10,000 from his investment portfolio. He applied for his disability insurance and the insurer would only give him $30,000 in coverage. It said he can get more later if his income increases. To protect his insurability, Drew added an FPO, which says hecan add $10,000 in coverage each year without evidence of insurability but subject to a financial underwriting. His salary is still $50,000 but his investment income is now $20,000. can he add more disability coverage?
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No.
The insurer only considers income that would stop in th eevent of a disability. If Drew became disabled his investment income would not be affected. An FPO allows you to add coverage without a medical underwriting but subject to a financial underwriting. A financial underwriting is to determine if your income warrants the added coverage. |
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Jack worked as an accountant and bought an individual disability policy based on this job class. Six month slater he quit his job as an accountant and became a ,member of the bomb disposal unit of the FBI. Can the insurer adjust his premium?
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Yes.
On a disability policy, even a non-cancelable policy, if the insured switches job classifications the insurer can amend the premium to bring it in line with the new job class. If the insured has moved to an unacceptable job class, it can cancel the policy. |
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Igor owns a machine shop that employs 15 tradesmen. While Igor is responsible for the business side of the operation he spends 50% of his time actively working in the shop. Igor has lots of money at his disposal and would like to buy the best type of disability policy available for himsef. Would a non-cancellable policy appropriate?
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No.
An insurance company will only offer a non-cancellable policy to "white collar" (office) workers and a select few blue collar (hands-on) occupations. Th ereason for this is the insurer cannot cancel th epolicy or increase the premkum unless the insured moves to another job claasification, and blue-collar workers are more likely to get injured. Non-cancellable (Non-can) The insurer is required to renew the policy as long as the insured keeps paying the premium. The insurer cannot increase the premium. |
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Graeme had a critical illness policy with a "Big 10" coverage. He needed to have a heart transplant. Fortunately, the operation was a complete success. He survived and has been healthy for the past 6 months. Would his critical illness policy have paid out?
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Yes. Major organ transplant is covered under a "Big 10" critical illness policy. He suffered an illness named in the policy and survived a minimum of 30 days.
On a critical illness policy, to be entitled to receive a benefit you must: - suffer a critical illness named in the policy - survive a certain number of days - usually 30. |
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Adam earned $10,000 gross income prior to his disability. His individual disability policy has an all source maximum of 75% of his pre-tax income. What does this mean?
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The most he can receive from all disability sources combined is $7,500 (75% of $10,000). All sources includes CPP, individual disability plans group disability plans, etc.
The all source maximum is designed to ensure that the insured is not receiiving so much in disability payments that there is "disincentive" to get back to work. |
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What is the CPP disability primary offset clause?
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CPP disability is first payor. As a result, any amount th einsured is entitled to receive under a disability policy will be reduced by what the insured is personally entitled to receive from CPP.
For instance, if the benefit on your disability policy is $5,000 per month and the CPP disability is paying you $1,000, your individual policy will pay out $4,000. Additional learning: Full CPP Offset: Any amount the insured is entitled to receive under a disability policy will be reduced by what the insured is personally entitled to receive from CPP and what their dependants are entitled to receive from CPP. |
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What rider allows you to add additional disability coverage on a disability policy each year without evidence of insurability but subject to a financial underwriting?
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Future Income Option (FIO)
An FIO is also known as Future Purchase Option (FPO). This ride rallows you to add stated amounts of disability insurance, on stated dates, without evidence of insurability, but you must prove your income warrants the added coverage (this is known as financial underwriting). Note: If you answered GIB, you are wrong because GIB refers to life insurance, not disability. |
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What position does an insurer take if the individiual is entitled to benefits under its individual plan and CPP disability?
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The insurance company takes the position of a second payor.
This means they will require the individual to claim benefits under the CPP disability program first, theen the insurer will deduct the amount CPP pays from what it will pay. This is known as CPP promary offset. |
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What type of policy pays out benefits if you are unable to do two or more activities of daily living (ADLs)?
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Long term care insurance also known as LTC insurance.
LTC pays out a daily or weekly benefit to help those who cannot do 2 or more ADLs pay for services such as in-home care, nursing home care, etc. |
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Joe ha s a critical illness policy with "Big 4" coverage.
He had a heart attack and died 12 days later. Would the critical illness policy benefit be payable? |
No.
A critical illness policy is known as a "livig benefit". It only pays out if you survive one of the critical illnesses for a certain number of days (usually 30). Hopefully, Joe had life insurance that would be payable upon his death. |
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A business owner is applying to purchase business overhead insurance, and the gaent asks to see his financial records. He is very tentative, and asks why the agent needs this information. What should the agent tell him?
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The insurer needs his statements to do a financial underwriting.In fact, the insurer will need to do two types of underwriting:
Financial underwriting : determine how large the comany's overhead costs are as this is what the insurer will cover if he becomes disabled. Health underwriting: determine the risk associated with his health to determine how likely he is to suffer a disability. |
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What is the purpose of a business overhead policy?
What is normally the longest benefit period on a business overhead policy? |
To keep the business afloat -- 2 years.
A business overhead policy covers certain costs to keep the business afloat while the business while the business owner is disabled so when he recovers, he will still have a business to get back to. After a 2-yr disability, it is extremely unlikely that the person will recover and be able to come back to work. Therefore the maximum benefit period is usually 2 years. |
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Sally has a disability insurance company policy with a 3 month elimination period and a 5 years benefit period. The policy has a preseumptive disability clause. Sally just had an accident where she lost the use of 2 limbs. For how long will she receive benefits?
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The policy will pay benefits for the full benefit period. In this case, 5 years.
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Sally has a disability insurance company policy with a 3 month elimination period and a 5 years benefit period. The policy has a preseumptive disability clause. Sally just had an accident where she lost the use of 2 limbs.
Will she have to satisfy the elimination period? |
If you have a presumptive disability and the policy has a presumptive disability clause, benefits start immediately, even if you do not miss a single day of work.
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Is kidney transplant surgery covered under a critical illness policy with "Big 4" coverage?
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No.
"Big 4" coverage covers heart, attack. stroke, coronary bypass and cancer. However, organ transplant surgery may be listed in some critical illness policies but they would have to give you the list in the question. |
