Disability income and accidental death and dismemberment policies

Correct answer: It pays a periodic cash benefit to the insured, replacing part of earned income while sickness or injury prevents work.

Disability income insurance is loss-of-time coverage. It does not reimburse medical bills; it pays a periodic benefit directly to the insured to replace a portion of pre-disability earned income for as long as the disability continues and the benefit period lasts.

Correct answer: No benefit accrues during the first 90 days; benefits begin to accrue after that period and the first check arrives at the end of the first benefit month, roughly four months after the disability began.

The elimination period is a stated number of days of continuous disability that must pass before benefits begin to accrue. Benefits are typically paid at the end of each benefit interval rather than in advance, so with a 90-day elimination period and monthly payments the first check arrives about four months after disability begins.

Correct answer: A stated percentage of the principal sum, less than the full amount, paid for a single severe loss such as one hand, one foot, or sight in one eye.

In AD and D coverage the principal sum is the full face amount, paid for accidental death. The capital sum is a stated lesser percentage of the principal sum, paid under the schedule of losses for a single severe loss such as loss of one hand, one foot, or sight in one eye. Multiple severe losses commonly pay the full principal sum.

Correct answer: The relapse is treated as a continuation of the prior claim, so no new elimination period applies and benefits resume.

A recurrent disability provision states that if the insured becomes disabled again from the same cause within a stated period after returning to work, the new period of disability is treated as a continuation of the prior claim. Because it is the same claim, no new elimination period is imposed and benefits resume under the original benefit period.

Correct answer: Full disability benefits are payable without his having to satisfy the policy's usual definition of disability.

Presumptive disability provisions pay full benefits upon specified severe losses, such as loss of sight, hearing, speech, or the use of limbs, without requiring the insured to meet the policy's ordinary test of disability. Loss of sight in both eyes is a classic presumptive loss, so the fact that he could perform sedentary work does not reduce or bar the benefit.

Correct answer: An own-occupation definition would pay because she cannot perform the duties of her own job, while a strict any-occupation definition likely would not, because she is suited for other gainful work.

Own occupation pays when the insured cannot perform the duties of her own job, so the surgeon qualifies even though she can teach. Any occupation is stricter: it pays only if the insured cannot work in any gainful occupation for which she is reasonably suited, and teaching anatomy is such an occupation. Many policies use own occupation for an initial period and then switch to the stricter test.

Correct answer: Paying less than full earnings preserves the insured's financial incentive to recover and return to work.

Benefit amounts are set as a percentage of pre-disability earnings so that the insured is always financially better off working than remaining on claim. Insurers reinforce this with issue and participation limits and by coordinating with other income sources such as group coverage or other disability benefits.

Correct answer: They are accident and health contracts under Title 8 of the Insurance Code, with individual policy forms and required provisions governed by Chapter 1201.

Both disability income and AD and D are accident and health coverages. In Texas they fall under Title 8 of the Insurance Code, which addresses health insurance and other health coverages, and individual accident and health policy forms and their required provisions are governed by Chapter 1201 (Tex. Ins. Code Title 8; Tex. Ins. Code ch. 1201).

Correct answer: Presumptive disability

Presumptive disability treats certain severe, specified losses — sight, hearing, speech, or use of limbs — as conclusive proof of total disability, so full benefits are payable without the insured having to satisfy the contract's ordinary definition of disability.

Correct answer: Lengthen the elimination period

The elimination period is the number of days of continuous disability that must pass before benefits begin to accrue. Lengthening it shifts more of the early, most frequent short claims to the insured, so the premium drops — without changing the benefit amount or benefit period.

Correct answer: Capital sum

In AD&D coverage the full face amount is the principal sum, payable for accidental death. A capital sum is a stated lesser percentage of the principal sum, paid for a single severe loss such as one hand, one foot, or the sight of one eye — exactly what the schedule of losses provides here.

Correct answer: The relapse is treated as a continuation of the earlier claim, so no new elimination period applies

A recurrent disability provision states that if the insured relapses within a stated period after returning to work, the new period of disability is treated as a continuation of the prior claim. Because it is the same claim, no new elimination period must be satisfied and benefits resume immediately.

Correct answer: Preserve the insured's financial incentive to return to work

Benefit amounts are set at a percentage of pre-disability earnings so that being disabled is never more profitable than working; the insured keeps a financial incentive to recover and return to work. Insurers reinforce this with issue and participation limits and by coordinating with other income sources.

Correct answer: Benefits are payable under an own-occupation definition, but likely not under an any-occupation definition, because she can work in a gainful occupation for which she is suited

An own-occupation definition pays when the insured cannot perform the duties of her own job — surgery — so she qualifies. An any-occupation definition is stricter and pays only if she cannot work in any gainful occupation for which she is reasonably suited; teaching and consulting in medicine fits her training, so that stricter test would not be met.

Correct answer: Death from a heart attack caused by advanced heart disease

AD&D is accident-only, limited-benefit coverage: the loss must result from accidental bodily injury and occur within the time period the policy states after the accident. Death from disease is a sickness loss and is typically excluded, along with self-inflicted injury and war. The other three losses are accidental and appear on the schedule of losses.

Correct answer: Chapter 1201

Both disability income and AD&D coverages are accident and health contracts under Title 8 of the Texas Insurance Code, and individual policy forms and required provisions are governed by Chapter 1201, Accident and Health Insurance (Tex. Ins. Code ch. 1201; Tex. Ins. Code Title 8).

Correct answer: An own-occupation definition

An own-occupation definition pays when the insured cannot perform the duties of her own job, even if she is able to work in some other suitable occupation. Because the surgeon cannot operate, she qualifies as totally disabled under that definition despite being employable as a consultant.

Correct answer: A stated number of days of continuous disability that must pass before benefits begin to accrue

The elimination, or waiting, period is a stated number of days of continuous disability that must elapse before benefits begin to accrue. Lengthening it lowers the premium, and benefits are typically paid at the end of each benefit interval rather than in advance.

Correct answer: A stated percentage of the principal sum paid for a single severe loss, such as one hand, one foot, or sight in one eye

The principal sum is the full face amount, paid for accidental death. The capital sum is a stated lesser percentage of the principal sum, paid for a single severe loss such as one hand, one foot, or sight in one eye. The schedule of losses lists each covered loss and its percentage.

Correct answer: The relapse is treated as a continuation of the earlier claim, so no new elimination period applies

A recurrent disability provision treats a relapse from the same cause within a stated period as a continuation of the prior claim. Benefits resume without a new elimination period, and the disability continues under the original benefit period.

Correct answer: Full benefits are payable under the presumptive disability provision without meeting the usual disability test

A presumptive disability provision pays full benefits, without applying the usual definition of disability, upon severe losses such as sight, hearing, speech, or the use of limbs. Loss of sight in both eyes is a classic presumptive loss, so full benefits are payable even though the insured retains some work capacity.

Correct answer: Disability income pays a periodic benefit while the insured remains disabled, and AD&D pays a lump sum for a loss listed in its schedule caused by accident

Disability income is loss-of-time coverage that pays a periodic cash benefit while sickness or injury keeps the insured from working. AD&D is accident-only, limited-benefit coverage that pays a lump sum for a loss appearing in its schedule of losses. Neither reimburses medical expenses.

Correct answer: They are accident and health contracts under Title 8, with individual policy forms and required provisions governed by Chapter 1201

In Texas both disability income and AD&D are accident and health contracts under Title 8 of the Insurance Code, and individual policy forms and their required provisions are governed by Chapter 1201.

Correct answer: Partial replacement preserves the insured's financial incentive to return to work

Insurers limit the benefit to a percentage of pre-disability earnings so that the insured is financially better off working than remaining on claim. Issue and participation limits and coordination with other income sources serve the same purpose.

Correct answer: The capital sum — a stated percentage of the principal sum that is less than 100%

In AD&D coverage the principal sum is the full face amount payable for accidental death. A single severe loss — one hand, one foot, or the sight of one eye — pays the capital sum, a stated lesser percentage of the principal sum, as listed in the schedule of losses. Multiple severe losses commonly pay the full principal sum.

Correct answer: Any-occupation definition

The any-occupation test is the stricter standard: benefits are payable only if the insured cannot work in any gainful occupation for which he or she is reasonably suited. Own-occupation is more liberal, and loss-of-income definitions measure the drop in earnings instead.

Correct answer: About 60 days after the disability began, because benefits start accruing after the 30-day wait and are paid at the end of each benefit month

The elimination period is a stated number of days of continuous disability that must pass before benefits begin to accrue — here 30 days. Because disability income benefits are typically paid at the end of each benefit interval rather than in advance, the first monthly check arrives roughly a month after the elimination period ends, or about 60 days after disability began.

Correct answer: As a continuation of the prior claim, so no new elimination period applies

A recurrent disability provision states that a relapse from the same cause within a stated period after returning to work is treated as a continuation of the earlier claim. Benefits resume without a new elimination period, and the payments count against the same benefit period.

Correct answer: Presumptive disability provision

Presumptive disability pays full benefits upon severe specified losses — such as sight, hearing, speech, or use of limbs — without requiring the insured to satisfy the policy's ordinary definition of disability. The loss itself is presumed to be totally disabling.

Correct answer: To preserve the insured's financial incentive to recover and return to work

Benefits are set at a percentage of pre-disability earnings so that the insured is not financially better off while disabled — the gap preserves an incentive to return to work. Insurers reinforce this with issue and participation limits and by coordinating with other income sources.

Correct answer: It is accident-only, limited-benefit coverage and pays nothing for losses caused by sickness

AD&D is accident-only, limited-benefit coverage. The loss must result from accidental bodily injury and must occur within the time period stated in the policy after the accident. Sickness, self-inflicted injury, and war are typically excluded, and AD&D is not a substitute for medical expense or disability income coverage.

Correct answer: Both are accident and health contracts under Title 8, with individual policy forms and required provisions governed by Chapter 1201

In Texas both disability income and AD&D are accident and health contracts under Title 8 of the Insurance Code, and individual policy forms and required provisions are governed by Chapter 1201 (Tex. Ins. Code Title 8; Tex. Ins. Code ch. 1201). Paying cash to the insured rather than to a provider does not change the line of authority.

Correct answer: It preserves a financial incentive for the insured to recover and return to work

Disability income insurance replaces a portion of earned income, not all of it. Paying a percentage of pre-disability earnings keeps the insured better off working than remaining on claim, which is why insurers also apply issue and participation limits and coordinate with other income sources.

Correct answer: No benefit accrues for the first 90 days of continuous disability, and the first payment is made at the end of the first benefit interval after that period

The elimination period is a stated number of days of continuous disability that must pass before benefits begin to accrue. Nothing accrues during those 90 days, and because disability benefits are paid at the end of each benefit interval, the insured receives the first payment after completing the first month of covered disability following the elimination period.

Correct answer: Presumptive disability provision

Presumptive disability pays full benefits without requiring the insured to meet the policy's usual definition of disability when a specified severe loss occurs, such as loss of sight, hearing, speech, or the use of limbs. The insured is presumed totally disabled.

Correct answer: The capital sum

In AD&D coverage the full face amount is the principal sum, payable for accidental death. A capital sum is a stated lesser percentage of the principal sum paid for a single severe loss such as one hand, one foot, or sight in one eye, exactly as the schedule of losses provides here.

Correct answer: The second period is treated as a continuation of the prior claim, so no new elimination period applies

A recurrent disability provision treats a relapse from the same cause within a stated period as a continuation of the original claim. Because it is the same claim, the insured does not satisfy a second elimination period and the benefit resumes under the original benefit period.

Correct answer: Own occupation

An own-occupation definition pays if the insured cannot perform the duties of her own job, even if she works in another field. She cannot operate, so she is disabled under that test. An any-occupation definition would deny the claim because she is gainfully employed, and a loss-of-income definition would pay nothing because her earnings did not drop.

Correct answer: A residual, or partial, disability benefit

A residual or partial disability benefit pays a reduced amount when the insured returns to work but at lower earnings, bridging part of the gap between pre-disability and current income.

Correct answer: Chapter 1201 of the Texas Insurance Code, within Title 8 on health insurance and other health coverages

Disability income and AD&D policies are accident and health contracts under Title 8 of the Texas Insurance Code, and individual policy forms and their required provisions are governed by Chapter 1201.