Disability income and accidental death and dismemberment policies
Question 1 of 40
Which statement best describes what a disability income policy pays?
It reimburses the insured's hospital and physician charges arising from a covered injury or sickness.
It pays a periodic cash benefit to the insured, replacing part of earned income while sickness or injury prevents work.
It pays a single lump sum equal to the principal sum when the insured suffers an accidental injury.
It pays the insured's employer for the cost of hiring and training a replacement worker.
Question 2 of 40
An insured's individual disability income policy has a 90-day elimination period and pays monthly benefits. The insured becomes totally disabled on January 1 and remains disabled. Which statement correctly describes how payment works?
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 insurer must pay the first monthly benefit in advance on January 1 and later reconcile the elimination period.
Once benefits begin, the insurer must pay retroactively for the 90-day elimination period.
Because the elimination period is 90 days, the premium for this policy is higher than it would be with a 30-day elimination period.
Question 3 of 40
Under an accidental death and dismemberment policy, the term "capital sum" refers to:
The total premium the insured has paid into the policy, returned when a covered loss occurs.
The full face amount payable for accidental death.
The amount the insurer sets aside as a reserve for future dismemberment claims.
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.
Question 4 of 40
An insured collected disability income benefits for five months, recovered, and returned to full-time work. Six weeks later the same condition flared up and disabled her again. Her policy contains a recurrent disability provision with a six-month period. What is the likely result?
The claim is denied because returning to work terminated the coverage for that condition.
A new elimination period must be satisfied because the disability stopped and restarted.
The relapse is treated as a continuation of the prior claim, so no new elimination period applies and benefits resume.
Benefits resume immediately but the maximum benefit period restarts from zero as a brand-new claim.
Question 5 of 40
A disability income policyholder suffers an accident that causes total and permanent loss of sight in both eyes, yet he could still perform some sedentary work. His policy's presumptive disability provision means that:
Full disability benefits are payable without his having to satisfy the policy's usual definition of disability.
Only a reduced, residual benefit is payable because he retains some earning capacity.
Benefits are payable only after he proves he cannot work in any gainful occupation for which he is suited.
A single lump sum equal to the capital sum is payable in place of monthly benefits.
Question 6 of 40
A surgeon can no longer perform operations because of a hand tremor, but she is fully able to teach anatomy at a medical school. How will the definition of disability in her policy most likely affect her claim?
Both an own-occupation and a strict any-occupation definition would pay full benefits, since she cannot do surgery.
Neither definition would pay, because her injury did not result from an accident.
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.
An any-occupation definition is more generous, so it would pay while an own-occupation definition would not.
Question 7 of 40
Why do disability income insurers limit the monthly benefit to a percentage of the insured's pre-disability earnings rather than replacing the full amount?
State law forbids paying any benefit that exceeds half of the insured's earnings.
Paying less than full earnings preserves the insured's financial incentive to recover and return to work.
The remainder is held in reserve and paid to the insured as a lump sum when the benefit period ends.
Full replacement would convert the policy into an accidental death and dismemberment contract.
Question 8 of 40
How are individual disability income and accidental death and dismemberment policies classified and regulated in Texas?
They are life insurance contracts and are not subject to accident and health regulation.
They are property and casualty contracts because dismemberment losses arise from accidents.
They are unregulated limited-benefit products exempt from policy form requirements.
They are accident and health contracts under Title 8 of the Insurance Code, with individual policy forms and required provisions governed by Chapter 1201.
Question 9 of 40
A disability income policy provision that pays the full monthly benefit without requiring the insured to meet the policy's usual test of disability, upon a total loss such as sight, hearing, speech, or the use of two limbs, is called:
Residual disability
Recurrent disability
Waiver of premium
Presumptive disability
Question 10 of 40
An applicant for individual disability income coverage says the quoted premium is higher than he can afford but he wants to keep the same monthly benefit amount and the same long benefit period. Which change would most directly reduce the premium?
Lengthen the elimination period
Shorten the elimination period
Add a cost-of-living adjustment option
Add a future increase option
Question 11 of 40
An accidental death and dismemberment policy has a face amount of $100,000. The insured loses the sight of one eye in a covered accident, and the schedule of losses provides 50 percent for that loss. The $50,000 paid is best described as the:
Principal sum
Residual benefit
Capital sum
Probationary benefit
Question 12 of 40
An insured collected disability income benefits for four months, returned to full-time work, and then became disabled again from the same cause a few weeks later. The policy's recurrent disability provision means that:
The insured must satisfy a new elimination period before benefits resume
The relapse is treated as a continuation of the earlier claim, so no new elimination period applies
A new probationary period must pass before the condition is again covered
Benefits resume only at the reduced residual rate
Question 13 of 40
Disability income policies typically limit the monthly benefit to a percentage of the insured's pre-disability earnings rather than replacing all of them. The main reason is to:
Preserve the insured's financial incentive to return to work
Allow the insurer to also reimburse the insured's medical bills
Keep the benefit from exceeding the policy's capital sum
Satisfy the policy's probationary period requirement
Question 14 of 40
A surgeon insured under a disability income policy develops a hand tremor. She can no longer operate, but she is fully able to teach and consult in medicine at a good salary. How does the definition of disability affect her claim?
Benefits are payable under either an own-occupation or an any-occupation definition, because she cannot perform surgery
No benefits are payable under either definition, because she is still able to earn income
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
Benefits are payable under an any-occupation definition, but not under an own-occupation definition
Question 15 of 40
Which of the following claims would an accidental death and dismemberment policy normally NOT pay?
Accidental death in an automobile collision, paid as the principal sum
Loss of both hands in a machinery accident, paid as the full principal sum
Loss of one foot in a fall, paid as the capital sum under the schedule of losses
Death from a heart attack caused by advanced heart disease
Question 16 of 40
In Texas, individual accident and health policy forms and their required provisions — including individual disability income and accidental death and dismemberment policies — are governed by which chapter of the Insurance Code?
Chapter 4054
Chapter 1201
Chapter 541
Chapter 843
Question 17 of 40
A surgeon insured under a disability income policy develops a hand tremor. She can no longer perform surgery, but she could earn a living as a medical consultant. Under which definition of disability is she most likely to collect full benefits?
An any-occupation definition
An own-occupation definition
A nonoccupational coverage limitation
A probationary period provision
Question 18 of 40
In a disability income policy, the elimination period is best described as:
A stated number of days of continuous disability that must pass before benefits begin to accrue
The maximum length of time monthly benefits can continue to be paid
The period at the start of the contract during which sickness is not yet covered
The time after an accident within which a covered loss must occur
Question 19 of 40
Under an accidental death and dismemberment policy, the capital sum is:
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 full face amount payable for accidental death
The monthly amount payable while the insured remains unable to work
The total premium refunded when a claim is denied
Question 20 of 40
An insured collects disability income benefits for four months, returns to full-time work, and then suffers a relapse of the same condition three weeks later. The policy contains a recurrent disability provision. What is the result?
A new elimination period must be satisfied because the insured returned to work
Only a reduced residual benefit is payable for the relapse
The relapse starts a new claim with a new, separate benefit period
The relapse is treated as a continuation of the earlier claim, so no new elimination period applies
Question 21 of 40
An insured under a disability income policy loses the sight of both eyes in an accident but is still physically able to do some sedentary work. Which provision most likely governs the claim?
Benefits are denied because the insured can still perform some work
Only a residual benefit is payable, based on the reduction in earnings
Premiums are waived, but no monthly income benefit is payable
Full benefits are payable under the presumptive disability provision without meeting the usual disability test
Question 22 of 40
Which statement correctly distinguishes disability income insurance from accidental death and dismemberment insurance?
Both reimburse the insured's medical providers for treatment of the injury
AD&D pays a periodic benefit while the insured is disabled, and disability income pays a lump sum for a listed loss
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 covers only accidents, while AD&D covers both accident and sickness
Question 23 of 40
How are individual disability income and AD&D policies treated under Texas law?
They are life insurance contracts and fall outside Title 8 of the Insurance Code
They are accident and health contracts under Title 8, with individual policy forms and required provisions governed by Chapter 1201
AD&D is exempt from the Insurance Code because it is limited-benefit coverage
Disability income is regulated only by federal law and not by the Texas Insurance Code
Question 24 of 40
Disability income benefits are normally set at a percentage of pre-disability earnings rather than at one hundred percent. The primary reason is that:
Benefits must match the medical expenses the insured actually incurs
Paying the full amount would waive the policy's elimination period
Partial replacement preserves the insured's financial incentive to return to work
An AD&D rider is expected to pay the remaining portion of the lost income
Question 25 of 40
An insured with an accidental death and dismemberment policy loses the sight of one eye in a covered accident. Under the policy's schedule of losses, what amount is generally payable for that single loss?
The full principal sum, because any dismemberment loss pays the face amount
A monthly income benefit for as long as the vision loss continues
Nothing, because sight losses are covered only under disability income policies
The capital sum — a stated percentage of the principal sum that is less than 100%
Question 26 of 40
A disability income policy will pay benefits only if the insured is unable to engage in any gainful occupation for which he is reasonably suited by education, training, and experience. This describes which definition of disability?
Any-occupation definition
Own-occupation definition
Loss-of-income definition
Presumptive disability definition
Question 27 of 40
An insured becomes totally disabled on January 1. The disability income policy has a 30-day elimination period and pays a monthly benefit. When should the insured expect the first benefit payment?
On January 1, because benefits are paid in advance from the date of disability
On approximately January 31, at the end of the elimination period
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
Only after the entire benefit period has been completed
Question 28 of 40
An insured collected disability income benefits for four months, returned to full-time work, and then suffered a relapse of the same condition six weeks later. Under a recurrent disability provision, how is the second period of disability treated?
As a new claim requiring a new elimination period to be satisfied
As a continuation of the prior claim, so no new elimination period applies
As an excluded loss, because the insured demonstrated the ability to work
As a partial disability, payable only at the reduced residual benefit amount
Question 29 of 40
A disability income insured suffers the total and permanent loss of speech and hearing in an accident. The insurer begins paying the full monthly benefit even though the usual test of total disability was not separately established. Which provision produced this result?
Residual disability provision
Waiver of premium provision
Recurrent disability provision
Presumptive disability provision
Question 30 of 40
Disability income policies typically limit the monthly benefit to a percentage of pre-disability earnings rather than 100% of income. What is the primary reason for this design?
Texas law forbids issuing a disability income policy for more than half of earned income
To preserve the insured's financial incentive to recover and return to work
Because disability benefits must match the amount payable under the AD&D schedule of losses
Because the elimination period cannot be satisfied unless earnings continue
Question 31 of 40
Which statement correctly describes accidental death and dismemberment coverage?
It reimburses the covered person's hospital and physician charges arising from an accident
It pays a periodic income benefit for as long as the insured remains unable to work
It is accident-only, limited-benefit coverage and pays nothing for losses caused by sickness
It covers all causes of loss, including self-inflicted injury and acts of war
Question 32 of 40
How are individual disability income and AD&D policies classified and regulated in Texas?
Both are accident and health contracts under Title 8, with individual policy forms and required provisions governed by Chapter 1201
AD&D is written as a property and casualty line and falls outside Title 8 entirely
Disability income is regulated as life insurance because it pays cash directly to the insured
Neither is regulated by the state, because both pay cash benefits rather than provider claims
Question 33 of 40
An individual disability income policy limits the monthly benefit to 60 percent of the insured's pre-disability earned income rather than 100 percent. What is the primary underwriting reason for this design?
It preserves a financial incentive for the insured to recover and return to work
It allows the insurer to pay each benefit in advance instead of at the end of the benefit interval
It converts the contract from loss-of-time coverage into medical expense coverage
It shortens the elimination period the insured must satisfy before benefits accrue
Question 34 of 40
A disability income policy has a 90-day elimination period, a monthly benefit, and a five-year benefit period. The insured becomes totally disabled on March 1 and remains disabled. How does the elimination period operate?
Benefits accrue from March 1 but the insurer may delay the first check by 90 days
The insurer pays the first monthly benefit in advance on March 1 and then waits 90 days
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
Sickness is excluded for the first 90 days the policy is in force, whether or not the insured is disabled
Question 35 of 40
An insured with a disability income policy suffers a covered accident and permanently loses sight in both eyes. The policy pays full monthly benefits even though the insured could still perform some gainful work. Which provision produced this result?
Residual disability benefit
Recurrent disability provision
Waiver of premium provision
Presumptive disability provision
Question 36 of 40
An AD&D policy has a face amount of $200,000. The insured loses one hand in a covered accident and the schedule of losses pays 50 percent for that loss. The $100,000 paid is best described as:
The principal sum
The capital sum
A periodic loss-of-time benefit
A residual disability benefit
Question 37 of 40
An insured collected disability benefits for four months, returned to full-time work, and then became disabled again from the same cause three weeks later. The policy's recurrent disability provision applies. What is the effect?
A new elimination period must be satisfied before benefits resume
The second period of disability is denied as a pre-existing condition
Benefits resume only at the reduced residual rate
The second period is treated as a continuation of the prior claim, so no new elimination period applies
Question 38 of 40
A surgeon develops a hand tremor and can no longer operate. She accepts a medical school teaching position at the same salary she earned before. Under which definition of disability would she most clearly qualify for benefits?
Own occupation
Any occupation
Loss of income
Presumptive disability
Question 39 of 40
After a covered disability, an insured returns to her job part time and earns 55 percent of her former income. Her policy pays a reduced monthly benefit reflecting that lost earnings. This benefit is called:
A presumptive disability benefit
A residual, or partial, disability benefit
A cost-of-living benefit
A capital sum benefit
Question 40 of 40
In Texas, the policy form and required provisions of an individual accident and health contract, such as an individual disability income or AD&D policy, are governed primarily by:
The Texas Property Code, because benefits are paid in cash to the insured
Federal law alone, because health coverage is preempted from state regulation
Chapter 1201 of the Texas Insurance Code, within Title 8 on health insurance and other health coverages
No statute; individual accident and health forms are governed only by the terms the insurer chooses to write