9.3 Disability Insurance

According to the Social Security Administration, disability means:

• you are unable to do the work you did before your illness or accident

• your are unable to do the work you did before your illness or accident and it is expected to last one year or longer

• your disability must be expected to last one year or longer

• your disability can be healed with long-term care services

The Social Security Administration's definition of disability is most closely linked with the ____ disability definition

• any occupation

• own occupation

• modified-own occupation

• comprehensive occupation

Michelle and Jerry are each planning to apply for disability insurance coverage from a private insurance firm. Although Michelle and jerry are the same age and have the same health profile, Michelle's premium is lower. What explains this phenomenon?

• women are more likely to be involved in life-ending accidents compared to men

• men are more likely to become disabled

• women are less likely to die of natural causes

• men are less likely to become injured on the job

At what age is the probability of death greater than the probability of becoming disabled?

• 40

• 50

• 60

• at no age below 65 is the probability of death greater than the probability of becoming disabled

How many credits must someone have with the Social Security Administration to be eligible to apply to receive Social Security disability benefits?

• None

• 10 in the past 5 years

• 20 in the past 10 years

• 40 in the past 10 years

A short-term disability insurance policy is designed to pay benefits for a maximum of ​ (a)   months

• 12
• 3
• 6
• 9

Who should consider purchasing a long-term disability policy with a maximum monthly benefit?

• someone with a high net worth

• someone with a high debt

• someone with a low debt

• someone with multiple sources of income

Barney applied for a long-term disability policy with a highly rated insurance company. His application was approved for $35,000 in annual benefits. What is the maximum amount he should expect to pay in annual premiums if he is healthy and working in a hazardous industry?

• $350

• $700

• $1,050

• $1,150

Answer explanation

For individuals working in hazardous occupations, annual long-term disability premiums cost approximately 3% of the annual benefit.

The answer is his approved annual benefits multiplied by 3% percent as a decimal

Your friend Pranav just graduated from medical school. He is excited to begin his new career but it worried about how he will be able to pay back his nearly $200,000 in student loans if he were to become disabled. You have recommended a long-term own occupation disability policy. Approximately how much will Pranav pay per month in premiums for this type of policy if the monthly benefit is $5,000? Pranav is a smoker but works in a low-risk occupation.

• $100

• $150

• $200

• $675

Answer explanation

Annual benefit is 12 X $5,000 = $60,000. Cost for a low-risk occupation and a smoker is 2% of the annual benefit, or $60,000 X 0.02 = $1,200. Monthly premiums = $1,200 / 12 = ? per month

When buying a disability insurance policy, you should consider purchasing all the following riders, EXCEPT:

I. guaranteed renewable rider

II. inflation protection rider

III. workers' compensation rider

• I only

• III only

• I and II only

• II and III only