California Life-Only & Accident and Health AgentRelated Benefits and ProductsMedium
A self-employed architect earns $12,000 per month. She is considering a disability income policy. The policy states a monthly benefit limit of 60% of her gross income. If she becomes totally disabled, what is the maximum monthly benefit she could receive?
- A$7,200
- B$6,000
- C$4,800
- D$12,000
Show answer & explanationAnswer & explanation
Correct answer: A. $7,200
The maximum monthly benefit is calculated by multiplying the client's gross monthly income by the policy's benefit limit percentage. $12,000 * 0.60 = $7,200.
Why the other options are wrong
- B. This is 50% of her income, not the 60% limit.
- C. This is 40% of her income, not the 60% limit.
- D. This represents 100% of her income, which is above the policy's benefit limit.
Disability Income Benefit Calculation
The process of determining the maximum monthly payment a policyholder can receive under a disability income insurance policy, typically based on a percentage of their pre-disability gross income.
- Policies usually cover 50-70% of gross income.
- Prevents malingering (incentive to work).
- Benefit limits can vary by insurer and occupation.
Memory trick: Income protection, percentage perfection!