California Life-Only & Accident and Health AgentAccident and Health InsuranceMedium
An insured individual has a disability income policy with a 60-day elimination period and a benefit of $2,000 per month. If the insured becomes disabled on January 1st and remains disabled for 4 months, what is the total amount of benefits the insured will receive?
- A$2,000
- B$8,000
- C$6,000
- D$4,000
Show answer & explanationAnswer & explanation
Correct answer: D. $4,000
The elimination period is 60 days (2 months). The insured is disabled for 4 months. Benefits are paid for the period of disability minus the elimination period: 4 months - 2 months = 2 months. Total benefits: 2 months * $2,000/month = $4,000.
Why the other options are wrong
- A. This only accounts for 1 month of benefits after the elimination period.
- B. This incorrectly pays for the entire 4-month disability without applying the elimination period.
- C. This incorrectly calculates 3 months of benefits after the elimination period.
Disability Income Elimination Period
A waiting period after the onset of disability during which no benefits are paid, similar to a deductible for a disability income policy.
- Must be satisfied before benefits begin.
- Reduces the cost of the premium.
- Can be 30, 60, 90, 180 days, or longer.
Memory trick: Subtract the waiting time, then multiply by the monthly payout.