Life & Health Insurance Exam (National Portion)Health InsuranceMedium
A client has a disability income policy with a 60-day elimination period and a monthly benefit of $2,000. If the client becomes disabled on June 1st and the disability lasts for 4 months, how much will the policy pay?
- A$4,000
- B$8,000
- C$2,000
- D$6,000
Show answer & explanationAnswer & explanation
Correct answer: A. $4,000
The elimination period is 60 days (2 months). If the disability lasts 4 months, benefits will be paid for the remaining 2 months (4 months - 2 months elimination period). Therefore, 2 months * $2,000/month = $4,000.
Why the other options are wrong
- B. This would be the full 4 months of benefits, ignoring the elimination period.
- C. This would be only one month's benefit, which is incorrect.
- D. This implies a 1-month elimination period, which is incorrect.
Disability Income Elimination Period
A waiting period before disability income benefits begin, during which the insured must be continuously disabled.
- Also known as a waiting period.
- Must be satisfied before benefits are payable.
- Can be 30, 60, 90, 180 days, or longer.
- The longer the elimination period, the lower the premium.
Memory trick: Elimination first, then calculate the remaining months for payment.