California Life-Only & Accident and Health AgentRelated Benefits and ProductsMedium
A self-employed graphic designer earns an average of $8,000 per month. She has a disability income insurance policy with a 60% benefit percentage, a 90-day elimination period, and a 'own occupation' definition of disability. If she becomes totally disabled and cannot perform the duties of her specific job, how much will her monthly benefit be after the elimination period?
- A$6,400
- B$8,000
- C$4,800
- D$3,200
Show answer & explanationAnswer & explanation
Correct answer: C. $4,800
The monthly benefit is calculated by applying the benefit percentage to the insured's average monthly earnings. In this case, $8,000 (earnings) * 60% (benefit percentage) = $4,800.
Why the other options are wrong
- A. Incorrect calculation; this would be 80% of earnings ($8000 * 0.80).
- B. Incorrect; the policy pays a percentage of earnings, not 100%.
- D. Incorrect calculation; this would be 40% of earnings ($8000 * 0.40).
Disability Income Benefit Calculation
The process of determining the monthly payment an insured will receive from a disability income policy, typically a percentage of their pre-disability earnings.
- Based on a percentage of pre-disability income (e.g., 60-70%).
- Subject to policy maximums.
- Does not include the elimination period in the calculation of the benefit amount itself.
Memory trick: To 'CALCULATE' disability income, you need your 'EARNINGS' and the 'PERCENTAGE'.