20 Disability Insurance Quiz Questions and Answers

Question 1:
What is the primary purpose of disability insurance?
A. To cover medical expenses during hospitalization
B. To replace a portion of income if an individual is unable to work due to a disability
C. To provide retirement benefits
D. To cover funeral costs

Answer: B
Explanation: Disability insurance is specifically designed to provide financial protection by replacing lost income when an individual cannot work due to illness, injury, or other disabilities, helping maintain financial stability.

Question 2:
Which type of disability insurance typically covers disabilities lasting less than two years?
A. Long-term disability insurance
B. Short-term disability insurance
C. Permanent disability insurance
D. Group disability insurance

Answer: B
Explanation: Short-term disability insurance provides benefits for temporary disabilities, usually lasting from a few weeks to up to two years, whereas long-term options cover extended periods.

Question 3:
What factor does an insurer typically consider when determining disability insurance premiums?
A. The policyholder’s favorite hobbies
B. The policyholder’s age, health, occupation, and income
C. The policyholder’s marital status
D. The policyholder’s pet ownership

Answer: B
Explanation: Premiums are calculated based on risk factors like age, health history, job type, and income level, as these influence the likelihood of a claim and the potential payout amount.

Question 4:
In disability insurance, what does “own occupation” coverage mean?
A. Coverage only if the disability occurs at the workplace
B. Coverage that pays benefits if you cannot perform your specific job
C. Coverage limited to physical disabilities
D. Coverage that requires proof of total disability from all work

Answer: B
Explanation: “Own occupation” coverage means benefits are paid if the insured cannot perform the duties of their specific profession, even if they could work in another field.

Question 5:
What is an elimination period in disability insurance?
A. The time after a claim when benefits stop
B. The waiting period before benefits begin after a disability starts
C. The maximum duration of benefits
D. The age limit for policy renewal

Answer: B
Explanation: The elimination period is the initial waiting time (e.g., 30 to 90 days) after a disability begins before the insurance starts paying benefits, helping to reduce premiums.

Question 6:
Which of the following is typically NOT covered under a standard disability insurance policy?
A. Disabilities from accidents
B. Disabilities from illnesses
C. Pre-existing conditions after the waiting period
D. Self-inflicted injuries

Answer: D
Explanation: Most policies exclude self-inflicted injuries or acts of war, as they are considered preventable or high-risk events not aligned with the policy’s intent.

Question 7:
How does group disability insurance differ from individual disability insurance?
A. Group plans are only for employers and offer lower premiums
B. Individual plans cover more disabilities
C. Group plans are always more expensive
D. Individual plans require a medical exam

Answer: A
Explanation: Group disability insurance is often provided through employers or associations, typically at lower costs due to shared risk, while individual plans are personalized and may require underwriting.

Question 8:
What benefit period does long-term disability insurance usually cover?
A. Up to 6 months
B. 1 to 2 years
C. Several years or until retirement age
D. Only during working hours

Answer: C
Explanation: Long-term disability insurance generally provides benefits for an extended period, often until the insured reaches retirement age or for a set number of years, depending on the policy.

Question 9:
Why might someone with a high-risk occupation pay higher premiums for disability insurance?
A. High-risk jobs increase the likelihood of disability claims
B. Insurers prefer low-risk jobs
C. High-risk occupations require more paperwork
D. Premiums are based on income only

Answer: A
Explanation: Occupations with higher risks of injury or illness, such as construction or firefighting, lead to higher premiums because they increase the probability of claims for the insurer.

Question 10:
What is the role of a residual disability rider in disability insurance?
A. It covers only total disabilities
B. It provides partial benefits for reduced work capacity
C. It extends the elimination period
D. It limits the benefit period

Answer: B
Explanation: A residual disability rider offers benefits proportional to the reduction in income or work ability, allowing partial payments if the insured can still work but at a limited capacity.

Question 11:
Under disability insurance, what does “total disability” generally mean?
A. Inability to perform any job at all
B. Inability to perform the duties of one’s own occupation
C. Temporary inability to work for a day
D. Partial inability to work part-time

Answer: A
Explanation: Total disability typically refers to a condition where the insured cannot perform the substantial and material duties of any occupation for which they are reasonably suited.

Question 12:
How are disability insurance benefits usually taxed?
A. Always tax-free
B. Taxable if premiums were paid with pre-tax dollars
C. Taxable only for self-employed individuals
D. Always taxable

Answer: B
Explanation: If premiums are paid with pre-tax employer contributions, benefits are generally taxable; however, if paid with after-tax dollars, benefits may be tax-free.

Question 13:
What is a cost-of-living adjustment (COLA) rider in disability insurance?
A. It increases benefits based on inflation
B. It reduces premiums over time
C. It shortens the elimination period
D. It limits coverage to basic living expenses

Answer: A
Explanation: A COLA rider adjusts benefits annually to account for inflation, ensuring that the payments maintain their purchasing power over time.

Question 14:
Which scenario would likely qualify for disability insurance benefits?
A. A voluntary career change
B. A temporary illness preventing work for three months
C. Quitting a job due to stress
D. Retirement at age 65

Answer: B
Explanation: A temporary illness that prevents the insured from working and meets the policy’s definition of disability would typically qualify for benefits during that period.

Question 15:
What does the term “non-cancelable” mean for a disability insurance policy?
A. The policy can be canceled by the insurer at any time
B. Premiums and benefits are guaranteed and cannot be changed until a certain age
C. Coverage is limited to non-work-related disabilities
D. The policy renews automatically

Answer: B
Explanation: A non-cancelable policy guarantees that premiums and benefits remain fixed until the policy’s end date, usually age 65, as long as premiums are paid.

Question 16:
How can someone increase the amount of coverage in their disability insurance policy?
A. By purchasing a rider for future insurability
B. By waiting for the policy to expire
C. By reducing their income
D. By switching to a different insurer annually

Answer: A
Explanation: Riders like future purchase options allow policyholders to increase coverage without new medical underwriting, accommodating life changes like salary increases.

Question 17:
What is an exclusion in disability insurance?
A. A required medical exam
B. A specific condition or event not covered by the policy
C. The minimum benefit amount
D. The premium payment schedule

Answer: B
Explanation: Exclusions are predefined conditions, such as pre-existing illnesses or hazardous activities, that the policy does not cover to manage risk for the insurer.

Question 18:
Why is it important to have disability insurance if you are self-employed?
A. It provides health coverage
B. It replaces income lost due to disability, as there are no employer benefits
C. It covers business expenses only
D. It is mandatory by law

Answer: B
Explanation: Self-employed individuals lack employer-provided disability benefits, so personal policies are crucial for income replacement during disabilities.

Question 19:
What factor might affect the approval of a disability insurance claim?
A. The color of the policy document
B. Medical evidence and documentation of the disability
C. The policyholder’s hobbies
D. The season of the year

Answer: B
Explanation: Claims require substantial medical evidence to verify the disability and its impact on work ability, ensuring the claim meets policy requirements.

Question 20:
How does disability insurance differ from health insurance?
A. Disability insurance covers medical bills
B. Health insurance replaces lost income
C. Disability insurance focuses on income replacement due to inability to work
D. They are essentially the same

Answer: C
Explanation: While health insurance covers medical treatments and costs, disability insurance specifically addresses lost wages from disabilities, providing financial support for daily living.