Currently neither Ken nor Sandra has disability insurance coverage. Ken and Sand

Question

Currently neither Ken nor Sandra has disability insurance coverage.  Ken and Sandra would like more information from you about disability insurance. Which of the following statements is true in relation to disability insurance?  Justify your answer.

A. Shorter elimination periods result in lower premium costs.

B. Benefits paid from employer-provided group disability plans are received income tax-free.

C. If a guaranteed renewable contract is used, the insurance company cannot increase premiums on individual policies but can raise premiums for all individuals covered by that policy.

            D. Disability policies are nearly always designed to provide lifetime benefits.

Explanation / Answer

a)Yes. Premiums are higher for policies that offer benefits for longer periods of time.

b) No. An employer provides short term and long term disability to all eligible employees, and provides them as an employee benefit without cost to the employees. Because the employer deducts such payments from its income as a business expense, any disability benefits received by disabled employees are fully income taxable.

c)No. While re-insurability is guaranteed, premiums can rise based on the filing of a claim, injury, or other factor that could increase the risk of future claims.Premiums can also be raised on an entire class of insured people during the life of a guaranteed renewable policy for health, life or disability insurance.

d) No. It encompasses paid sick leave, short-term disability benefits, and long-term disability benefits.

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