A disability income definition under which the insured is considered totally disabled only if unable to perform the duties of ANY occupation for which they are reasonably suited by education, training, or experience, is known as the:
A. Own occupation definition
B. Any occupation definition
C. Residual disability definition
D. Presumptive disability definition
Show answer and reasoning
Correct answer: B. Any occupation definition
Correct. The any occupation definition is the stricter standard requiring the insured be unable to work at any occupation reasonably suited to their background, not merely their own job.
- A: The own occupation definition considers the insured disabled if unable to perform their own specific job's duties, a more liberal (insured-favorable) standard than any occupation.
- C: Residual disability addresses partial income loss when the insured can work in some capacity but at reduced income, not the any-occupation total disability standard.
- D: Presumptive disability automatically deems certain losses (such as loss of sight or limbs) as total disability, a different mechanism than the any-occupation definition.
Source: NM PSI Candidate Information Bulletin, Series 18-27, Disability Income and Related Insurance
A disability income rider that automatically increases the insured's benefit amount over time to help the benefit keep pace with inflation is the:
A. Future increase option rider
B. Cost of living rider
C. Waiver of premium rider
D. Residual disability rider
Show answer and reasoning
Correct answer: B. Cost of living rider
Correct. A cost of living rider (or adjustment) on a disability policy automatically increases benefits during a claim, or the coverage amount over time, to help keep pace with inflation.
- A: The future increase option rider allows the insured to purchase additional coverage at future dates without new evidence of insurability, addressing changing income needs rather than automatic inflation adjustment of an existing benefit.
- C: A waiver of premium rider excuses premium payment during disability, unrelated to inflation-adjusting the benefit amount.
- D: A residual disability rider pays a partial benefit proportional to income loss when the insured can work in a limited capacity, unrelated to automatic inflation adjustment.
Source: NM PSI Candidate Information Bulletin, Series 18-27, Disability Income and Related Insurance
A small business purchases a policy that reimburses fixed overhead expenses, such as rent and utilities, if the business owner becomes disabled and cannot work. This is:
A. Key employee disability income insurance
B. Disability buy-sell insurance
C. Business overhead expense insurance
D. Short-term disability insurance
Show answer and reasoning
Correct answer: C. Business overhead expense insurance
Correct. Business overhead expense insurance reimburses a disabled business owner's fixed operating expenses, such as rent, utilities, and employee salaries, so the business can continue operating.
- A: Key employee disability income insurance pays the business a benefit due to losing a key employee's productivity, not specifically reimbursing fixed operating overhead expenses.
- B: Disability buy-sell insurance funds the buyout of a disabled owner's business interest by co-owners, a different purpose than covering ongoing overhead costs.
- D: Short-term disability insurance replaces a portion of an individual's personal income for a limited period, not specifically business overhead costs.
Source: NM PSI Candidate Information Bulletin, Series 18-27, Disability Income and Related Insurance
Under Social Security disability insurance, a claimant's disability must generally be expected to last at least how long, or result in death, to qualify for benefits?
A. 30 days
B. 90 days
C. 6 months
D. 12 months
Show answer and reasoning
Correct answer: D. 12 months
Correct. Social Security disability generally requires the impairment be expected to last at least 12 months or result in death to qualify for benefits.
- A: Thirty days is far shorter than the Social Security disability duration standard.
- B: Ninety days is shorter than the Social Security disability duration requirement.
- C: Six months is shorter than the Social Security duration requirement for qualifying disability.
Source: NM PSI Candidate Information Bulletin, Series 18-27, Disability Income and Related Insurance
A managed care organization that generally requires members to select a primary care physician and obtain referrals to see specialists, in exchange for typically lower out-of-pocket costs, is best described as a(n):
A. Health Maintenance Organization (HMO)
B. Fee-for-service indemnity plan
C. Preferred Provider Organization (PPO)
D. Point-of-Service (POS) plan
Show answer and reasoning
Correct answer: A. Health Maintenance Organization (HMO)
Correct. An HMO typically requires members to select a primary care physician and obtain referrals for specialist care, in exchange for lower costs within a defined network.
- B: A fee-for-service indemnity plan reimburses for covered services with no network or referral requirements, the opposite of the managed structure described.
- C: A PPO generally allows members to see any provider, in or out of network, without mandatory referrals, though in-network care costs less.
- D: A POS plan blends HMO and PPO features, requiring a primary care physician but allowing some out-of-network access at higher cost, a hybrid rather than the pure structure described.
Source: NM PSI Candidate Information Bulletin, Series 18-27, Medical Plans
