Economics Unit 7 (Chapter 16) #2

Disability

Inability to work due to illness or injury

*Long-Term Disability

Typically covers 65% of pre-disability income

Own Occupation (Affect Coverage Eligibility)

Unable to perform your specific occupation (job)

Modified-Own Occupation (Affect Coverage Eligibility)

Unable to perform your occupation (job) but could do other work

Any Occupation (Affect Coverage Eligibility)

Unable to perform any occupation (job)

Elimination Period

The waiting time before benefits begin

Workers’ Compensation

Covers only work-related injuries or illnesses

Emergency Funds (Disability)

Should cover expenses during elimination period

Policy Owner

Makes premium payments

Insured

Person whose death triggers policy payout

Insurable Interest

Where the policy owner suffers financial loss if the insured dies

Beneficiary

Person who receives death benefit

Contingent Beneficiary

Secondary recipient if primary beneficiary dies

Term-Life Insurance

Provides coverage for a specific period

Cash-Value Life Insurance

Combines death benefit with savings component

Annual Renewable Term

A one-year life insurance policy that you renew annually

Variable Life Insurance

Allows you to invest in mutual funds with your cash value balance

Disability Premium Waiver

The insurance company pays your premiums if you become disabled

Convertibility Provision

Allows you to change to a cash-value policy without proving you are healthy

Guaranteed Renewability

Allows you to extend your policy without taking a medical exam

Income Multiplier Method

Estimates life insurance needs by multiplying annual income (10x)

Complex Needs Analysis

Considers all debts, liabilities, and income replacement needs to calculate life insurance