Life & Health Insurance Practice Exam

How frequently must Disability Income claims be paid at minimum?

1. Annually

2. Quarterly

3. Monthly

4. Weekly

The correct answer is: Monthly

Disability income insurance is designed to provide policyholders with a portion of their income if they become unable to work due to a disabling condition. The frequency of claim payments is crucial because it helps maintain the financial stability of individuals during a period when they may have no other source of income. Monthly payments are the standard for disability income claims. This frequency reflects the typical expense structure of individuals; many people budget their financial obligations (like rent or mortgage, utilities, and groceries) on a monthly basis. By receiving payments every month, insured individuals can better manage their financial needs and obligations effectively. Other payment frequencies, like weekly or quarterly, could create significant challenges for individuals trying to meet ongoing expenses. Weekly payments, although they may provide quicker access to funds, can complicate budgeting for those used to planning on a monthly basis. Quarterly payments, on the other hand, could leave individuals without adequate funds in between payments, potentially leading to financial strain. Therefore, the requirement for disability income claims to be paid monthly aligns best with standard financial practice and offers necessary support to policyholders during their recovery periods.