South Carolina Life and Health Practice Exam

How are benefits typically paid out in disability income policies?

1. In a lump sum

2. Via reimbursement for expenses

3. Periodic income

4. Through personal checks

The correct answer is: Periodic income

In disability income policies, benefits are typically paid out as periodic income. This structure is essential because the primary purpose of disability income insurance is to replace lost wages when a policyholder cannot work due to a covered disability. By providing payments at regular intervals, such as weekly or monthly, these policies aim to help individuals maintain their standard of living and cover ongoing expenses, such as rent or mortgage, utility bills, and daily necessities. This method of payment aligns with the objective of income replacement, ensuring that the insured can manage their financial obligations over time rather than receiving a one-time payment, which might not adequately support long-term needs during the duration of their disability.