Individual Medical Expense and Disability Income Insurance
Individual medical expense
Outside the ACA marketplaces, individual medical policies are medically underwritten, so producers must master the application, the conditional receipt (coverage effective only if the applicant proves insurable), and disclosure duties. Standard provisions include the free-look period (commonly 10 days), the grace period, reinstatement (often automatic within 31 days of lapse with required premium), and the incontestability clause (usually two years). ACA-compliant plans instead guarantee issue and renewability with community rating and essential health benefits.
Disability income design
Disability income replaces a portion of earned income, typically 50-70%, and is priced off occupation class, income, and benefit design. The critical variables are the definition of disability (own occupation vs. any occupation vs. income replacement), the elimination period (a time deductible, not a claims-filing deadline), the benefit period (short-term vs. to-age-65 vs. lifetime), and riders such as residual/partial disability, COLA, and waiver of premium. Own-occupation is broader and costlier than any-occupation, which usually applies after an initial own-occupation period.
Taxation
Benefits are income-tax free when the insured paid the premium with after-tax dollars; employer-paid premiums make benefits taxable, and employer-paid coverage creates imputed income. Social Security and workers' compensation offsets reduce payable benefits.
Traps
Exam items swap own-occupation and any-occupation, describe the elimination period as a waiting period before applying, or assume group disability is always tax-free.
Worked example
A surgeon with a $15,000 monthly income buys a $9,000 monthly benefit (60%) with a 90-day elimination period and own-occupation for 24 months, then any-occupation to age 65. Injury in January; benefits begin in April after the 90 days elapse.