Maryland Life and Health Insurance License Practice Exam

When can beneficiaries expect payouts from an individual disability income policy after a claim is made?

1. Immediately upon filing a claim

2. After the defined elimination period has passed

3. Once a financial hardship is demonstrated

4. Upon approval from a medical review

The correct answer is: After the defined elimination period has passed

Beneficiaries can expect payouts from an individual disability income policy after the defined elimination period has passed because this period represents a waiting time established in the policy. During this elimination period, which can vary depending on the policy terms, the insured must be disabled and unable to work to qualify for benefits. The purpose of this elimination period is to prevent claims for short-term disabilities and to encourage policyholders to return to work if possible. Once this period is complete, and the claim is approved, payments to the beneficiary can begin, provided that the claim meets the terms and conditions outlined in the policy. This structure ensures that the benefits are provided after the insured has experienced a substantial period of income loss due to disability. Other options do not accurately reflect how benefits are typically processed. For example, payouts are not made immediately upon filing a claim as that would undermine the purpose of the elimination period. Additionally, demonstrating a financial hardship is not a requirement for benefit payout under a disability income policy; rather, the focus is on meeting the specific definition of disability. Lastly, although approval from a medical review can influence the decision, it is the completion of the elimination period that triggers the start of benefit payments.