Maryland Life and Health Insurance License Practice Exam

Which disability policy provision addresses concerns of benefits decreasing over time?

1. Cost of living benefit

2. Renewability clause

3. Waiver of premium

4. Rehabilitation benefit

The correct answer is: Cost of living benefit

The correct choice is the cost of living benefit, as this provision specifically addresses the concern that benefits from a disability policy might decrease in value over time due to inflation. When an individual is unable to work and relies on disability benefits, it's crucial that the purchasing power of those benefits is preserved. The cost of living benefit is designed to adjust the monthly benefits to match increases in the cost of living, ensuring that the disabled policyholder can maintain their standard of living despite economic changes. In contrast, the renewability clause pertains to the policy's terms regarding renewal, ensuring that the policyholder can continue their coverage without the risk of being declined due to health changes. The waiver of premium allows policyholders to suspend premium payments while receiving benefits, and the rehabilitation benefit provides support for services aimed at helping disabled individuals regain the ability to work. While these provisions are also essential, they do not specifically address the issue of benefit amounts decreasing over time like the cost of living benefit does.