Looking for the answer to the question below related to  Management ?

Coming from an insurance point of view, which of the following is the main risk associated with disability?

 Options:

A) Loss of limbs B) Loss of income C) Decreased work skills D) Decreased mobility

The Correct Answer Is:

• B) Loss of income

Answer Explanation:

The main risk associated with disability from an insurance point of view is option B) Loss of income. This answer is correct for several reasons, as detailed below. Additionally, I will explain why the other options (A, C, and D) are not the primary risk factors but are still important considerations in disability insurance.

Loss of Income (Option B):

Disability insurance is primarily designed to mitigate the financial consequences of a disability that prevents an individual from working. Therefore, the most significant risk associated with disability, particularly from an insurance perspective, is the potential loss of income.

When a person becomes disabled and is unable to work, they face a sudden and often prolonged interruption in their income stream. This loss of income can have a cascading effect on their financial stability and overall quality of life.

From an insurance standpoint, disability insurance aims to replace a portion of the insured person’s lost income during the disability period. This helps them meet their financial obligations, such as mortgage or rent payments, utility bills, groceries, and other essential expenses.

Without this income replacement, disabled individuals may struggle to maintain their standard of living or even risk financial ruin.

Why the Other Options are Not Correct:

A) Loss of Limbs:

While the loss of limbs is a significant and life-altering event, it is not the primary risk associated with disability from an insurance perspective. Loss of limbs, such as amputations, falls under specific types of insurance like health insurance, medical insurance, or even specialized coverage like limb-loss insurance.

These policies may provide coverage for medical expenses, prosthetics, and rehabilitation but do not address the broader financial implications of disability, such as the loss of income or the ability to work.

Disability insurance is concerned with disabilities that impact an individual’s ability to perform their job and earn an income.

It covers a wide range of disabilities, including those that don’t involve physical limb loss, such as chronic illnesses, mental health conditions, and injuries that limit a person’s capacity to work.

C) Decreased Work Skills:

While a decrease in work skills can certainly be a consequence of disability, it is not the primary risk in the context of disability insurance. Disability insurance primarily focuses on the financial aspect of disability, specifically the loss of income due to an inability to work.

While decreased work skills may impact an individual’s employability or earning potential, this is a secondary concern compared to the immediate financial hardship caused by the loss of income.

Employment-related issues, such as skill degradation or diminished job opportunities, are complex and can vary widely depending on an individual’s disability and the nature of their occupation.

Disability insurance may offer vocational rehabilitation services to help policyholders regain their skills and return to work, but the primary goal remains income replacement during the disability period.

D) Decreased Mobility:

Decreased mobility, while a significant concern for individuals with certain disabilities, is not the main risk from an insurance perspective. Mobility issues often fall under health insurance, medical coverage, or specialized insurance plans like long-term care insurance.

These policies may cover expenses related to mobility aids, home modifications, and rehabilitation services. However, they do not directly address the income loss that occurs when someone is unable to work due to a disability.

In summary, while all the options listed (loss of limbs, loss of income, decreased work skills, and decreased mobility) are important aspects of disability, the main risk associated with disability from an insurance standpoint is the loss of income (Option B).

Disability insurance is specifically designed to provide financial protection by replacing a portion of an individual’s lost income when they are unable to work due to a disability. 

While other consequences of disability are significant, they are not the primary focus of disability insurance, which aims to ensure that individuals can maintain their financial stability and meet their ongoing financial obligations when they cannot work.

• A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?