Life License Qualification Program (LLQP) Practice Exam

What determines the maximum monthly benefit amount in a Disability Income policy?

1. Monthly expenditures at the time of disability

2. Gross income at the time of purchase

3. Gross income at the time of disability

4. Occupation at the time of purchase

The correct answer is: Gross income at the time of purchase

The maximum monthly benefit amount in a Disability Income policy is primarily determined by the insured's gross income at the time of purchase. This is because insurance companies typically use income as a key factor in evaluating the risk and setting the appropriate benefit levels for a policyholder. The policy is designed to replace a portion of the insured's income if they become unable to work due to a disability, and therefore, it is essential that the benefit amount correlates to the income level at the time the policy is initiated. While monthly expenditures at the time of disability may influence the policyholder's financial needs, they do not play a direct role in determining the maximum benefit during the underwriting process. Similarly, gross income at the time of disability itself does not dictate the benefit amount; the policy's terms are set at purchase based on when the coverage is established. Although occupation can impact the premiums and the overall risk assessment, it does not directly determine the benefit amount, which is fundamentally linked to the gross income at the policy's onset.