Massachusetts Health & Accident Insurance Practice Exam

Which method typically pays 50% of the full disability benefit amount?

1. Group Long-Term Disability

2. Flat Amount Method

3. Percent-of-Earnings Approach

4. Accidental Means Provision

The correct answer is: Flat Amount Method

The Flat Amount Method is a specific way of calculating benefits in disability insurance that pays a fixed dollar amount as a benefit, regardless of the insured’s previous earnings. Typically, this method guarantees a certain percentage, commonly around 50%, of the full disability benefit amount in cases of total disability. This means that instead of basing the benefit on a percentage of income or wage loss, it simply provides a flat, predetermined sum, making it straightforward for policyholders to understand their benefits. In contrast, the other approaches mentioned rely on various calculations that can take into account the individual's earnings, the nature of the disability, or specific conditions. These methods do not always guarantee a fixed payout, which is why the Flat Amount Method is distinctive in its straightforward approach to providing a defined benefit amount for total disability.