Washington State Insurance Practice Exam

What is a key characteristic of "disability insurance"?

1. It provides coverage for property damage

2. It pays a percentage of the policyholder's income during periods of incapacity

3. It offers medical benefits for chronic illnesses

4. It is mandated by employers

The correct answer is: It pays a percentage of the policyholder's income during periods of incapacity

Disability insurance is specifically designed to provide financial protection to individuals who are unable to work due to an injury or sickness. One of the key features of this type of insurance is that it pays a percentage of the policyholder's income during times when they are incapacitated and unable to earn a living. This financial support is crucial for individuals to manage their daily expenses and maintain their standard of living while they recover. In contrast to the other options, disability insurance does not focus on property damage, which common property and casualty insurance would cover. While it may provide some benefits related to medical care, disability insurance is primarily concerned with income replacement rather than direct health benefits for chronic illnesses. Additionally, while some employers may offer disability insurance as part of their employee benefits, it is not universally mandated by law, setting it apart from other forms of insurance coverage that are required for employees. Thus, the focus on income replacement during periods of incapacity makes this option the correct representation of disability insurance.