Disability & Long-Term CareQuestion 84 of 315
Why do disability income insurers cap the monthly benefit at roughly 60 to 70 percent of the insured's gross income?
a.Federal law forbids replacing 100 percent of income
b.To preserve the insured's financial incentive to return to work
c.Because state guaranty funds will not cover higher amounts
d.Because the IRS taxes any benefit above that level
Explanation
Insurers limit the benefit so that the insured still has a real financial reason to recover and return to work. Paying close to or more than full income would invite malingering and adverse selection.
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