A disability income policy can prevent an insured from earning a higher income than if he/she were working by utilizing

• A. benefit limits
• B. cost of living rider
• C. waiver of premium
• D. residual benefits

Answer: (A)

Benefit limits cap the amount the policy will pay each month. Disability income benefits are designed to replace part of the insured’s income up to a fixed maximum. If the insured earns more by working, the benefit doesn’t rise beyond that cap, so the total income from the policy doesn’t exceed what the limit allows. The other features work differently: a cost of living rider would raise benefits over time to match inflation; waiver of premium stops premium payments while disabled; residual benefits provide extra pay if earnings drop after disability. Thus, the cap provided by benefit limits is the mechanism that prevents earning more than the stated level.