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RPA 4 > Assignment 7 - Managing Personal Risk > Flashcards

Assignment 7 - Managing Personal Risk Flashcards

1
Q

Managed Care plan using a primary care physician who handles partic. medical care and in-network referrals.

Partic. may opt out of network, but will likely end up paying much more out-of-pocket.

A

point-of-service plan

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2
Q
  • type of settlement option
  • issues monthly pmts until the life ins. proceeds are exhausted
A

fixed amount option

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3
Q

type of protection for the owner/beneficiary where the insurer agrees not to deny a claim b/c of any error, concealment or misstmt by the insured (typically 2 yrs)

A

incontestability provision

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4
Q
  • category of policy that meets the general tax law def. of life ins.
  • was entered into on or after 6/21/1988
  • doesn’t meet a special 7-pay test given in the law
  • prem. pd during 1st 7 yrs of policy have been pd faster than they would have been pd for hypothetical 7-yr policy
  • everything is opposite to the normal tax advantages
A

Modified Endowment Contract (MEC)

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5
Q

term for time allowed for a policy to remain in full force even if the prem. has not been pd (usually 31 days)

A

grace period

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6
Q

nonforf. option that allows the policy owner to exchg. the CV of the policy for paid-up term ins. for the full face amt of the original ins. contract.

A

extended term ins. amt

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7
Q

(2) conditions that need to be satisfied for life insurance to enjoy tax adv.

A
  1. policy must be under state law
  2. must meet 1 of 2 tests under Sect. 7702
  • cash-value accumulation test
  • guideline premium and corridor test
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8
Q

tax adv. for life ins. policies

A
  1. tax-free benefit PD to benef.
  2. Inv. earnings are tax free in certain policies
  3. loans are treated as non-taxable distrib.
  4. distrib. prior to age 59 1/2 incure no 10% excise tax
  5. funds w/drawn from policy are drawn from post-tax prem. pmts 1st; 2nd from taxable inv. earnings
  6. 1 life policy can be exchg’d for another or for an annuity contract tax-free
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9
Q
  • type of MEC’s
  • fully paid-up life ins. contract after a single premium
  • not common after the chg to MEC-classification in 1988
A

Single-Premium Whole Life Insurance (SPWL)

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10
Q

Policy Loan Provision

A
  • loans and advances
  • policy must have CV component
  • cost of borrowing doesn’t exceed CV of policy
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11
Q

Advantages of Loan Provisions in Life Ins. Policies

A
  • ability to meet other, demanding/high int., fin. oblig. by using policy’s CV while still keeping policy active
  • w/drawing money from the life ins. fin. instrument w/o incurring income tax liability
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12
Q
  • requirement of life ins. contracts to provide policyholder w/ options to ge some value or continuation from policy even if it isterminated.
  • avoids total loss of their inv. if they cannot or choose to not continue paying premiums to keep it in force.
A

nonforfeiture

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13
Q

types of nonforfeiture options

A
  1. cash surrender value
  2. reduced paid-up insurance
  3. extended term insurance
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14
Q
  • type of nonforfeiture option
  • after prem. has been paid for max of 3 yrs
  • policy must have value req’d to satisfy this option
  • policy is surrendered to ins. comp. for cash amt; ins. cov’g ceases, and insurer has no further oblig. under policy
  • recipient of CV will pay income taxes on cash rec’d over net prem. pd on policy
A

Cash Surrender Value

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15
Q
  • type of nonforfeiture option
  • policyholder recieves a policy of same form of original, but as a “paid-up”ins. policy
  • face amt reflects CV rec’d under nonforf. option
  • lower face amt than original policy had in force
  • no additional prem. required to maintain it
A

Reduced Paid-Up Insurance

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16
Q
  • type of nonforfeiture option
  • policyholder exchg’s CV for paid-up TERM ins. w/ same face amt as original policy
  • length of term depends on net CV and insured’s age
A

Extended Term Ins.

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17
Q
  • refunds of portions of gross prem. that are credited back to policyholder
  • prem. credits based on insurer’s actual mortality experience, inv. earnings, and admin exp.
A

dividends

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18
Q

Types of dividend options

A
  1. cash
  2. applied towards the pmt of future prem. for the policy
  3. remain w/ the ins. company to accumulate int.
  4. used to buy additional amts of paid-up insurance (paid-up additions)
  5. used to purch 1-yr term ins.
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19
Q

in a life ins. policy, when the policyholder dictates HOW proceeds would be paid to the beneficiary

A

settlement option

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20
Q

types of settlement options

A
  1. interest option
  2. fixed-amt option
  3. fixed-period option
  4. life income options
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21
Q

w/ a settlement option, policyholder must choose whether:

A
  1. if it will be used at all
  2. if lump sum benef. pmt is better option
  3. if a trust vehicle is most desirable
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22
Q
  • type of settlement option
  • ins. proceeds are left w/ the insurer to accumulate int.
  • typically 3-4% plus any nonguaranteed “excess interest”
A

interest option

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23
Q
  • type of settlement option
  • period of time over which pmts are made is fixed
  • amt paid per period is not
  • min. guaranteed amt of int. is used to compute the amt of pmt
A

fixed-period option

24
Q
  • type of settlement option
  • proceeds are used to buy some sort of life annuity or life annuity w/ a survivorship feature
  • proceeds are paid for the duration of one’s life
A

life income options

25
Q

types of Riders and Supplementary Benef. on ins. policies

(additional benef.)

A
  1. guaranteed insurability
  2. double indemnity clause
  3. waiver of premium
  4. disability income rider
  5. LTC rider
  6. Accelerated Death Benef.
26
Q
  • type of Riders and Supplementary Benef. on ins. policies
  • allows the PH to purchase additional amts of ins. at state time intervals w/o further proof of insurability
A

guaranteed insurability

27
Q
  • type of Riders and Supplementary Benef. on ins. policies
  • accidental death or AD&D
  • double or more times policy’s face amt if the insured’s cause of death is by an accident
A

double indemnity clause

28
Q
  • type of Riders and Supplementary Benef. on ins. policies
  • allows for prem. to be waived if insured becomes total disabled prior to certain age.
  • life ins. will continue in force w/o further prem. pmts during the continuance of disability
A

waiver of prem.

29
Q
  • type of Riders and Supplementary Benef. on ins. policies
  • permits disability income pmts to be pd based on the face amt of perm. life ins. policy
  • not very common these days
A

disability income rider

30
Q
  • type of Riders and Supplementary Benef. on ins. policies
  • provides LTC benefits in areas of custodial care, home health care, and skilled nursing
  • reduces death benef. and CV of policy (dependent rider)
A

LTC rider

31
Q
  • type of Riders and Supplementary Benef. on ins. policies
  • provides that all or a portion of the discounted value of death benefit be paid to POLICYHOLDER in the event that he/she is diagnosed with dread disease at onset of terminal illness or perm. residence in nursing home
  • HIPPA - benef. received under this on a terminally ill insured are EXCLUDED from gross income for fed’l tax purposes
A

accelerated death benefits

32
Q

PH transfers ownership rights to another party

A

assignment

33
Q

type of assignment where only certain but not all rights are transferred to another party

exp = placed as collateral on a loan

A

collateral assignment

34
Q
  • this provision kicks in should the PH fail to pay the prem. due to keep the policy in force
  • if enough loan value in contract, provision takes effect and prem. will automatically be pd by means of a loan against the policy
A

automatic premium loan provision

35
Q

an insured EE may convert up to the face amt of his/her group term life ins. policy w/in 31 days of term of employment to one of the insurer’s regular perm. form at standard rates for age w/o evidence of insurability

A

conversion

36
Q

refers to regular life ins. issued w/o requiring the app to submit to a medical exam

A

nonmedical insurance

37
Q
  • contractual component allows the insured, w/in a 30yr period, to reinstate a lapsed policy that originally lapsed b/c of nonpmt of prem.
  • must pay back prem. and provide evidence of insurability
A

reinstatement clause

38
Q

consists of HMO, POS, and PPO network products that cons. may purchase on the open mkt or pay via P/R ded.

A

managed care plans

39
Q

cost sharing components of mng’d care plans

A
  • exp cov’d at 100% or %age of reasonable and customary charges for the area
  • annual or lifetime max limits?
  • deductible?
  • coins? out-of-pocket max?
40
Q
  • type of mng’d care plans
  • person selects a participating PCP; who then manages person’s medical care referring to specialists, hospital care and other medical services
  • comprehensive benefits
  • little or no deductible
  • in-network only
  • network covers limited geographic area
A

HMO

41
Q
  • type of mng’d care plans
  • combo of tradi’l HMO and fee-for-service
  • PCP
  • member can go outside network (for higher cost-sharing or lesser benef)
A

POS

42
Q
  • type of mng’d care plans
  • network of contracted providers that agree to discounted fee schedule
  • no PCP
  • member can go outside network for services (for higher costs-sharing)
A

PPO

43
Q

a gov’t health ins. program that provides medical expense ins. for indiv. not currently employed and:

  • age 65
  • under 65 w/ certain disabilities
  • have End-Stage Renal Disease
A

medicare

44
Q
  • part of Medicare
  • hospital ins. (HI)
  • financed through P/R taxes
  • covers inpatient care, skilled nursing facilities (not LTC), hospice care and some home health care
  • nearly everyone age 65 and over are eligible
A

Part A

45
Q
  • part of Medicare
  • Supplementary Medical Insurance (SMI)
  • completely voluntary
  • financed through prem. pmts by elig. subscribers
  • covers docs’ services and outpatient care
  • unlimited home health services
  • med equipment, diagnostic tests, surgical dressings
  • due to PPACA - yearly “wellness” and preventive visits are now fully covered here
A

Part B

46
Q

created to achieve more comprehensive medical expense ins. to cover gaps in Medicare Parts A and B

comprise a suite of 10 plans that range from basic to major supplement to Medicare

A

Medigap Policies

47
Q

created to achieve more comprehensive medical expense ins. to cover gaps in Medicare Parts A and B

MCO’s that contract w/ Medicare, offer Medicare benef. through HMOs and even additoinal benefs. depending on the org.

A

Medicare HMOs

48
Q
  • part of Medicare
  • known as Medicare Advantage Plans (or Medicare + Choice plan)
  • created by Balanced Budget Act
  • choose own providers, but may be charged more than their plan’s allowed amt but there is a cap on billing
  • Medicare pays the premium and the PFFS Private Fee For Service Plan provides benef.
A

Part C

49
Q

HSAs

A
  • must be paired w/ HDHP
  • deductible: $1,200/$2,400
  • OoP Max: $5,950/$11,900
  • have no other health ins. including Medicare
  • not be a dep. on another’s tax return
  • fully portable and owned by EE
  • annual contribs: $3,050/$6,150
  • contribs by EE, ER, or both
  • tax-free
50
Q

HRAs

A
  • set by ER and coupled w/ group health plan
  • helps to offset ded. and coins. expenses
  • ER money only
  • not portable
  • ER sets fund amts and limits
  • only for qualified expenses, prem. and LTC prem.
  • unused balances may be rolled over, limits set by ER
51
Q

tax implications for MEC’s

A

opposite of regular life ins. contract

  • loans - taxable distribs.
  • early w/drawals - 10% penalty
  • distrib - 1st coming from inv. earnings inside the policy; then tax-free on the return of inv. in the contract
52
Q

(2) types of assigment

A
  1. absolute
  2. collateral
53
Q

type of assignment where all rights of ownership are transferred to another

A

absolute assignment

54
Q

(3) protections in life ins. contracts for owner/beneficiary

A
  • incontestability provision
  • suicide provision
  • reinstmt provision
55
Q

type of protection in life ins. contracts for owners/benef. where if the owner commits suicide w/in the 1st 2 yrs (the usual), then the benef. will most likely get only the premiums back that were already paid on the policy - not the actual full benef.

if after 2-yr waiting period, then suicide is treated as any other death

A

suicide clause

56
Q

type of protection in life ins. contracts for owners/benef. where is a policy owner has failed to pay a permium w/in the time allowed, then this clause permits the insured to reinstate the policy w/in a specified period of time

will probably have to satisfy evidence of insurability and pmt of back premiums

A

reinstmt provision

RPA 4 (12 decks)

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