Assignment 7 - Managing Personal Risk Flashcards
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.
point-of-service plan
- type of settlement option
- issues monthly pmts until the life ins. proceeds are exhausted
fixed amount option
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)
incontestability provision
- 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
Modified Endowment Contract (MEC)
term for time allowed for a policy to remain in full force even if the prem. has not been pd (usually 31 days)
grace period
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.
extended term ins. amt
(2) conditions that need to be satisfied for life insurance to enjoy tax adv.
- policy must be under state law
- must meet 1 of 2 tests under Sect. 7702
- cash-value accumulation test
- guideline premium and corridor test
tax adv. for life ins. policies
- tax-free benefit PD to benef.
- Inv. earnings are tax free in certain policies
- loans are treated as non-taxable distrib.
- distrib. prior to age 59 1/2 incure no 10% excise tax
- funds w/drawn from policy are drawn from post-tax prem. pmts 1st; 2nd from taxable inv. earnings
- 1 life policy can be exchg’d for another or for an annuity contract tax-free
- type of MEC’s
- fully paid-up life ins. contract after a single premium
- not common after the chg to MEC-classification in 1988
Single-Premium Whole Life Insurance (SPWL)
Policy Loan Provision
- loans and advances
- policy must have CV component
- cost of borrowing doesn’t exceed CV of policy
Advantages of Loan Provisions in Life Ins. Policies
- 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
- 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.
nonforfeiture
types of nonforfeiture options
- cash surrender value
- reduced paid-up insurance
- extended term insurance
- 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
Cash Surrender Value
- 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
Reduced Paid-Up Insurance
- 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
Extended Term Ins.
- 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.
dividends
Types of dividend options
- cash
- applied towards the pmt of future prem. for the policy
- remain w/ the ins. company to accumulate int.
- used to buy additional amts of paid-up insurance (paid-up additions)
- used to purch 1-yr term ins.
in a life ins. policy, when the policyholder dictates HOW proceeds would be paid to the beneficiary
settlement option
types of settlement options
- interest option
- fixed-amt option
- fixed-period option
- life income options
w/ a settlement option, policyholder must choose whether:
- if it will be used at all
- if lump sum benef. pmt is better option
- if a trust vehicle is most desirable
- type of settlement option
- ins. proceeds are left w/ the insurer to accumulate int.
- typically 3-4% plus any nonguaranteed “excess interest”
interest option
- 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
fixed-period option
- 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
life income options
types of Riders and Supplementary Benef. on ins. policies
(additional benef.)
- guaranteed insurability
- double indemnity clause
- waiver of premium
- disability income rider
- LTC rider
- Accelerated Death Benef.
- 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
guaranteed insurability
- 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
double indemnity clause
- 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
waiver of prem.
- 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
disability income rider
- 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)
LTC rider
- 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
accelerated death benefits
PH transfers ownership rights to another party
assignment
type of assignment where only certain but not all rights are transferred to another party
exp = placed as collateral on a loan
collateral assignment
- 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
automatic premium loan provision
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
conversion
refers to regular life ins. issued w/o requiring the app to submit to a medical exam
nonmedical insurance
- 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
reinstatement clause
consists of HMO, POS, and PPO network products that cons. may purchase on the open mkt or pay via P/R ded.
managed care plans
cost sharing components of mng’d care plans
- 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?
- 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
HMO
- 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)
POS
- 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)
PPO
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
medicare
- 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
Part A
- 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
Part B
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
Medigap Policies
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.
Medicare HMOs
- 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.
Part C
HSAs
- 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
HRAs
- 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
tax implications for MEC’s
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
(2) types of assigment
- absolute
- collateral
type of assignment where all rights of ownership are transferred to another
absolute assignment
(3) protections in life ins. contracts for owner/beneficiary
- incontestability provision
- suicide provision
- reinstmt provision
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
suicide clause
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
reinstmt provision
