CLIENT PROFILE (Chapter 6) Flashcards
A&S Terminology
Registered Disability Savings Plan
(RDSP)
Registered plans approved by the federal government to provide qualifying disabled beneficiaries with a tax-deferred savings program and support payments in their later years.
A&S Terminology
Disability Tax Credit (DTC)
A non-refundable tax credit which helps reduce the income tax that people with physical or mental impairments, or their supporting family members, may have to pay
REVIEW
What are some key points of Grouped disability/critical illness plans?
- Benefits claimed under the policies are paid directly to the disabled employee
- The employees who are beneficiaries of a grouped plan must be members of a given class of employees within the organization
- Shareholders may be members of the group, along with non-shareholder employees, so long as the shareholders are also employees of the company
- The employer can tax-deduct premiums in the year in which they are paid
- Employees do not have to report these employer paid premiums as income
- If the employees claim benefits from the plan. Those are deemed to be taxable benefits.
REVIEW
What are some insurance needs to address the owners inability to sell a business?
- Buy-sell agreements (Cross-purchase, criss-cross, share redemption)
- Disability buyout insurance
- key-person insurance
- employee health trusts (EHTs)
- Personal Health Spending plans (PHSP)
- Group disability / critical illness plans
REVIEW
Name a couple types of disability insurance coverages for business
- Disability business overhead
expense (BOE) insurance - Business loan protection
- Disability buyout insurance (Entity purchase agreement)
- Disability buyout insurance (Cross-purchase agreement)
- Key person insurance
- Employee health trusts (EHTs)
- Personal health spending
plans (PHSPs) - Grouped DI/CI insurance
plans
Refer to the LLQP A&S manual for the tax implication characteristics on each coverage
[Ref. 5.7, Table 5.1]
REVIEW
What is the purpose of the elimination period?
To eliminate the need for the insurance companies to process claims of very short duration.
REVIEW
What are some of the riders that are applicable with disability insurance?
- Future purchase option (FPO)
- Cost-of-living adjustment (COLA)
- Accidental death and dismemberment (AD&D)
- Partial and residual disability benefits
- Return of premium (ROP)
- Hospitalization benefit
CHAPTER 6 - Client profile
Due to the wide array of products that offer accident and sickness (A&S) coverage, the client profile should cover the following aspects, what are they?
- Personal situation;
- Financial situation, including income and expenses;
- Insurance situation.
What are some factors to take into consideration when conducting a fact-finding interview for an insurance review on a client? (name at least three)
- Personal factors unique to the client, like age, gender and avocation
- Marital status of the client
- Dependents, if any, of the client (Spouse, children, other dependents)
- Client’s occupation
- Current health and health history of the client and his family
- Client’s retirement goals
TRUE OR FALSE?
A client’s occupation is the most critical factor in determining the type, benefits and costs of disability insurance coverage.
TRUE
- For example, the “own occupation” definition of disability and the right to acquire a policy that is guaranteed to be renewable without modification of costs or benefits are only available for those in low-risk classifications of occupation, such as doctors, lawyers and senior management personnel
[Ref. 6.1.4]
TRUE OR FALSE?
The amount of critical illness and long-term care insurance required is determined by occupation.
FALSE
The amount of critical illness and long-term care insurance required is not primarily determined by occupation.
[Ref. 6.1.4]
TRUE OR FALSE?
The degree of risk of disability inherent in the occupation may also determine the minimum waiting period that the insured must take, the duration of benefits and, of
course, the premiums payable.
TRUE
TRUE OR FALSE?
Disability income replacement insurance is, naturally, all about the client’s health.
FALSE
Disability income replacement insurance is, naturally, all about the client’s earned income
The insurance is designed to replace earned income lost because of a period of illness or injury
[Ref. 6.2]
What are some sources of Earned & unearned income?
EARNED INCOME
- Salary
- Bonuses and commission income from working
- Business income
UNEARNED INCOME
- Investments
- Annuities,
- Pensions,
- Income from trusts
- Royalties
- Passive income
- Spousal income
- Support payment (child support alimony)
- Pension income
- Disability income
- in-kind income
- Emergency Funds
TRUE OR FALSE?
It is important to keep in mind that, where an employee is a member of an employer/employee group plan, the group plan only covers his income from that employer, not outside sources of earned income.
TRUE
TRUE OR FALSE?
The amount of the benefit selected on a critical illness insurance is often tied to lifestyle or an estimate of expenses that might be incurred, which is also based on the percentage of the client’s income.
FALSE
The amount of the benefit selected on a critical illness insurance is often tied to lifestyle or an estimate of expenses that might be incurred, but is not based on a percentage of the client’s income.
[Ref. 6.3]
What are the tax treatment of contributions paid and benefits received under government programs?
The tax treatment of contributions paid and benefits received under the three public insurance and pension plans varies by type of plan and with who is the payer of the contributions.
[Ref. 6.5.2.4] & [Table 6.1, 6.2]
