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CFPE 501: Financial Planning Process & Insurance > Definitions > Flashcards

Definitions Flashcards

1
Q

Aletory

A

A term that describes the fact that both parties of a contract may NOT receive the same value.

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2
Q

Decelerations page

A

The insuring agreement of any insurance policy.

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3
Q

HO3

A

Homeowner’s Insurance

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4
Q

HO6

A

Condominium Insurance

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5
Q

ACV

A

Actual Cash Value, replacement cost minus depreciation

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6
Q

HO4

A

Renter’s Insurance

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7
Q

Open Peril

A

all perils except those specifically excluded

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8
Q

PAP value basis for damages

A

Actual cash value

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9
Q

CPL policy

A

Comprehensive personal liability (not avail through PAPs)

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10
Q

CPL exclusions

A

Intentional acts e.g. slander, defamation, libel

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11
Q

HO5

A

Highest level of building and personal property coverage (HO3 + HO15-no longer avail)

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12
Q

PAP

A

Personal auto policy

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13
Q

Inland marine insurance

A

Covers goods in transit

aka Personal Property Floater

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14
Q

Statement of Financial Position

A

Assets (cash, invested, use) = Liabilities + Net Worth

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15
Q

Cash Flow Statement

A

Inflows and Outflows

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16
Q

Dividend Scale

A

BOD updates annually to determine how much money can be paid to policy owners

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17
Q

General account

A

Holds cash value for traditional whole life policy

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18
Q

Mortality cost

A

cost of insuring a person, which increases at an accelerating rate

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19
Q

Modified endowment contract

A

MEC is an insurance contract that fails the ‘7-pay test’ and has too much premium paid, and subjects loans and withdrawals to taxes and penalty; all single premium contracts are MECs.

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20
Q

Life insurance

A

Provides a death benefit to beneficiaries for people who ‘die too soon’ (pays when dead)

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21
Q

Annuity

A

Provides a lifetime stream of income in case you ‘live too long’ (pays while alive)

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22
Q

NAIC

A

National association of insurance commissioners

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23
Q

Regulation XXX

A

NAIC law to ensure insurance company solvency by requiring higher reserves for term premium guarantees for more than 5-years

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24
Q

1035 Exchange

A

cash value policy can be exchanged for another policy, annuity or LTC

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25
Q

MOOP

A

maximum out-of-pocket (health insurance)

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26
Q

SPIA

A

single premium immediate annuity

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27
Q

Qualified annuities

A

payment made with pre-tax dollars inside a qualified plan

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28
Q

Non-qualified annuity

A

payment made with after-tax dollars outside of qualified plan

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29
Q

Contestable clause

A

2 year period after policy issue when the insurance company can contest the policy

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30
Q

Suicide clause

A

1-2 year period after policy issue when the insurance company can contest the policy if death by suicide; need only return cumulative premiums less debt

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31
Q

1035 Exchange

A
  1. Life insurance -> life policy, annuity or LTC
  2. Endowment -> endowment, annuity, or LTC
  3. Annuity -> annuity or LTC
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32
Q

Morbidity

A

measure of the rate of disability

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33
Q

Mortality

A

measure of the rate of death

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34
Q

Participating policies

A

Policies on which dividends are paid

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35
Q

Automatic payment loan

A

APL protects a coverage lapse due to non-payment if adequate cash value

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36
Q

Irrevocable beneficiary designation

A

Owner must get permission from beneficiary to do anyting other than stop premiums

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37
Q

Per stripes (sounds like burpees)

A

Stated share to PRIMARY beneficiaries, then stated shares that would go to predeceased heirs remains within their family unit divided among SECONDARY beneficiaries

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38
Q

Per capita

A

100% to surviving PRIMARY beneficiaries

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39
Q

Per capita by generation

A

Stated share to PRIMARY beneficiaries, then any portion that would go to predeceased heirs divided equally among all SECONDARY beneficiaries

40
Q

LI ‘cash’ dividend option

A

The client can handle and invest or spend the money

41
Q

LI ‘paid-up additions’ dividend option

A

Allows for the purchase of additional net cost whole life insurance. It can be added each year, regardless of the insured’s health or occupation.

42
Q

LI ‘reduced premium’ dividend option

A

Decreases out-of-pocket expenses

43
Q

LI ‘accumulate at interest’ dividend option

A

Allows for professional management of money, and a minimum rate is guaranteed, but interest is taxable (other dividend options do not increase tax liability)

44
Q

LI ‘one-year term’ dividend option

A

Provides the opportunity to obtain inexpensive insurance that is equal to the guaranteed cash value. It is added to each year, regardless of health or occupation, and it usually is used in addition to another option.

45
Q

LI riders - disability of waiver

A

The company agrees to waive the entire premium or the monthly charges, whichever applies, if the policy owner becomes totally disabled

46
Q

LI riders - accidental death

A

If the death of the insured is caused by an accident, and death is within 90 days of the accident, an additional sum equal to the amount of the rider will be paid

47
Q

LI riders - guaranteed isurability

A

The policy owner may purchase additional specified amounts of insurance at stated intervals without providing evidence of insurability.

48
Q

LI policy replacement advantages: term with term

A

advantages least complex alternative; if alternative policy is more cost effective, consider replacement

49
Q

LI policy replacement advantages: term with cash value

A

advantages normally can be done through term’s conversion clause; tax deferral on savings; answers the need for forced savings; answers the need for insurance past an age when term would become too expensive to continue

50
Q

LI policy replacement advantages: cash value with cash value

A

no advantages, unless alternative policy has better coverage or is less expensive

51
Q

LI policy replacement advantages: cash value with term

A

advantages reduces outlay in the short term; may better answer policy owner’s needs

52
Q

Annuitization payout optins: straigth life income

A

The proceeds are paid to a beneficiary on

the basis of life expectancy.

53
Q

Annuitization payout options: Life income with period certain:

A

The beneficiary is paid a life income for as long as they live, with a minimum number of payments guaranteed.

54
Q

Annutization payout options: Life income with refund

A

A beneficiary is paid a life income for as long as they live; if the original proceeds are not paid out when the beneficiary dies, the remainder is paid to a contingent
beneficiary.

55
Q

Annuitization payout options: Joint and survivor income

A

It provides income to two payees, with payments continuing to the survivor after the death of the first payee.

56
Q

Capitation

A

Capitation assures that primary care physicians are paid a fixed fee for every health care plan subscriber who names that physician as their primary care physician.

57
Q

Copayment

A

Most managed care plans have a fixed fee for each visit to a health care provider’s office.

58
Q

HMO

A
  • Health maintenance organization; both funding and service provider; subscriber can use only the physicians and hospitals that are a part of the HMO network.
  • Very little out-of-pocket costs other than small copays.
  • Pays PCPs on a capitation basis - ‘gatekeeper’
  • Specialists or any further care must be approved by and referred through the PCP
59
Q

PPO

A
  • A Preferred Provider Organization is a group of providers (including generalists, specialists, hospitals, clinics, etc.) that have agreed to be part of the plan;
  • a PPO does not require the insured to choose a PCP nor does it require a referral to utilize a specialist
  • encourages in-network participation through high out of network coinsurance
60
Q

POS

A
  • A Point Of Service plan is a hybrid between an HMO and a PPO.
  • choose PCP and get referrals to specialists
  • purpose of a POS plan is to provide financial incentives for an individual to use the lowest-cost providers, while still maintaining a full range of choices for each person
  • The POS plan has more restrictions than a PPO but is not as restrictive as an HMO
61
Q

EPO

A
  • Exclusive Provider Organization
  • similar to an HMO, but it is funded through an insurance company
  • health care conducted by contracted providers. Only care received from contracted providers is covered.
62
Q

PSN

A

Provider Service Networks: small health care plans typically are a cooperative effort between physicians and hospitals.

63
Q

PCP

A

Primary Care Physician

64
Q

HIP

A

Health insurance provisions

65
Q

HI Managed care plans (pre-payment plan)

A

HMO, PPO, PHO, POS, PSN, EPO

All control cost of healthcare through mechanisms

66
Q

HI Indemnity plans (fee for service; post-payment plan)

A

Total choice of providers without payment discrimination

67
Q

HIP Supplemental coverage

A

Dental, vision or accident; available at extra premiums

68
Q

HIP MOOP

A

‘Maximum out of pocket’ expense

For approved charges only typically includes deductibles, copayments and coinsurance

69
Q

HIP Coinsurance

A

Splitting of costs between an insurance company and insured up to MOOP

70
Q

HIP Copayments

A

Fixed payment for each visit

Applied to deductiblees and MOOP

71
Q

HIP Nonembedded deductible

A

Family deductible must be met before transition to coinsurance

72
Q

HIP Embedded deductible

A

Individual deductible must be met before transition to coinsurance (insurance co. participates sooner)

73
Q

HIP Deductible

A

Initial amount insured must pay befrore plan begins to pay

74
Q

HIP Coordination of benefits clause

A

Enforece concept of indemnity so insured does not collect more than 100% of cost

75
Q

HIP Utilization review

A

Includes pre-certification and case management

76
Q

HIP Preexisting condition

A

PPACA eliminated in most situation

77
Q

PPACA

A

Patient Protection and Affordable Care Act

78
Q

HIP Exclusions

A

IF not excluded than eligible for reimbursement

79
Q

HIP Internal limits

A

Cost containment mechanism in section “What’s not covered”

80
Q

HIP covered charges

A

Listed as ‘covered charges’ or ‘exclusions’ (best)

81
Q

Disability definition - any occupation

A

strictest definition; unable to perform any gainful occupation

82
Q

Disability definition - own occ

A

most liberal; unable to perform principal duties of own occ

83
Q

Disability definition - modified own occ

A

unable to perform any gainful occ reasonably fitted by education, training, experience or prior economic status

84
Q

Disability definition - split definition

A

unable to perform own occ for a time, then shifts to modified own occ

85
Q

Disability definition - loss of income

A

defines disability as a percentage of lost income

86
Q

Disability probation period

A

the period of time during which the individual policy must be in force before the insured is covered for
specified perils or illnesses.

87
Q

Disability elimination period

A

the period of time after the disability occurs and before benefit payments begin.

88
Q

Disability social insurance rider

A

a way of reducing the premium by requiring the insured to apply for Social Security disability benefits and reducing the benefits paid by amounts received

89
Q

Medicare

A

A federal social insurance program available to everyone who is eligible for Social Security benefits

90
Q

Medicaid

A

A combined state and federal program that is a form of welfare, and the single biggest payer of long-term care costs

91
Q

LTC insurance ADLs as defined in HIPAA

A

bathing, continenace, dressing, eating, toileting, tranferring

92
Q

LTC skilled nursing care

A

24-hour availability of a nurse under doctor supervision

93
Q

LTC imtermediate care

A

less intensive nursing or rehab

94
Q

LTC custodial care

A

assitance with ADLs but not medical

95
Q

LTC respite care

A

allows the primary care-giver a vacation

CFPE 501: Financial Planning Process & Insurance (2 decks)

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