Disability And Long Term Care Insurance Flashcards

1
Q

What is any occupation disability insurance?

A

Unable to engage in any occupation which which they are qualified by training, experience, education.
- this is also called modified any occupation or modified own occupation

  • some policies use split definition
    Own occ 2-10 years, Any occ to age 65.
  • this is the most likely to pay out, and the best answer on the exam
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2
Q

What does it mean to be totally disabled?

A

Reflects SS rules.
- if unable to engage in any substantial gainful activity, which is expected to result in death or expected to last for 12 months or more

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3
Q

What is a loss of income policy?

A

Abandons effort to define disability. Pays benefits based on economic loss following a physical disability. Partial disability is covered.

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4
Q

Define the non cancelable continuance provision

A

Individual can keep policy in force by paying premium. Premium won’t increase. Normally renewable to 65. Most expensoive

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5
Q

What is the guaranteed renewable disability, continuance provision?

A

Guarantees that the individual can keep the policy in force by paying the premium… but premium may increase on a class basis, not an individual basis. Renewable to age 65.
— lower premiums than noncancellable.

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6
Q

What is the conditionally renewable policy?

A

Allows a noncancelable or guaranteed renewable policy to continue beyon age 65. Usually has a 2 year benefit and premium is adjusted for benefits and age. Can only be extended i the insurances is still an active employee
Least expensive

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7
Q

What is presumptive disability clause?

A

Total disability benefits will be paid if the insured loses sight, hearing, speech, both hands, both feet, or one hand and one foot. Policies could cover partial, some could require loss to be permanent or temporary

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8
Q

Rider: partial disability

A

Many carriers add at no cost
- encourage insured to resume employment as soon as possible
-benefits usually start after a period of total disability and last up to 6 months
- usually 50% of the benefit for total disability

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9
Q

Rider: residual disability (proportional)

A

Expensive- own occ only
- payable for the max benefit period under basic contract
-paid in proportion to the insured’s reduced earnings (20-80%) range

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10
Q

Rider: Guaranteed insurability option

A

Additional premiums
-permits an insured the right to purchase additional amounts of coverage without new proof of insurability
-subject to financial underwriting

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11
Q

Rider: COLA

A

Additional premium
- COLA benefit increases could be floating or inflation index

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12
Q

Rider: social Insurance Substitute Benefit (SIS)

A

For total disability, the monthly benefit will be equal to the SIS benefit shown on the policy schedule less any SS disability payment. If the person receives a SS disability benefit, the SIS benefit is terminated or reduced.
- 5 month waiting period under SS
-generally must wait for 12 months because SS will not pay if disability doesnt last 12 months— then you get back pay

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13
Q

Connie buys a disability policy with a base benefit of 5000, and an SIS benefit of 1200. Connie becomes disabled and ultimately receives 600 in SS disability benefits. HOw much benefit does she receive from her policy when SS pays $600.
A 600
B 5000
C 5600
D 6200

A

C $5600

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14
Q

How are the premium and benefits taxed if:
Premium is paid by employee
owned by employee.

A

Benefits: Tax Free
Not deductible

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15
Q

How are premium and benefits taxed if:
Paid by employer under bonus arrangement on W-2
Owned by employee

A

Benefits tax free
benefits always tax free unless group plan
Deductible to employer as bonus to employee

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16
Q

How are premiums and benefits taxed if:
Paid by employer under salary continuation plan (group plan)
Owned by employee

A

Benefits taxable
Deductible by employer

17
Q

How are premiums and benefits taxed if:
Paid by partnership or S corp
Owned by partner or 2% shareholder of S corp

A

Benefits tax free (premium is conduit income to the partner or shareholder )
- benefits always tax free unless group plan
Deductible by partnership or S corp - because paid by employer

18
Q

What if benefits are shared by employee and employer?

A

Benefits will be partially tax free. This is a contributory plan

19
Q

Nick works for XYZ corporation as a sales manager. The company provides a salary continuation disability insurance program, and it pays the full premium. Nick’s benefit under the plan is $10k/month. Calculate Nick’s net of tax monthly benefit if his tax bracket is 32% during disability.
1. $3200
2. $5000
3. $6800
4. $10k

A
  1. $6800
    - if employer pays the full premium, benefits are taxable.
20
Q

How are premiums for LTC taxed

A

After 1996, premiums paid and unreimbursed medical expenses for qualified LTC services are deductible as itemized medical expenses.
- ages 51-60 is $1690/year
- ages 61-70 is $4510/year
Deductions are subject to 7.5% of AGI floor
- benefits received are generally not taxable

21
Q

What makes an LTC policy qualified or non qualified?

A

Non qualified-policy that provides cash at surrender. Premiums can’t be deducted

22
Q

Can a HSA account be used to cover LTC expenses?

A

YES. CAN PAY QUALIFIED PREMIUMS AND EXPENSES

23
Q

Which of the following is not true about Long term care insurnace?
A- Premiums paid are deductible in full
B- Unreimbursed expenses are subject to 7.5% ofAGI floor
C- Premiums paid are included as deductible medical expenses subject to 7l.5% of AGI floor

A

A - premiums are seldom fully deductible. The amount of deductible premium depends on the clients age..

24
Q

How does Medicare pay for skilled nursing care?

A

Patient hospitalized at least 3 days in a row before admission. Must be within a short time after leaving hospital.
—patients care in skilled nursing facility is for condition taht was treated in hospital
- condition must be expected to improve- excludes Alzheimer’s
- benefits for the first 20 days are paid in full by medicare
Days 21-200 a co pay is required of the pateient. Insured pays $194.50/day.
- after 100 days of coverage, the patient must pay the full cost