Disability, Insurance, Health, Insurance, And Long-Term Care Disability, insurance, health, insurance, and long-term care Flashcards
Disability insurance
What is the distinction between short-term and long-term disability coverage?
Short term, provides coverage for up to two years
Long-term, provides benefits for two or more years or until the insured reaches a certain age typically 65
Disability insurance
What policy elements are in a disability contract?
Definition of disability
Elimination Period
Benefit amount or percentage
Benefit term
Coverage perils insured against
Disability insurance
Definition of disability, used by most insurance companies is one or a combination of the following
Own occupation
Modified own occupation
Any occupation
Social Security, definition of disability
Hybrid, forms of disability
Disability insurance
What is own occupation disability (own occ)?
Inability to perform any or all the duties in one’s own occupation, it’s the most expensive
Disability insurance
What is modified own occupation?
Benefits are paid if a disabled person cannot perform their specific occupational duties would not continue to pay if that individual chose to be gainfully employed in another field
Disability insurance
What is any occupation (any occ)?
Inability to perform the duties of any occupation, for which one is reasonably qualified by education, training or experience
Disability insurance
What is Social Security definition of disability?
Mental or physical impairment that prevents worker from engaging in any substantial gainful employment must have lasted for five months, expected to last a total of at least 12 months or result in the death of the worker
Disability insurance
What is Social Security definition of disability?
Mental or physical impairment that prevents worker from engaging in any substantial gainful employment must have lasted for five months, expected to last a total of at least 12 months or result in the death of the worker
Disability insurance
What is the elimination period?
Acts as a deductible by making the insured cover part of the financial loss
Payments to the insured begin 30 days after the elimination. Period has ended. Example policy with a 30 day illumination. Would make the first payment to the insured after 60 days have elapsed.
Important to note if you have a 30 day elimination. Period you need 60 days worth of savings and if you had 60 day illumination. He would need 90 days of savings. Do you always need an extra 30 days because they are paid 30 days after the elimination period.
Disability insurance
What is a residual writer and a partial disability writer
Residual rider - disabled worker returns to work at lesser pay policy will pay the difference to the extent of available benefits
Partial disability rider - unable to perform one or more important duties of his own occupation, but is still able to perform some duties
Disability insurance
If disability benefits are received from an employer provided disability policy, and the employer paid all disability premiums what are the taxes?
Included in taxable income of the employee
Disability insurance
Disability benefits, I received from a personally paid disability policy. What are the taxes?
Excluded from taxable income
Disability insurance
Group disability policy premium is partially paid by the employer and partially paid by the employee. What are the taxes?
Benefits from the policy will be included in income to the extent of the employer pro rata share of premiums
Disability insurance
Group disability policy premium is partially paid by the employer and partially paid by the employee. What are the taxes?
Benefits from the policy will be included in income to the extent of the employer pro rata share of premiums
And what is the appropriateness of long-term disability coverage?
Income replacement amount of benefit must be appropriate
Benefits should match the term of work life expectancy
Should include coverage for both sickness and accidents
Client should have emergency funds sufficient to cover the elimination Period +30 days.
Benefits are taxable, after-tax cash flows should be sufficient to replace a lost income
Definition of disability should be appropriate to the worker
Policy should be noncancelable or guaranteed renewable
Premium should be competitive
A policy has a Social Security disability benefits, offset provision that should be considered in the selection process
Business overhead expense insurance
What is it and how does it work?
Design to cover the expenses that are usual and necessary in the operation of a business should the owner insured become disabled?
Premiums tax deductible as a business expense
Benefits are taxable income to the entity
Benefit is for one to two years
Covers employees compensation, but does not cover business owner salary
What is a disability buyout policy?
Used to cover the value of the individuals interest in the business should that individual become disabled?
What is key person disability insurance?
Provides continued income to a key employee executive, if disability occurs
How is taxation of key person disability insurance premium payments treated?
Employer contributions, not taxable to the employee
Employee is the beneficiary. Premium payments are deductible by the employer.
Employer is the beneficiary premiums are not deductible
Key person disability insurance
What are the taxation of benefits?
If employer is the beneficiary, beneficiary receive our tax free to the employer
If employee is the beneficiary, benefits received, are taxable to the employee
What are the rights of renewability an individual health and disability insurance policy provisions?
Noncancelable policy’s
Guaranteed renewable policy’s
Conditionally renewable policy’s
Policies that are renewable only at the insurance companies option
Policy where the insurance company may terminate the policy that is a cancelable policy
What is a non-cancelable policy
Continuous guarantee the insure, the right to renew until a specific age or state a number of years no increase in premium
What is a guaranteed renewable policy
Right to renew is guaranteed insurance company is allowed to adjust the premium by policyholder class
What is a conditionally renewable policy?
Continuous term policies that the insurance company may terminate, if certain condition stated in the contract are met
What are policies that are renewable
Renewed only at the insurance companies options no guarantee
A policy that does not contain a renewable provision is a what?
Single term policy
What are the 12 required provisions of an insurance contract?
Entire contract - policy, endorsements, and attach papers
Time limit on certain defenses - policy is uncontestable after two years, except for fraud
Grace Period. - . Where the insured may be pay past due premiums and continued coverage.
Reinstatement - policy that his lapsed may be reinstated
Notice of claim - must notify the insurance company of a claim within 20 days
Claim forms - insurance company will furnish
Proof of loss - written proof of loss within 90 days from date of loss
Time of payment claims - benefits are payable by the insurance company immediately upon proof of loss
Payment of claims - payable to the insured
Physical examination and autopsy - insurance company can require physical examination and autopsies
Legal action - no legal action can be brought to recover on a contract for 60 days following the submission of proof of loss
Change of beneficiary - may be changed, unless designated as irrevocable
What are additional provisions that can be put in an insurance contract?
Change of occupation
Misstatement of age
Insurance with other insurers - coverage will not your payment of benefits in excess of maximum
Relation of earnings to insurance - benefits under two or more policies will not exceed average earned income for a two year.
Unpaid premiums - I deduct and pay premiums from a claim
Cancellation clause
Conformity, estate statues
Illegal occupation
Intoxicants in narcotics
What is the guaranteed insurability option?
Income of the insured increases. Insured may increase the amount of coverage.
What is a cost of living adjustment benefit?
Increases the benefit amount received by the insured each year
Health insurance
What are copayments?
Amounts and insured must pay to receive certain covered services typically nominal in amount
Health insurance
What is coinsurance?
Percentage paid by the insurer, and the insured for claims, after the deductible is satisfied
80/20 coinsurance: insured must pay 20% of covered expenses after satisfying the deductible. The insurance company pays the 80%.
What is a health maintenance organization HMO?
Organization that provides a broad range of health services to a group of subscribers for a fixed periodic payment
Consist of comprehensive health care provided by contracted physicians and medical facilities for pre-negotiated payment
Health insurance
What is a preferred provider organization (PPO)?
Similar to an HMO, except allows members to receive care outside of the net work of PPO providers
Insured will generally face higher deductible’s, and or higher coinsurance
Health insurance
Payments of premiums by an employer? Taxes
Deductible, business expense
Not included in taxable income of an employee
Health insurance
Health insurance premiums are paid by an individual. What is the tax treatment?
Receive beneficial tax treatment only if all medical expenditures exceed 10% of adjusted gross income (itemized deductions)
Health insurance
What are the tax for an individual and self-employed who pays premiums for health insurance?
Can deduct 100% of the cost of health insurance from the gross income
Can also deduct 100% of their health insurance premiums in calculating their self-employment tax
Cobra
Terms of coverage for employees independence for reduction in hours
18 months
Cobra
Terms of coverage for employees and dependence for normal termination
18 months
Cobra
Terms of coverage of employee, a qualified beneficiary that meets Social Security definition of being disabled?
29 months
Cobra
Term of coverage for the spouse after a divorce
36 months
Cobra
Spouses and dependent children of a covered employee, becoming eligible for Medicare
36 months
Cobra
Beneficiaries of an employee, who lose their coverage because of death of the employee
36 months
Cobra
What must you do for continuation of coverage under cobra?
Must elect coverage within 60 days of the qualifying event
Have 45 days to pay the premium before the cobra election was made
Cobra
What is the cost of coverage under cobra?
Paid by the eligible beneficiary employer may charge up to 102% of normal group rates
Health insurance
Plans cover dependence must allow coverage for adult children what age and must they be living at home?
Until age 26
Child not live at home, or be claimed as a dependent
Child may be married coverage does not extend to child spouse or children
Archer medical savings account
What is it?
Attacks favored savings account for medical expenses.
New plans cannot be established, but existing ones can be maintained
Archer medical savings account
Contributions can be made by the employee or the employer what are the tax consequences?
Contributions made by the employee deductible from income
Contributions made by the employer are deductible by employer, not subject to Social Security taxes, and other payroll taxes, not income to the employee
Archer medical savings account
How are earnings on the account treated
Tax deferred until distribution
Distributions for qualified medical expenses are not taxable
Distributions made before age 65 or 72 an additional 20% excise penalty, if not used for qualified medical expenses
Archer medical savings account
What are the estate implications?
Account balance is included in the gross estate of the owner at death
Property will qualify for the marital deduction. The surviving spouse is the name to beneficiary.
Beneficiary other than surviving spouse plan ceases to be an archer on the date of death balance is taxable to the beneficiary at the date of death. Beneficiary has an itemized deduction equal to the estate, tax attributable to the archer.
Health savings accounts
Can an individual have both an archer savings account and a health savings account?
Yes, but contributions to the archer will reduce contribution limits to the health savings account
Health savings account
Can you roll an existing archer account over to a health savings account?
Yes
Health savings account (HSA)
What is it?
Qualifying individuals with high deductible, insurance plans can make tax deductible cash contributions that may be used to reimburse the individual tax free for qualifying medical expenses
It’s an above the line deduction
Health savings account
What happens if you make a qualified medical expense withdraws before age 65?
Subject to the 20% penalty penalty does not apply to withdraws made after the individual reaches age 65, dies or becomes disabled
Health savings account
Are catch-up contributions allowed at age 55 or older and how much is that?
Yes $1000
Health savings account
Can you make contributions after age 65?
No
Health savings account
What is the last month rule?
A person who is eligible for an HSA on December 1 is considered an eligible individual for the entire year and can make a full contribution for the full year
Health savings accounts
What happens if you exceed contribution limits?
6% excise tax is imposed on all the excess
Health savings account
Can you rollover funds from an IRA to an HSA?
Yes, one time direct rollover
Excludable from gross income, not subject to early withdrawal penalties
No deduction may be taken for this amount
Amount is limited to the annual maximum contribution that can be made to an HSA
Health savings accounts
Are they subject to RMD rules?
No
Long-term care
What is the defined benefit approach to long-term care?
Defined. Following elimination. Maximum benefit. usually ranges from 2 to 5 years but many policies have a feature that provides benefits for life.
Long-term care insurance
What is the pool of money concept benefits approach?
Individual is entitled to coverage equal to a specific amount of dollars payments will last as long as the maximum amount of coverage has been expended
Long-term care
What is the benefit that can be attached to some life insurance policies that provides needs for long-term care?
Accelerated benefits
Long-term care
What are the two criteria for determining eligibility insured must usually meet one of the following
Must be chronically ill: defined as being unable to perform two of six activities of daily living for at least 90 days. Good way to remember is BED To Chair
B - Bathing
E - Eating
D - Dressing
T - Toileting
C - Continence
BED To Chair - Transferring from Bed to Chair
Substantial services are required to protect the individual because of substantial cognitive impairment example Alzheimer’s
Long-term care
Premiums paid by the individual are treated how for federal tax purposes
Deductible as medical expenses for itemized, deduction purposes, limited on the basis of the individuals age
Long-term care
Premiums paid by self-employed individual are treated how for tax purposes
Deduction for AGI (above the line) are still limited based on age
Long-term care insurance
How are employer payments for group premiums taxed to both the employer and employee?
Deductible to the employer
Not taxable income to employee
Long-term care
Can long-term care benefits be included in a cafeteria plan or flexible spending account on a tax advantage basis?
No
Long-term care insurance
Benefits paid from the plan are generally excludable from gross income up to a maximum of what dollar amount per day in 2024
$415
Long-term care insurance
Benefits paid from the plan are generally excludable from gross income up to a maximum of what dollar amount per day in 2024
$415
Long-term care insurance
What is a partnership long-term care insurance?
Aligns, unique, long-term care insurance policies with Medicaid for clients that continue to need coverage beyond the policy limits
Long-term care
What is the key reasons why a partnership, long-term care insurance may be used for a client
Typically client is only allowed to have $2000 in assets to qualify for Medicaid
Typically client would be forced to spend down assets before qualifying for Medicaid
Partnership, long-term care program, gives the client credit for the amount of money, either partnership, long-term care insurance policy provided
