Exam 3 Part A Flashcards
1
Q
What if an insured is covered for a loss under two or more policies?
A
- Possibility of recovering more than the loss itself
- Creates a moral hazard
- Profit from insurance
- Violates Indemnity
2
Q
Policy Provisions
A
- Clauses provide allocating rules to split payment of losses among various insured
- Maximum indemnification is usually at 100% of the loss
3
Q
Primary Excess Rate
A
- Two Policies cover the same loss
- A is primary, and B is secondary
- A covers 100% of loss up to the FA of A
- B then covers the rest of the loss up to the FA of B
4
Q
Pro Rata Method
A
- Face Amount, bases calculation on Face Amount
- Ratio of each Face Value of policy divided by the total amount of insurance in force on the property
- FAa / (FA(a)+FA(b))
- FA b/ (FA(a)+FA(b))
5
Q
Limits of Liability
A
- Loss occurs -ask this questions
“What would this policy pay if it was the only one?
-LOL uses the amount that would be paid by a particular insurer if they were the only policy covering the loss as its basis - LOL(a) / (LOL(a) + LOL(b))
6
Q
Employee Benefits
A
- Any type of compensation other than direct current salary of wages
- Total compensation = current wages (cash) + value of EE benefits
7
Q
Why Employee Benefits Are So Important
A
- Spend high $ on EE benefits approximately - 40% of payroll
- Rate of increase is high - growing much faster than cash wages (Labor Strife - SEPTA)
8
Q
Why Do Firms Offer Employee Benefits
A
- Attract and retain capable EEs
- Tax advantages
- Productivity and better EE relations
- ER can take advantage of group insurance
9
Q
Benefit Financing
A
- Non Contributory
- Contributory
- Voluntary
10
Q
Non Contributory
A
- ER pays full cost of the plan
- EE is covered without making a financial contribution
- All eligible EEs must be covered
- Eligibility = participation
11
Q
Contributory
A
- ER and EE share in the cost of the plan
- For an eligible EE to become a participant they must make a financial contribution
12
Q
Voluntary
A
- EE pays entire cost of the insurance plan
13
Q
Income Taxes
A
- ER can deduct the cost of EE benefits as an ordinary business expense (same as salary)
- The EE is sometimes not taxed on the value of their ER provided benefits
- Method is to compensate an EE tax free
14
Q
Disability Insurance
A
- Benefit- monthly income payments
- ER pays full cost
- Premium is not taxable to EE
- Benefit is taxable to EE if they become disabled
15
Q
Disability Insurance (Employee Pays Some or All of Cost
A
- Finance through a pretax salary reduction plan
- Benefit will be taxable to the EE if they become disabled
