Fundamentals & Insurance

Question 1

U-I-A-D-P-I-M-

Answer 1

Uber Is A Drunk Person’s Immediate Motor Vehicle!
Understanding a Client’s Personal & Financial Circumstances
Identifying & Selecting Goals
Analyzing the Current Course of Action & Potential Alternatives
Developing the FP Recommendations
Presenting the FP Recommendations
Implementing the FP Recommendations
Monitoring Progress & Updating

Question 2

Debts that are not discharged in Bankruptcy

Answer 2

Students and Government Loans
3 years of back taxes
Alimony and Child Support
Monies owed due to malicious acts, drunk driving, criminal fines and penalties & embezzlement

Question 3

Assets that are exempt from creditors

Answer 3

Exempt property (homestead, life insurance, qualified plans)
Debts associated with negligence
Contributory Traditional & Roth IRAs (up to $1M indexed every 3 years- filings between 4/19 - 3/22 have $1.3628M)
Qualified Plans & Converted IRAs have unlimited exemption

Question 4

Net Worth = ???

Answer 4

Assets - Liabilities = NW

Question 5

Examples of Cash & Cash Equivalents

Answer 5

Cash, MM, CD < or = 12 months

Question 6

Examples of Invested Assets

Answer 6

IRA, Brokerage acct, CD > 12 months

Question 7

Examples of Personal Use Assets

Answer 7

Car, House, Jewelry, Furniture

Question 8

Examples of Current & Long Term Liabilities

Answer 8

Current (Credit Card debt)
Long Term (Mortgage, Auto Loan, Student Loan)

Question 9

Emergency Fund = ???

Answer 9

Current Assets / Nondiscretionary Expenses

Question 10

Current Ratio = ???

Answer 10

Current Assets / Current Liabilities

Question 11

Consumer Debt

Answer 11

Payments should not exceed 20% of NET income

Question 12

Housing Debt = ???

Answer 12

< or = 28% of GROSS income

Monthly Housing Costs (P+I+T+I) / Monthly Gross Income

Question 13

Housing + All Other Recurring Debt = ???

Answer 13

< or = 36% of GROSS income

Monthly Housing Costs (P+I+T+I) + All Other Recurring Debt / Monthly Gross Income

Question 14

Savings Ratio = ???

Answer 14

Annual Savings (Employee + Employer Contributions) / Annual Gross Income

Question 15

ROI = ???

Answer 15

(Ending Investments - Beginning Investments - Savings - Gifts Received) / Average Invested Assets

Question 16

Average Invested Assets = ???

Answer 16

(Beginning Investments + Ending Investments) / 2

Question 17

Federal Pell Grant

Answer 17

Need based and dependent upon EFC

Question 18

Stafford Loan

Answer 18

Primary type of financial aid provided by US Dept of Ed

Student loans- Subsidized is need-based/ interest paid for by fed govt & Unsubsidized is not

Question 19

Parent Loans for Undergraduate Students (PLUS)

Answer 19

NOT need based but dependent on parent’s credit score

Loan for parents to pay for their children’s undergraduate studies

Question 20

Grad PLUS loan for Grad students (PLUS Direct)

Answer 20

Interest accrues as you go

Question 21

Federal Perkins Loan Program

Answer 21

Expired 9/17; need based but exceptionally low EFC amounts

Question 22

Federal Supplemental Education Opportunity Grant (FSEOG)

Answer 22

Awarded to students with very low EFC; need based

Question 23

Can you claim an American Opportunity Tax Credit or Lifetime Learning Credit in the same year?

Answer 23

Yes, just just NOT for the same expenses

Question 24

Can you claim both an AOTC and LLC for the same child in the same year?

Answer 24

NO

Question 25

Can you use an AOTC or LLC for the SAME expense paid by a qualified tuition program?

Answer 25

NO

Question 26

Can you use the AOTC or LLC in the same year for a distribution from a qualified tuition plan?

Answer 26

YES, just not for same expenses

Question 27

Insurable Risks are ????

Answer 27

CHAD

not Catastrophic, Homogenous exposure units, Accidental, and measurable and Determinable

Question 28

A legal contract requires ?????

Answer 28

Competent parties, Offer and Acceptance, Legal considerations, and Lawful purpose

Question 29

6 Steps of Risk Management

Answer 29

D-I-E-D-I-E: Don’t Insure Everything (Squared)

Determine the objectives of the risk management program
Identify the risks to which the client is exposed
Evaluate the identified risks as to probability of occurrence and potential loss
Determine alternatives for managing risks, and select the most appropriate alternative for each
Implement the program
Evaluate, monitor, and review (control)

Question 30

Principle of Indemnity

Answer 30

A person is entitled to compensation only to the extent that financial loss has been suffered.

Question 31

Subrogation Clause

Answer 31

Insurance company cannot collect against a negligent third party.

Question 32

Amount Insured Pays = ???

Answer 32

(amount purchased / (coinsurance amount)) x Loss

Question 33

Dividend options for insurance policies are …..

Answer 33

CRAP-O
Cash option
Reduce premiums
Accumulate at interest
Paid-up additions
Term (one-year)

Question 34

Nonforfeiture Options (4)

Answer 34

Cash Surrender Value- insured receives the accumulated cash value when terminating LI policy. Cash value less surrender charges

Reduced Paid-up Insurance- insured receives the cash value in the form of a paid-up policy with a smaller face amount

Extended Term Insurance- insured receives the cash value in the form of a paid-up term policy for a specified duration, with same face amount as original policy

Accelerated Death Benefits- accelerated death benefit for terminally ill (lump sum or monthly income). 24 months or less & income is not taxable. No limitations on use of income

Question 35

FIFO vs. LIFO

Answer 35

First in First Out- withdrawals up to the owner’s basis are not taxable but rather are treated as a return of capital (pre-1982)

Last in First Out- withdrawals are taxed to the extent of earnings before capital (basis) is returned

Question 36

How much does a retiree’s SS benefit increase each year if delaying benefit?

Answer 36

Increases by 8% (simple interest)

Question 37

Things not covered under Medicare Part B

Answer 37

Dental care, dentures
Cosmetic surgery
Hearing aids
Eye exams

Question 38

Exceptions to Registration

Answer 38

Banks and Bank holding companies that are not investment companies
Any broker/dealer whose advisory services are solely incidental to the conduct of business
Lawyers, accountants, teachers and engineers whose advise is solely incidental to their profession (LATE)
Publisher of a bona fide newspaper, magazine or periodical of regulation circulation
Advisers whose advice and services is related strictly to securities guaranteed by the US
Such person not within the intent of the law as the SEC may designate by rules, regulations or order

Question 39

Elements of a Valid Insurance Contract are ???

Answer 39

COALL

Offer and Acceptance
Legal Competency of all parties
Exchange of Consideration
Lawful purpose