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My CFP Flashcards > Insurance > Flashcards

Insurance Flashcards

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1
Q

What are the 4 main business insurance policies that are tax deductible by the business?

A

Workers’ Compensation insurance
Unemployment insurance
Commercial umbrella insurance
A BOP policy

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2
Q

How do you calculate the life insurance amount to purchase given (using capital retention calculation) given yearly income needs and inflation?

A

annual need ($50,000) / inflation

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3
Q

What is in Section II of a homeowners policy?

A

Liability and medical payments

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4
Q

What are the two main ways dividends on an MEC are NOT taxable?

A

When they are used to purchase paid up additions

When they are kept with the company and accumulate with interest (the interest is taxable)

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5
Q

At policy surrender, how do you calculate how much of the distribution will be taxable?

A

guaranteed cash value - (net premiums paid)

the net premiums paid is the premiums billed less the dividends used to reduce the premium

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6
Q

What is the main company that checks the BACKGROUND (not just ratings) of an insurance company?

A

AM Best

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7
Q

What is the highest rating for AM best?

A

A++

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8
Q

Is vacant land (endorsed) covered by coverage E?

A

Yes it can be

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9
Q

Level amount of life insurance for a fixed period of time is ___.

A

extended term, by definition.

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10
Q

Does HO3 provide broad or basic coverage?

A

Broad

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11
Q

What is one of the methods to enforce the principles of indemnity?

A

Subrogation

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12
Q

True/False
Form HO-2 differs from HO-3 in that the HO-2 policy provides broad form coverage on the dwelling, other structures, and loss of use.

A

True

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13
Q

T/F

Form HO-4 is a renter’s policy.

A

True

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14
Q

Form HO-6 loss of use limit is ____% of the policy limit on personal property.

A

50%

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15
Q

T/F

Form HO-5 provides open perils coverage for personal property.

A

True

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16
Q

With a term insurance policy what affect does the annual renewable term feature have on the premiums?

A

Premiums increase annually

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17
Q

What does re-entry on a term policy mean?

A

You could requalify for low cost premiums through abbreviated underwriting

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18
Q

What does decreasing term mean?

A

Decreasing death benefit, level premium. Good for mortgages

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19
Q

What are first to die/joint life policies good for?

A

good for buy sells or mortgage protections

20
Q

What is the premium like on a variable life policy?

A

Fixed

21
Q

What does adhesion mean regarding a contract?

A

Accepted as is

22
Q

What is special about the capital utilization approach to life insurance needs analysis?

A

Annuitization to provide income but leaves no money at the end

23
Q

When is a life insurance policy in force?

A

when the policy is delivered, and the premium is collected

24
Q

What are the 4 main properties excluded under coverage C (personal property coverage)?

A
  1. animals, birds, fish
  2. motorized land vehicles and aircraft
  3. renters’ property
  4. property in a place specifically designated for renters
25
Q

Is sinkhole a covered peril for the exam?

A

yes

26
Q

What should someone with an HO2 policy usually do?

A

change it to an open perils type policy because H02 only have broad form coverage

27
Q

What is the main thing that is specifically excluded under a personal umbrella policy

A

professional acts

28
Q

What is the main thing that is specifically excluded under a commercial property insurance policy

A

professional acts

29
Q

What are the four main categories of Medicare part A

A

hospital care
care in a nursing home or facility
home health care
care in a hospice

30
Q

What are the four main categories of Medicare part B

A

physicians services
home health care
diagnostic tests
all outpatient services of a participating hospital

31
Q

What does noncancellable mean on a disability insurance policy?

A

guarantees the insured’s right to maintain the policy at the stated premium (less expensive than guaranteed renewable because with that the premiums can increase)

32
Q

Which is worse- own or any occupation?

A

any

33
Q

Can a 1035 be done if the insured changes?

A

No

34
Q

In a conversion provision of a life insurance policy, do they have to prove insurability?

A

NO

35
Q

What is the main thing NAIC does NOT do?

A

enacts legislation

36
Q

In a life settlement question which describes a transaction involving an insured who is not terminally ill and is over 65, look for what type of answer? (regarding the taxation of settlement)

A

Look for the one with the LTGCG answer

37
Q

What dollar amount may trigger MEC rules if the person also needs to show proof of insurability?

A

ANY (even $50,000) may trigger a policy to become an MEC

What if they didn’t have to show proof of insurability? Is there a risk of it becoming an MEC by increasing 50k? NO.

38
Q

Does a key employee on a key employee life policy have incident of ownership?

A

No

39
Q

Is there a grace period for the dependent care (max 5k) part of a FSA?

A

no

40
Q

What is special (but not good) about the dependent care FSA?

A

if married, both spouse must earn income in order for the dependent care FSA to work. (exception if disabled or dstudent)

if one spouse earns less than $5K, benefit is limited to whatever the spouse earned

41
Q

Main characteristics of an HRA?

A

solely employer funded

reimburses employees for substantiated medical expenses up to a maximum dollar amount per coverage period

42
Q

Other than LTC insurance, what other means provides nursing care home coverage for longer than 100 days?

A

medicaid

medicare supplements and medigaps may provide for a rehabilitation stay, but not extended nursing home coverage

43
Q

If a company owns key life policies on employees and wants to borrow against the cash value, is the interest accrued tax deductible?

A

Yes, up to $50,000

44
Q

Are “damages- personal injuries (punitive)” taxable?

A

Yes - generally

45
Q

Are self funded plans subject to COBRA?

A

Yes

46
Q

Do group life policies have more or less “liberal” underwriting?

A

more liberal

My CFP Flashcards (21 decks)

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