Insurance Flashcards
What are the 4 main business insurance policies that are tax deductible by the business?
Workers’ Compensation insurance
Unemployment insurance
Commercial umbrella insurance
A BOP policy
How do you calculate the life insurance amount to purchase given (using capital retention calculation) given yearly income needs and inflation?
annual need ($50,000) / inflation
What is in Section II of a homeowners policy?
Liability and medical payments
What are the two main ways dividends on an MEC are NOT taxable?
When they are used to purchase paid up additions
When they are kept with the company and accumulate with interest (the interest is taxable)
At policy surrender, how do you calculate how much of the distribution will be taxable?
guaranteed cash value - (net premiums paid)
the net premiums paid is the premiums billed less the dividends used to reduce the premium
What is the main company that checks the BACKGROUND (not just ratings) of an insurance company?
AM Best
What is the highest rating for AM best?
A++
Is vacant land (endorsed) covered by coverage E?
Yes it can be
Level amount of life insurance for a fixed period of time is ___.
extended term, by definition.
Does HO3 provide broad or basic coverage?
Broad
What is one of the methods to enforce the principles of indemnity?
Subrogation
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.
True
T/F
Form HO-4 is a renter’s policy.
True
Form HO-6 loss of use limit is ____% of the policy limit on personal property.
50%
T/F
Form HO-5 provides open perils coverage for personal property.
True
With a term insurance policy what affect does the annual renewable term feature have on the premiums?
Premiums increase annually
What does re-entry on a term policy mean?
You could requalify for low cost premiums through abbreviated underwriting
What does decreasing term mean?
Decreasing death benefit, level premium. Good for mortgages
What are first to die/joint life policies good for?
good for buy sells or mortgage protections
What is the premium like on a variable life policy?
Fixed
What does adhesion mean regarding a contract?
Accepted as is
What is special about the capital utilization approach to life insurance needs analysis?
Annuitization to provide income but leaves no money at the end
When is a life insurance policy in force?
when the policy is delivered, and the premium is collected
What are the 4 main properties excluded under coverage C (personal property coverage)?
- animals, birds, fish
- motorized land vehicles and aircraft
- renters’ property
- property in a place specifically designated for renters
Is sinkhole a covered peril for the exam?
yes
What should someone with an HO2 policy usually do?
change it to an open perils type policy because H02 only have broad form coverage
What is the main thing that is specifically excluded under a personal umbrella policy
professional acts
What is the main thing that is specifically excluded under a commercial property insurance policy
professional acts
What are the four main categories of Medicare part A
hospital care
care in a nursing home or facility
home health care
care in a hospice
What are the four main categories of Medicare part B
physicians services
home health care
diagnostic tests
all outpatient services of a participating hospital
What does noncancellable mean on a disability insurance policy?
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)
Which is worse- own or any occupation?
any
Can a 1035 be done if the insured changes?
No
In a conversion provision of a life insurance policy, do they have to prove insurability?
NO
What is the main thing NAIC does NOT do?
enacts legislation
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)
Look for the one with the LTGCG answer
What dollar amount may trigger MEC rules if the person also needs to show proof of insurability?
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.
Does a key employee on a key employee life policy have incident of ownership?
No
Is there a grace period for the dependent care (max 5k) part of a FSA?
no
What is special (but not good) about the dependent care FSA?
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
Main characteristics of an HRA?
solely employer funded
reimburses employees for substantiated medical expenses up to a maximum dollar amount per coverage period
Other than LTC insurance, what other means provides nursing care home coverage for longer than 100 days?
medicaid
medicare supplements and medigaps may provide for a rehabilitation stay, but not extended nursing home coverage
If a company owns key life policies on employees and wants to borrow against the cash value, is the interest accrued tax deductible?
Yes, up to $50,000
Are “damages- personal injuries (punitive)” taxable?
Yes - generally
Are self funded plans subject to COBRA?
Yes
Do group life policies have more or less “liberal” underwriting?
more liberal
